DoD's $279M aircraft manufacturing contract awarded to Northrop Grumman Systems Corporation shows limited competition

Contract Overview

Contract Amount: $27,925,009 ($27.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2019-04-18

End Date: 2023-01-31

Contract Duration: 1,384 days

Daily Burn Rate: $20.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IPA3+

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92127

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $27.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IPA3+ Key points: 1. The contract's value of $279.25 million represents a significant investment in aircraft manufacturing capabilities. 2. Awarded as a sole-source contract, it indicates a lack of broader market competition for these specific services or products. 3. The duration of 1384 days suggests a long-term commitment to the contractor and the project. 4. The contract's classification under NAICS code 336411 points to a focus on aircraft engine and engine parts manufacturing. 5. The absence of small business set-asides suggests the primary contractor is a large entity, with potential subcontracting opportunities. 6. The firm fixed-price contract type aims to provide cost certainty for the government.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. However, the $279.25 million award over approximately 3.8 years suggests a substantial per-year investment. Without comparable contract data or market analysis, it's difficult to definitively assess if this represents excellent value for money. The firm fixed-price nature provides some cost control, but the absence of competition limits the government's ability to leverage market forces for optimal pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple potential bidders. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the government's requirements. The lack of competition means the government did not benefit from price discovery through a bidding process, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in sole-source situations.

Public Impact

The primary beneficiaries are the Department of Defense and potentially its operational units relying on advanced aircraft manufacturing. The contract supports the production or sustainment of critical aircraft components or systems. The geographic impact is centered around the contractor's facilities in California, potentially creating or sustaining jobs in that region. Workforce implications include skilled labor in aerospace engineering, manufacturing, and related technical fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of transparency in the justification for sole-source award.
Long contract duration may reduce flexibility to adapt to changing technological needs.
Potential for contractor lock-in due to specialized nature of work.

Positive Signals

Award to a known entity (Northrop Grumman) suggests a degree of confidence in their capabilities.
Firm fixed-price contract provides budget predictability.
Contract supports critical defense manufacturing needs.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract falls within the aircraft manufacturing sub-sector, which is a critical component of national defense. The market is often dominated by a few large, established players like Northrop Grumman due to the complexity and scale of production. Comparable spending benchmarks are difficult to establish without more specific details on the aircraft components or systems involved, but large-scale defense manufacturing contracts often run into hundreds of millions or billions of dollars.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. The prime contractor, Northrop Grumman, is a large aerospace and defense company. While the contract itself is not set aside for small businesses, there may be opportunities for small businesses to participate as subcontractors to Northrop Grumman. The extent of small business subcontracting would depend on the company's subcontracting plan and the nature of the work required.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The firm fixed-price nature provides some level of financial oversight by limiting cost overruns. Transparency regarding the justification for the sole-source award and ongoing performance monitoring would be key accountability measures. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Aircraft Manufacturing
Defense Procurement
Aerospace Industry
Sole-Source Contracts
Northrop Grumman Contracts

Risk Flags

Sole-source award
Limited competition
Potential for cost overruns
Lack of transparency in justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IPA3+

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $27.9 million.

What is the period of performance?

Start: 2019-04-18. End: 2023-01-31.

What specific aircraft components or systems does this contract cover, and why was Northrop Grumman the sole source?

The provided data indicates the contract falls under NAICS code 336411, which pertains to 'Aircraft Engine and Engine Parts Manufacturing.' However, the specific components or systems are not detailed. The justification for a sole-source award typically stems from factors such as unique technical capabilities, proprietary technology, essential integration with existing systems, or a lack of alternative sources meeting stringent performance requirements. Without access to the contract's justification documentation (e.g., Justification and Approval - J&A), the precise reasons for Northrop Grumman being the sole source remain speculative. This could involve specialized engine technology, unique manufacturing processes, or critical components for a specific defense platform where Northrop Grumman is the sole qualified provider.

How does the $279.25 million award compare to similar aircraft manufacturing contracts awarded by the DoD?

Comparing this $279.25 million contract requires context on the specific type of aircraft components or systems being manufactured. The aerospace and defense sector sees a wide range of contract values. For instance, contracts for entire aircraft platforms or major sub-assemblies can easily reach billions of dollars. However, contracts focused on specific engine parts or manufacturing services, as suggested by NAICS 336411, might typically range from tens to hundreds of millions. Given the sole-source nature and the duration (over 3.5 years), $279.25 million appears to be a substantial, but not necessarily outlier, value for specialized aircraft engine manufacturing services provided by a major defense contractor like Northrop Grumman. A more precise comparison would necessitate identifying contracts for identical or highly similar components and services awarded competitively.

What are the key risks associated with a sole-source contract of this magnitude?

The primary risk associated with a sole-source contract of this magnitude is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government may not achieve the most cost-effective outcome. Another significant risk is contractor lock-in; if the contractor develops unique expertise or proprietary technology essential for the program, switching providers in the future could be prohibitively expensive or technically infeasible. There's also a risk of reduced innovation, as the absence of competition might lessen the incentive for the contractor to proactively seek cost-saving efficiencies or introduce cutting-edge solutions. Finally, sole-source awards can sometimes face public scrutiny regarding fairness and the justification process, potentially impacting program transparency.

What is Northrop Grumman's track record with similar DoD contracts, particularly in aircraft engine manufacturing?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience across various aerospace and defense domains, including aircraft manufacturing and systems integration. They have a long history of producing complex military aircraft, avionics, and related components. While the specific NAICS code 336411 points to engine and engine parts manufacturing, Northrop Grumman's broader portfolio likely includes significant work in this area, either directly or through subsidiaries and partnerships. Their track record with the DoD is generally characterized by large-scale, long-term programs. Assessing their performance on specific contracts would require reviewing past performance evaluations, delivery records, and any documented issues or successes related to similar procurements. Given their size and scope, they are a frequent recipient of substantial DoD awards.

How has federal spending in aircraft manufacturing (NAICS 336411) trended over the past five years?

Federal spending in the aircraft manufacturing sector, particularly under NAICS code 336411 (Aircraft Engine and Engine Parts Manufacturing), has generally remained robust, driven by ongoing modernization efforts and sustainment requirements within the Department of Defense and other agencies like the FAA. While specific year-over-year trends can fluctuate based on major program milestones and budget allocations, the overall demand for advanced aircraft engines and components has been sustained. Factors influencing spending include geopolitical stability, technological advancements in propulsion systems, and the lifecycle of existing military aircraft fleets. Data from sources like the Federal Procurement Data System (FPDS) would show significant annual outlays, often in the billions, distributed across numerous contracts, with a concentration among major aerospace prime contractors.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 17066 GOLDENTOP RD, SAN DIEGO, CA, 92127

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $27,925,009

Exercised Options: $27,925,009

Current Obligation: $27,925,009

Actual Outlays: $1,097,497

Subaward Activity

Number of Subawards: 54

Total Subaward Amount: $10,360,433

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862015D3009

IDV Type: IDC

Timeline