DoD's $10.7M contract for electronic components awarded to Northrop Grumman Systems Corporation without competition

Contract Overview

Contract Amount: $10,723,956 ($10.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-06-01

End Date: 2009-05-29

Contract Duration: 728 days

Daily Burn Rate: $14.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CELAMP

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $10.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CELAMP Key points: 1. The contract's value of over $10.7 million was awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Awarded without competition, this contract bypasses the opportunity for market-driven price discovery and potentially higher costs. 3. The contract duration of 728 days (2 years) suggests a significant, ongoing need for the specified electronic components. 4. The North American Industry Classification System (NAICS) code 334419 points to a specialized manufacturing requirement. 5. The contract was managed by the Defense Contract Management Agency, suggesting a focus on defense-related procurement. 6. The absence of small business set-aside flags indicates this contract was not specifically targeted to support small businesses.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bidding and specific details on the 'electronic components' procured. Cost-plus-fixed-fee contracts can sometimes lead to higher final costs compared to fixed-price contracts if not managed rigorously. Without comparable contract data or detailed cost breakdowns, assessing the true value-for-money is difficult. The $10.7 million award over two years averages approximately $5.35 million annually, which requires context regarding the scale and complexity of the components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT COMPETED,' indicating a sole-source procurement. This means only one vendor, Northrop Grumman Systems Corporation, was solicited and awarded the contract. The lack of competition means the government did not explore alternative suppliers or pricing structures that could have been available through a competitive bidding process.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible prices, potentially leading to higher expenditures for taxpayers compared to a competitively bid contract.

Public Impact

The primary beneficiary is the Department of Defense, which receives the specified electronic components for its operations. The services delivered involve the manufacturing and supply of specialized electronic components, crucial for defense systems. The contract's geographic impact is centered in Illinois (IL), where the contractor is located. Workforce implications are likely within Northrop Grumman's manufacturing and engineering divisions, supporting specialized jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in higher prices than available through market competition.
Cost-plus-fixed-fee structure requires diligent oversight to prevent cost overruns.
Limited transparency into the specific components and their necessity due to sole-source nature.
Potential for vendor lock-in if these components are highly specialized and difficult to source elsewhere.

Positive Signals

Award to a large, established defense contractor like Northrop Grumman suggests a focus on reliability and proven capability.
The contract was managed by the Defense Contract Management Agency, implying established oversight processes.
The fixed-fee component of the contract provides some level of cost certainty for the government.

Sector Analysis

The contract falls under the 'Other Electronic Component Manufacturing' sector (NAICS 334419). This sector is critical for the defense industry, providing essential parts for various military platforms and systems. Spending in this area is often characterized by high technical requirements, specialized manufacturing processes, and long product lifecycles. Comparable spending benchmarks are difficult to establish without knowing the exact nature of the components, but defense-related electronics manufacturing can represent significant investment due to stringent quality and performance standards.

Small Business Impact

This contract was not set aside for small businesses, nor does it indicate any subcontracting requirements for small businesses. The award to a large prime contractor like Northrop Grumman suggests that the primary focus was on capability and delivery rather than small business participation. This contract does not appear to contribute to the small business ecosystem through direct set-asides or mandated subcontracting.

Oversight & Accountability

The contract was managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance and ensuring compliance. As a cost-plus-fixed-fee contract, oversight would focus on the allowability, allocability, and reasonableness of costs incurred by the contractor. Transparency is limited due to the sole-source nature, but standard government contract reporting mechanisms would apply. Inspector General jurisdiction would likely fall under the Department of Defense.

Related Government Programs

Department of Defense Procurement
Defense Electronics Manufacturing
Northrop Grumman Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of detailed component specification
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CELAMP

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $10.7 million.

What is the period of performance?

Start: 2007-06-01. End: 2009-05-29.

What specific electronic components were procured under this contract, and what were their intended applications within the Department of Defense?

The provided data identifies the North American Industry Classification System (NAICS) code as 334419, which corresponds to 'Other Electronic Component Manufacturing.' However, it does not specify the exact nature of the electronic components. These could range from integrated circuits, resistors, capacitors, to more complex sub-assemblies. Their intended applications are also not detailed but are presumed to be for various defense systems, potentially including aircraft, ground vehicles, communication equipment, or weapon systems, given the awarding agency is the Department of Defense. Without further details, the specific function and criticality of these components remain unknown.

How does the $10.7 million contract value compare to typical spending for similar electronic components within the defense sector?

Direct comparison of the $10.7 million contract value is difficult without knowing the precise nature and quantity of the electronic components. Spending on electronic components within the defense sector can vary dramatically, from a few dollars for standard parts to millions for highly specialized, custom-designed systems. Given this contract was awarded without competition to Northrop Grumman Systems Corporation over a two-year period (728 days), it suggests a requirement for a substantial quantity or highly specialized components. However, without benchmarks for comparable sole-source procurements of similar items, assessing whether $10.7 million represents high, low, or average spending is not feasible based solely on the provided data.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for electronic components?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature means the Department of Defense did not benefit from competitive bidding, potentially leading to a higher price than could have been achieved in an open market. This limits price discovery and negotiation leverage. Secondly, the cost-plus-fixed-fee (CPFF) payment structure carries inherent risks of cost escalation. While the 'fixed fee' provides some ceiling on the contractor's profit, the 'cost-plus' element means the government reimburses the contractor for allowable costs incurred. If costs are not meticulously managed and scrutinized, the total contract price can exceed initial estimates. For specialized electronic components, technical challenges or unforeseen production issues could drive up costs, impacting the final price paid by the government.

What is Northrop Grumman Systems Corporation's track record with similar defense contracts, particularly those involving electronic components?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in various defense systems, including electronics, aerospace, and information technology. While the specific data provided does not detail their past performance on contracts for 'Other Electronic Component Manufacturing' (NAICS 334419), their broad portfolio suggests a significant capacity to handle complex manufacturing and supply chain requirements for the DoD. Historically, large defense contractors like Northrop Grumman are awarded numerous contracts, some of which would inevitably involve the procurement or manufacturing of electronic components. Assessing their specific track record for this particular type of component would require a deeper dive into their contract history, performance reviews, and any past issues related to quality, delivery, or cost overruns on similar procurements.

How does the duration of the contract (728 days) align with the typical lifecycle or obsolescence rate of the electronic components procured?

A contract duration of 728 days (approximately two years) for electronic components needs to be evaluated against the specific technology's lifecycle and obsolescence rate. For cutting-edge or rapidly evolving technologies, a two-year procurement window might be too long, risking the acquisition of components that quickly become outdated or unsupported. Conversely, for more established or ruggedized components used in long-lifecycle defense systems (like aircraft or naval vessels), a two-year supply contract could be appropriate for ensuring sustained availability. Without knowing the exact nature of the components, it's difficult to definitively assess the alignment. However, defense procurement often prioritizes long-term availability and reliability, suggesting these components might be intended for systems with extended operational lives, making a two-year supply contract reasonable.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 600 HICKS RD, ROLLING MEADOWS, IL, 60008

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $12,229,807

Exercised Options: $12,229,807

Current Obligation: $10,723,956

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline