DoD's $43M Northrop Grumman contract for navigation systems awarded via full and open competition

Contract Overview

Contract Amount: $42,992,908 ($43.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2008-10-31

End Date: 2012-06-30

Contract Duration: 1,338 days

Daily Burn Rate: $32.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: NEXGEN MWS PRODUCTION CONTRACT

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $43.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: NEXGEN MWS PRODUCTION CONTRACT Key points: 1. Contract awarded for navigation systems, a critical component for military operations. 2. The contract was competed openly, suggesting a competitive bidding process. 3. Northrop Grumman, a major defense contractor, is the awardee. 4. The contract type is Firm Fixed Price, which shifts cost risk to the contractor. 5. The contract duration was over three years, indicating a substantial project. 6. The award was made by the Department of the Air Force. 7. The North American Industry Classification System (NAICS) code points to instrument manufacturing.

Value Assessment

Rating: fair

Benchmarking the value of this $43 million contract is challenging without specific performance metrics or detailed cost breakdowns. However, the firm-fixed-price structure suggests an attempt to control costs by placing risk on the contractor. Comparing this to similar navigation system contracts would require access to more granular data on system capabilities and quantities. The duration of the contract (over three years) indicates a significant undertaking, and the final cost relative to initial estimates would be a key indicator of value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of two bidders suggests a moderate level of competition for this specific contract. While two bidders are better than one, a higher number of competitors typically leads to more aggressive pricing and potentially better value for the government.

Taxpayer Impact: A competitive process, even with two bidders, is generally favorable for taxpayers as it encourages more efficient pricing compared to sole-source awards.

Public Impact

The primary beneficiaries are the Department of the Air Force and its operational units requiring advanced navigation systems. The contract delivers essential components for aircraft and potentially other platforms, enhancing mission capabilities. The geographic impact is likely concentrated within the United States, where Northrop Grumman operates and where the systems will be deployed. Workforce implications include employment opportunities at Northrop Grumman and potentially its subcontractors within the aerospace and defense manufacturing sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (2 bidders) may have resulted in a higher price than a more robustly competed contract.
Firm Fixed Price contracts can sometimes lead to contractor pressure to cut corners on quality if not adequately overseen.
The specific capabilities and technological advancements of the navigation systems are not detailed, making it hard to assess if the best available technology was procured.

Positive Signals

Awarded under full and open competition, maximizing the pool of potential offerors.
Firm Fixed Price contract type aligns incentives for cost control with the contractor.
Northrop Grumman is an established defense contractor with a track record in complex systems integration.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the manufacturing of navigation and guidance instruments. The market for such systems is characterized by high technological barriers to entry, significant R&D investment, and a primary customer base of government entities. Spending in this sub-sector is driven by modernization efforts, operational readiness requirements, and the development of next-generation military platforms. Comparable spending benchmarks would involve analyzing other contracts for similar electronic warfare, sensor, or navigation systems within the DoD.

Small Business Impact

There is no indication that this contract included a small business set-aside, and the awardee, Northrop Grumman, is a large corporation. Therefore, the direct impact on small businesses through this specific award is likely minimal. However, large defense contracts often involve subcontracting opportunities, and it is possible that small businesses could be involved further down the supply chain. The absence of explicit small business participation goals in the contract details suggests that subcontracting to small businesses was not a primary focus of this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Accountability measures would be tied to the contract's performance clauses, delivery schedules, and quality standards. Transparency is generally limited for specific defense contracts due to national security considerations, but basic award information is publicly available. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

DoD Navigation Systems Procurement
Air Force Avionics Modernization Programs
Northrop Grumman Defense Contracts
Aerospace Instrument Manufacturing
Firm Fixed Price Defense Contracts

Risk Flags

Limited Competition
Potential for Cost Overruns (inherent in FFP if scope poorly defined)
Technological Obsolescence Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. NEXGEN MWS PRODUCTION CONTRACT

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 $43.0 million.

What is the period of performance?

Start: 2008-10-31. End: 2012-06-30.

What is Northrop Grumman's track record with similar navigation system contracts awarded by the Department of Defense?

Northrop Grumman has a long history of developing and producing complex systems for the Department of Defense, including avionics, radar, and navigation systems. They have been involved in numerous large-scale defense programs across various branches of the military. While specific details on past navigation system contracts would require deeper research into their portfolio and performance history, their status as a major defense prime contractor suggests significant experience. Analyzing past contract performance, including any reported issues with delivery, cost overruns, or quality, would provide a more comprehensive understanding of their reliability for this specific type of procurement.

How does the $43 million value of this contract compare to other similar navigation system procurements?

Without specific details on the quantity and technological sophistication of the navigation systems procured under this $43 million contract, a direct value comparison is difficult. However, for context, major defense programs often involve hundreds of millions or even billions of dollars. This $43 million contract appears to be of moderate size within the broader defense spending landscape. To provide a more precise comparison, one would need to identify contracts for similar systems (e.g., inertial navigation systems, GPS receivers, or integrated navigation suites) awarded around the same period and analyze their total value, duration, and scope of work. The number of bidders (two) also suggests it might not have been a highly contested, large-scale competition that could drive down per-unit costs significantly.

What are the primary risks associated with this contract for the Department of the Air Force?

Key risks for the Department of the Air Force include potential cost overruns if the firm-fixed-price contract does not adequately account for unforeseen technical challenges or material cost increases, although the FFP structure aims to mitigate this. Performance risk is also present; the contractor might deliver systems that do not meet stringent performance specifications or reliability standards required for military operations. Schedule risk, leading to delays in fielding critical navigation capabilities, is another concern. Finally, technological obsolescence could become an issue if the systems procured are not adaptable to future upgrades or evolving threats, especially given the contract's duration.

How effective is the firm-fixed-price (FFP) contract type in ensuring value for money in defense procurements like this one?

The Firm Fixed Price (FFP) contract type is generally considered effective in ensuring value for money when the scope of work is well-defined and the risks are understood. It places the primary responsibility for cost control on the contractor, incentivizing them to manage expenses efficiently to maximize profit. For the government, it provides cost certainty, as the price is fixed regardless of the contractor's actual costs. However, for complex, technology-intensive procurements like advanced navigation systems, there's a risk that the contractor might build in a significant cost contingency to cover potential unknowns, potentially leading to a higher initial price. Effective oversight is still crucial to ensure the contractor doesn't compromise quality to meet the fixed price.

What are the historical spending patterns for navigation systems by the Department of the Air Force?

Historical spending patterns for navigation systems by the Department of the Air Force typically reflect ongoing modernization efforts, platform upgrades, and the sustainment of existing fleets. The Air Force consistently invests in advanced avionics and navigation technologies to maintain air superiority and operational effectiveness. Spending can fluctuate based on major acquisition programs, such as the development of new aircraft (e.g., F-35, B-21) or the retrofitting of older platforms with updated navigation suites. Budgetary allocations for R&D, procurement, and sustainment of these systems are usually detailed within the annual DoD budget requests and appropriations acts, showing a sustained, albeit variable, commitment to this technology area.

What is the significance of the NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) in understanding this contract?

The NAICS code 334511 provides crucial context by defining the specific industry segment this contract serves. It indicates that the procurement is for the manufacturing of systems and instruments used for search, detection, navigation, and guidance, specifically within the aeronautical and nautical domains. This classification helps in understanding the type of technology involved – likely sophisticated electronic and mechanical components – and the specialized manufacturing capabilities required. It also allows for comparisons with other government contracts or industry data within this specific manufacturing sub-sector, aiding in market analysis and benchmarking.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $57,672,838

Exercised Options: $43,293,522

Current Obligation: $42,992,908

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline