Northrop Grumman awarded $10.6M contract for aircraft manufacturing, a sole-source award with a long performance period

Contract Overview

Contract Amount: $10,661,207 ($10.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-01-14

End Date: 2011-08-08

Contract Duration: 2,397 days

Daily Burn Rate: $4.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $10.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. The contract's value of $10.6 million over its duration suggests a significant investment in specialized aircraft manufacturing capabilities. 2. As a sole-source award, the absence of competitive bidding raises questions about potential price efficiencies and market responsiveness. 3. The contract's duration of nearly 7 years indicates a long-term need for the services or products provided. 4. The 'Aircraft Manufacturing' NAICS code points to a focus on complex, high-value production within the defense sector. 5. The 'Cost Plus Fixed Fee' contract type suggests that costs are reimbursed, plus a fixed fee, which can shift some risk to the government. 6. The award was managed by the Defense Contract Management Agency, indicating a focus on defense-related procurement.

Value Assessment

Rating: fair

Benchmarking the value of this $10.6 million contract is challenging without specific details on the aircraft manufactured or services rendered. However, the 'Cost Plus Fixed Fee' structure, while common for complex projects, can sometimes lead to higher overall costs for the government compared to fixed-price contracts if not managed rigorously. The long duration suggests a substantial scope, and without competitive data, it's difficult to definitively assess if the pricing represents excellent value for money. Further analysis would require comparing the unit costs or total project cost against similar, competitively awarded contracts for comparable aircraft or manufacturing services.

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 that the government did not benefit from the price discovery and potential cost savings that can arise from a competitive bidding process. This approach may be justified by specific technical requirements but warrants scrutiny to ensure the government is not overpaying.

Taxpayer Impact: For taxpayers, sole-source awards mean that the government may not be achieving the lowest possible price for goods or services. While sometimes necessary, it removes the downward pressure on pricing that competition provides, potentially leading to higher overall expenditure.

Public Impact

The primary beneficiaries are likely the Department of Defense, which receives the manufactured aircraft or related services. The contract supports the production of specialized aircraft, crucial for national defense capabilities. The geographic impact is primarily centered around the contractor's facilities in California, potentially supporting local employment and the regional aerospace ecosystem. The contract implies a need for skilled labor in aircraft manufacturing, including engineers, technicians, and production staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Long contract duration (nearly 7 years) increases exposure to potential scope creep or changing requirements.
Lack of specific details on the aircraft or services makes independent value assessment difficult.

Positive Signals

Award to a known entity (Northrop Grumman) suggests established capabilities and a track record in defense manufacturing.
The contract addresses a specific, likely critical, need within the Department of Defense.
The 'Aircraft Manufacturing' NAICS code indicates a focus on a high-technology, strategic sector.
Managed by the Defense Contract Management Agency, implying adherence to defense procurement standards.

Sector Analysis

The aerospace and defense manufacturing sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract falls squarely within the aircraft manufacturing segment, a critical component of national security. Spending in this sector is often driven by government procurement, particularly for military applications. Comparable spending benchmarks would typically involve analyzing the costs of similar military aircraft production programs, which are often classified or highly specialized, making direct comparisons difficult.

Small Business Impact

This contract was not awarded to a small business, nor does it appear to have a specific small business set-aside component indicated ('sb': false). Therefore, the direct impact on small businesses through this specific award is likely minimal. However, as a large prime contractor, Northrop Grumman may engage small businesses as subcontractors for specialized components or services, contributing indirectly to the small business ecosystem within the aerospace supply chain. The extent of this subcontracting would need further investigation.

Oversight & Accountability

Oversight for this contract would primarily fall under the purview of the Department of Defense and the Defense Contract Management Agency (DCMA). The DCMA is responsible for ensuring contract compliance, monitoring performance, and verifying costs, especially under cost-reimbursement type contracts. Transparency is generally limited for defense contracts of this nature, with specific details often classified or proprietary. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Procurement
Aircraft Production
Aerospace Manufacturing
Sole-Source Contracts
Cost-Plus Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. See the official description on USAspending.

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: 2005-01-14. End: 2011-08-08.

What is Northrop Grumman's track record with similar sole-source defense contracts?

Northrop Grumman is a major defense contractor with extensive experience in sole-source and competitively awarded contracts across various defense platforms. Historically, they have been awarded numerous sole-source contracts for complex systems, including aircraft, spacecraft, and defense electronics, often due to their specialized expertise and technological capabilities. While specific details of past sole-source awards are often not publicly disclosed in full, their consistent role as a prime contractor for the U.S. military suggests a substantial history of managing such agreements. Analyzing their performance on these contracts would require access to internal DoD data on cost, schedule, and performance metrics, which are typically not publicly available for individual sole-source awards.

How does the 'Cost Plus Fixed Fee' pricing structure compare to other contract types for aircraft manufacturing?

The 'Cost Plus Fixed Fee' (CPFF) contract type is often used for research and development or complex manufacturing where the scope is not fully defined at the outset, or where innovation is a key component. In CPFF, the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set regardless of the final cost, shifting more risk to the contractor. For aircraft manufacturing, if the design and production processes are well-established and predictable, a fixed-price contract might offer better value by incentivizing contractor efficiency. However, for novel aircraft or significant modifications, CPFF can be more appropriate, though it requires robust government oversight to control costs and ensure the fixed fee remains reasonable relative to the effort.

What are the primary risks associated with a sole-source award of this magnitude and duration?

The primary risks associated with a sole-source award of this magnitude ($10.6M) and duration (nearly 7 years) include potential lack of price competition, leading to higher costs for the government. Without competitive pressure, the contractor may have less incentive to innovate on cost-saving measures. There's also a risk of contractor complacency or reduced efficiency over the long term. Furthermore, if the government's needs evolve significantly during the contract's life, modifying a sole-source agreement can be complex and may not result in the best value compared to re-competing the requirement. Ensuring robust contract management, clear performance metrics, and fair profit margins are critical to mitigating these risks.

What does the 'Aircraft Manufacturing' NAICS code imply about the nature of this contract?

The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' indicates that this contract is for the production of complete aircraft, or parts and structures for aircraft. This typically involves complex assembly, integration of various systems (avionics, engines, airframes), and adherence to stringent quality and safety standards. Contracts under this code often involve significant engineering, testing, and manufacturing processes, requiring specialized facilities and a highly skilled workforce. The value and duration of this contract suggest it could be for a specific military aircraft program, a significant upgrade, or the production of a substantial number of aircraft or major components.

How does the 'CALIFORNIA' state code impact the analysis of this contract?

The 'CALIFORNIA' state code indicates that the contractor, Northrop Grumman Systems Corporation, is located or performing work in California. California has a large and historically significant aerospace and defense industry, with numerous companies involved in aircraft design, manufacturing, and related technologies. The presence of a major defense contractor in the state often correlates with a robust supply chain, a skilled workforce, and significant economic activity within the sector. For this specific contract, it suggests that the work is being performed within a region known for its aerospace expertise, potentially leveraging established infrastructure and talent pools.

What are the implications of the contract start date (2005) and end date (2011) for current analysis?

The contract start date of January 14, 2005, and end date of August 8, 2011, mean this contract is long completed. Analyzing it now provides historical context rather than insight into current spending or performance. The duration of nearly seven years (2397 days) indicates a substantial, long-term requirement at the time. The fact that it was a sole-source, cost-plus-fixed-fee award suggests specific circumstances justified this approach for the Department of Defense during that period. Understanding why it was sole-sourced and how the costs were managed could offer lessons learned for current procurement strategies, but the data itself does not reflect ongoing or recent federal spending patterns.

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

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: ONE HORNET WAY M/S K08304/, EL SEGUNDO, CA, 90245

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline