DoD's $17.5B R&D contract with Northrop Grumman shows long-term investment in advanced technologies

Contract Overview

Contract Amount: $17,513,168 ($17.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-12-01

End Date: 2013-01-31

Contract Duration: 2,618 days

Daily Burn Rate: $6.7K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 7

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: REDONDO BEACH, LOS ANGELES County, CALIFORNIA, 90278

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $17.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Significant long-term investment in R&D suggests a focus on future capabilities. 2. The contract's duration and value indicate a critical role for the contractor. 3. Cost-plus-fixed-fee structure may incentivize cost overruns if not closely managed. 4. Research and Development in Physical, Engineering, and Life Sciences is a broad category, making specific performance metrics crucial. 5. The exclusion of sources after initial full and open competition warrants scrutiny. 6. A single award over an extended period suggests a high degree of specialization or unique capability.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its R&D nature and long duration. The cost-plus-fixed-fee (CPFF) pricing structure, while common for R&D, carries inherent risks of cost escalation. Without detailed breakdowns of research objectives and milestones, it's difficult to assess if the $17.5 billion represents excellent value for money. The absence of specific performance metrics in the provided data makes a direct comparison to similar contracts or market rates for R&D services difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was initially awarded under full and open competition but later excluded sources. This suggests that after the initial competition, a decision was made to limit further competition, possibly due to specialized requirements, proprietary technology, or national security concerns. The implications for price discovery are that the government may not have benefited from the full spectrum of potential bidders and competitive pricing that a truly open competition would have provided throughout the contract's life.

Taxpayer Impact: Limiting competition after initial award can potentially lead to higher costs for taxpayers as the benefits of broader market engagement are forgone.

Public Impact

The primary beneficiaries are likely the Department of Defense and its operational readiness through advancements in physical, engineering, and life sciences. Services delivered encompass cutting-edge research and development, potentially leading to new military technologies and capabilities. The geographic impact is primarily centered around the contractor's facilities in California, but the ultimate impact of the R&D could be global. Workforce implications include highly skilled jobs in research, engineering, and scientific fields, supporting the advanced technology sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract type can lead to cost overruns if not rigorously managed.
The 'after exclusion of sources' clause raises questions about the extent of competition throughout the contract's lifecycle.
Long contract duration (over 8 years) increases the risk of scope creep or evolving requirements not aligning with initial objectives.
Lack of specific performance metrics makes it hard to gauge the true value and effectiveness of the R&D investment.
The broad R&D category (541710) can obscure the specific nature and impact of the work performed.

Positive Signals

Significant investment in R&D signals a commitment to future technological superiority for national defense.
Award to a major defense contractor like Northrop Grumman suggests access to specialized expertise and infrastructure.
The initial full and open competition indicates an effort to secure competitive pricing at the outset.
The contract's long duration may reflect the complex and lengthy nature of advanced R&D projects.
The contract supports critical research areas vital for national security.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. This is a critical area for defense innovation, aiming to develop next-generation technologies. The market for defense R&D is characterized by high barriers to entry, significant government investment, and a limited number of large, specialized contractors. Comparable spending benchmarks are difficult to establish without knowing the specific R&D focus, but the $17.5 billion over nearly 9 years indicates a substantial, long-term commitment to a particular technological domain.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Given the substantial value and specialized nature of R&D, it is unlikely that small businesses would be the primary awardees. However, Northrop Grumman, as a large prime contractor, may engage small businesses as subcontractors. The extent of small business subcontracting is not detailed here but is a key area for oversight to ensure opportunities within the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the terms of the Cost Plus Fixed Fee (CPFF) contract, requiring detailed reporting on costs and progress towards research objectives. Transparency is often limited in defense R&D contracts due to national security sensitivities, but Inspector General (IG) oversight would be applicable for investigating fraud, waste, or abuse.

Related Government Programs

Advanced Technology Development
Research and Development Services
Defense Science and Technology
Engineering Services
Systems Development

Risk Flags

Potential for cost overruns due to CPFF structure.
Limited competition after initial award may impact price discovery.
Long contract duration increases risk of obsolescence or changing priorities.
Broad R&D category lacks specificity on research focus.
Significant financial commitment requires robust oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.5 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 $17.5 million.

What is the period of performance?

Start: 2005-12-01. End: 2013-01-31.

What specific research and development areas are covered under this $17.5 billion contract?

The provided data classifies the contract under NAICS code 541710, 'Research and Development in the Physical, Engineering, and Life Sciences.' This is a broad category. Without access to the contract's statement of work or specific task orders, the precise R&D areas remain unspecified. However, given the contractor (Northrop Grumman) and the agency (Department of Defense), it is highly probable that the research focuses on areas critical to national security, such as advanced materials, aerospace technologies, electronic warfare, cyber capabilities, sensor development, or potentially directed energy systems. The long duration and high value suggest a foundational or transformative research effort rather than incremental improvements.

How does the Cost Plus Fixed Fee (CPFF) structure impact the value proposition for the government?

The Cost Plus Fixed Fee (CPFF) structure is common for research and development contracts where the scope of work can be uncertain or evolve. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While this structure allows for flexibility in R&D, it carries a risk of cost overruns if costs exceed initial estimates, as the contractor's profit (the fixed fee) remains constant. The government bears the brunt of cost increases. Effective value for money in a CPFF contract relies heavily on robust government oversight, stringent cost controls, and clear performance metrics to ensure the contractor remains incentivized to manage costs efficiently while achieving research objectives.

What are the implications of 'full and open competition after exclusion of sources' for this contract?

This contract clause indicates that while the contract was initially awarded through full and open competition, subsequent phases or modifications involved excluding other potential sources. This could occur for various reasons, such as the need for specialized knowledge, proprietary technology developed under the initial award, or national security imperatives. However, it raises concerns about the extent of competition maintained throughout the contract's lifecycle. If significant portions of the work were later competed only among a limited set of sources, it may have reduced the potential for competitive pricing and innovation compared to a continuously open competition. This warrants scrutiny to ensure the exclusion was justified and did not unduly inflate costs.

What is Northrop Grumman's track record with large, long-term DoD R&D contracts?

Northrop Grumman is a major defense contractor with extensive experience in large-scale, long-term research and development programs for the Department of Defense. They have a history of developing complex systems across various domains, including aerospace, defense electronics, and information systems. Their track record typically involves significant technological advancements, though like many large contractors, they have also faced scrutiny regarding contract costs and performance on specific programs. For a contract of this magnitude and duration, it suggests the DoD views Northrop Grumman as possessing unique capabilities or critical expertise essential for the targeted R&D objectives.

How does the $17.5 billion spending compare to other DoD R&D investments?

The $17.5 billion figure for a single R&D contract over approximately 8 years is substantial, placing it among the larger investments in defense research and development. The DoD's annual R&D budget typically runs into the tens of billions of dollars, funding a wide array of projects from basic research to advanced technology development. This specific contract represents a significant portion of the DoD's investment in a particular technological area, underscoring its strategic importance. While not the entirety of DoD R&D spending, it signifies a major, long-term commitment to advancing capabilities within the physical, engineering, and life sciences domains.

What are the potential risks associated with a contract of this duration and value?

Contracts of this magnitude and duration (over 8 years) carry several inherent risks. Firstly, the 'cost plus fixed fee' structure, as mentioned, can lead to cost overruns if not managed tightly. Secondly, the long timeframe increases the risk of technological obsolescence or shifts in strategic priorities, potentially rendering the R&D outcomes less relevant by the time they are realized. Thirdly, 'after exclusion of sources' clauses can limit competitive pressure over time. Fourthly, managing such a large contract requires significant oversight resources from the government to ensure performance, cost control, and adherence to objectives. Finally, the sheer scale increases the potential impact of any failures or significant delays.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: BASIC RESEARCH

Offers Received: 7

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1 SPACE PARK BLVD, REDONDO BEACH, CA, 90278

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline