DoD's $185M R&D contract with Northrop Grumman faces scrutiny over competition and value

Contract Overview

Contract Amount: $185,242,615 ($185.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2018-06-29

End Date: 2026-06-30

Contract Duration: 2,923 days

Daily Burn Rate: $63.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: ARRAY AT COMMERCIAL TIMESCALE (ACT) IV

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $185.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ARRAY AT COMMERCIAL TIMESCALE (ACT) IV Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 8 years raises questions about long-term cost control and adaptability. 3. Cost-plus-fixed-fee structure may incentivize cost escalation rather than efficiency. 4. Lack of small business participation noted, potentially missing opportunities for innovation and economic inclusion. 5. Contract falls under R&D for physical, engineering, and life sciences, a critical but complex sector. 6. Geographic concentration in Maryland for contract performance.

Value Assessment

Rating: questionable

Benchmarking the value of this $185 million R&D contract is challenging due to its sole-source nature and specialized research focus. The cost-plus-fixed-fee (CPFF) pricing structure, while common in R&D, can lead to higher overall costs compared to fixed-price contracts if not managed rigorously. Without competitive bids, it's difficult to ascertain if the fixed fee adequately reflects the effort or if the government is receiving optimal value for the funds expended. The contract's duration also adds to the uncertainty regarding long-term cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically justified when only one source possesses the necessary capabilities or when urgency precludes a competitive process. However, the absence of multiple bidders significantly reduces the government's ability to leverage market forces to achieve the best possible price and terms. This limits the potential for innovative solutions that might emerge from a broader competitive field.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding. This can result in higher overall spending for the government and, consequently, for taxpayers.

Public Impact

The primary beneficiary is the Department of Defense, which receives advanced research and development services. The contract supports advancements in physical, engineering, and life sciences, potentially leading to new defense technologies. Performance is concentrated in Maryland, impacting the local economy and workforce in that region. The contract likely involves highly skilled scientists, engineers, and technicians, contributing to specialized job creation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee structure may not incentivize maximum cost efficiency.
Long contract duration (over 8 years) increases risk of cost overruns and obsolescence.
Lack of small business involvement limits broader economic impact and potential innovation sources.

Positive Signals

Awarded to a known entity (Northrop Grumman) with established capabilities in R&D.
Contract addresses critical research needs within the Department of Defense.
Fixed fee component provides some level of cost predictability within the CPFF structure.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences (NAICS 541715). This is a high-value, knowledge-intensive sector crucial for technological advancement and national security. The market is characterized by significant investment, long development cycles, and a reliance on specialized expertise. Comparable spending in this area often involves large, complex projects awarded to established defense contractors.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there explicit information regarding subcontracting to small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate. This could mean missed opportunities to leverage the innovation and agility of the small business sector and potentially limits the broader economic impact of the contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Given the R&D nature and sole-source award, rigorous oversight of technical progress, cost expenditures, and adherence to the contract's fixed fee is crucial. Transparency may be limited due to the non-competitive nature, but internal DoD reviews and potentially Inspector General audits would be the primary accountability mechanisms.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Aerospace and Defense R&D
Engineering Services Contracts
Life Sciences Research Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee structure
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $185.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ARRAY AT COMMERCIAL TIMESCALE (ACT) IV

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 $185.2 million.

What is the period of performance?

Start: 2018-06-29. End: 2026-06-30.

What is Northrop Grumman's track record with similar sole-source R&D contracts for the Department of Defense?

Northrop Grumman has a long history of performing complex R&D and systems integration for the Department of Defense, often through sole-source or limited-competition vehicles due to their specialized capabilities. Analyzing their past performance on similar Cost Plus Fixed Fee (CPFF) contracts would involve reviewing contract close-out data, any reported cost overruns or underruns, and performance evaluations. While specific data on all past sole-source R&D contracts is not publicly itemized, their extensive portfolio suggests significant experience. However, the lack of public detail on specific performance metrics for individual contracts makes a comprehensive assessment challenging without access to government performance reports (e.g., CPARS).

How does the fixed fee in this CPFF contract compare to industry standards for similar R&D efforts?

Determining the 'fairness' of the fixed fee in a Cost Plus Fixed Fee (CPFF) contract is complex without detailed knowledge of the specific R&D scope, risks, and estimated costs. Industry standards for fixed fees in R&D contracts can vary widely, typically ranging from 5% to 15% of the estimated cost, depending on the contract type, risk, and complexity. For a sole-source award, the government relies heavily on its negotiation team and should have conducted thorough cost and technical analyses to ensure the fee is reasonable. Benchmarking requires access to proprietary data or detailed government cost breakdowns, which are often not public. The fee's adequacy is a key area for oversight to ensure value for taxpayer money.

What are the primary risks associated with the long duration (over 8 years) of this contract?

The extended duration of this contract presents several significant risks. Firstly, technological obsolescence is a major concern; R&D fields evolve rapidly, and technologies developed early in the contract may be outdated by its completion. Secondly, cost escalation risk is heightened over longer periods, as unforeseen challenges or changes in scope can lead to budget increases, even with a fixed fee component. Thirdly, maintaining consistent program oversight and contractor performance over such a long timeframe requires sustained effort and can be challenging. Finally, the government's ability to adapt to changing strategic needs or pivot to new research directions is constrained by the long-term commitment.

What is the potential impact of the sole-source award on the overall innovation ecosystem for this R&D area?

Sole-source awards, while sometimes necessary, can stifle innovation within the broader ecosystem. By not opening the contract to competitive bidding, the government misses out on potentially novel approaches, disruptive technologies, or more cost-effective solutions that smaller or non-traditional contractors might offer. This can create barriers to entry for new players and reinforce the dominance of incumbent contractors. Over time, this can lead to a less dynamic and potentially less innovative R&D landscape, as the primary driver for innovation becomes fulfilling the requirements of a specific, pre-determined contract rather than exploring a wider range of possibilities.

Are there any specific performance metrics or milestones publicly available for this contract?

Publicly available performance metrics or detailed milestones for this specific sole-source R&D contract are generally not disclosed. Contract Performance Reports (CPARs) are typically used by the government to assess contractor performance, but these are often considered sensitive and are not routinely released to the public. While the contract likely outlines specific technical objectives, deliverables, and reporting requirements, the granular details of progress tracking and success criteria are usually internal to the contracting agency and the contractor. This lack of transparency makes independent assessment of program effectiveness difficult.

How does this contract's spending compare to other R&D investments in the physical, engineering, and life sciences by the DoD?

The $185 million total value over approximately 8 years places this contract within the significant investment category for R&D within the DoD. The DoD's annual R&D budget is in the tens of billions of dollars, funding a vast array of projects across numerous scientific disciplines. While this specific contract represents a substantial sum for a single award, it is one component of a much larger federal R&D portfolio. To provide precise comparative context, one would need to analyze spending trends for NAICS code 541715 and similar R&D categories across different DoD branches and agencies over the contract's performance period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA865018R7841

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1580A W NURSERY RD, LINTHICUM HEIGHTS, MD, 21090

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

Financial Breakdown

Contract Ceiling: $188,361,800

Exercised Options: $185,242,615

Current Obligation: $185,242,615

Actual Outlays: $10,283,166

Subaward Activity

Number of Subawards: 200

Total Subaward Amount: $71,916,469

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline