DoD's $38.7M contract for gateway operational readiness demonstration awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $38,698,590 ($38.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2008-10-24

End Date: 2009-12-11

Contract Duration: 413 days

Daily Burn Rate: $93.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92128

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $38.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION Key points: 1. The contract's value of $38.7 million for a demonstration project raises questions about cost-effectiveness given the lack of competitive bidding. 2. Awarded as a sole-source contract, the absence of competition limits price discovery and potentially inflates costs for taxpayers. 3. The short duration of 413 days suggests a focused, short-term objective, but the significant expenditure warrants scrutiny. 4. The contract falls under 'Other Electronic Component Manufacturing,' indicating a specialized technical requirement. 5. Northrop Grumman's track record as a major defense contractor suggests technical capability, but the sole-source nature bypasses market validation of their pricing. 6. The lack of small business involvement (sb: false) indicates this contract did not prioritize small business participation.

Value Assessment

Rating: questionable

The $38.7 million contract value for a demonstration project, awarded without competition, makes a direct value-for-money assessment difficult. Benchmarking against similar operational readiness demonstrations is challenging due to the sole-source nature. However, the absence of competitive pressure suggests that the pricing may not have been optimized. The cost-plus-fixed-fee (CPFF) contract type also introduces risk, as the contractor is reimbursed for allowable costs plus a fixed fee, potentially leading to cost overruns if not managed tightly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. The 'NOT COMPETED' status indicates that a competitive process was not undertaken. This approach is typically justified when only one responsible source can provide the required supplies or services. However, it bypasses the price discovery mechanisms inherent in a competitive environment, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding, where multiple companies vie for the contract by offering their best prices.

Public Impact

The primary beneficiary is Northrop Grumman Systems Corporation, which received a significant contract award. The services delivered are related to an 'INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION,' suggesting a focus on testing and validating critical systems. The geographic impact is likely concentrated in California, where the contractor is located, and potentially at the specific military installation where the demonstration takes place. The workforce implications would primarily affect specialized technical personnel employed by Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Sole-source award bypasses market validation of pricing and technical solutions.
No indication of small business participation or subcontracting opportunities.

Positive Signals

Awarded to a major defense contractor (Northrop Grumman) with established capabilities.
Contract focuses on a specific demonstration, implying a defined objective.
Contract has a clear start and end date, providing a defined period of performance.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically related to electronic components and systems integration. The market for such specialized defense technology is often characterized by a limited number of large, established prime contractors like Northrop Grumman. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of 'operational readiness demonstrations' and the sole-source award.

Small Business Impact

This contract was not set aside for small businesses (sb: false), nor does it appear to have specific subcontracting requirements mentioned in the provided data. The award to a large prime contractor like Northrop Grumman suggests that the focus was on their direct capabilities rather than leveraging the small business ecosystem. This means potential opportunities for small businesses to participate in this specific contract are likely minimal.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. As a cost-plus-fixed-fee contract, rigorous oversight of allowable costs and performance is crucial. Transparency is limited by the sole-source nature and the lack of public competition details. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Systems Integration
Aerospace Electronics Manufacturing
Military Operational Readiness Programs
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award lacks competitive justification.
Cost-plus-fixed-fee contract type poses potential cost overrun risks.
Limited transparency due to non-competitive nature.
No small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION

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 $38.7 million.

What is the period of performance?

Start: 2008-10-24. End: 2009-12-11.

What is Northrop Grumman's track record with similar sole-source, cost-plus-fixed-fee contracts for operational readiness demonstrations?

Northrop Grumman, as a major defense contractor, has a long history of performing complex defense-related contracts, including those involving system integration, testing, and operational readiness. Their experience with sole-source awards, particularly for specialized or urgent requirements, is extensive. Cost-plus-fixed-fee (CPFF) contracts are common in R&D and demonstration phases where cost uncertainties are high. While specific data on 'interim gateway operational readiness demonstrations' is not publicly detailed, Northrop Grumman's portfolio includes numerous projects requiring similar technical expertise and contract structures. Analyzing their past performance on CPFF contracts would involve reviewing their compliance with cost accounting standards, delivery performance, and any documented cost overruns or efficiencies. However, detailed performance metrics for specific past contracts are often not publicly disclosed.

How does the $38.7 million cost compare to similar operational readiness demonstrations, considering it was sole-sourced?

Direct comparison of the $38.7 million cost to similar operational readiness demonstrations is challenging due to the sole-source nature of this award and the specific, potentially unique, requirements of an 'Interim Gateway Operational Readiness Demonstration.' Competitive awards allow for price benchmarking against multiple bids, providing a market-driven assessment of value. In a sole-source scenario, the government relies on negotiation and internal cost estimates. Without competitive bids, it's difficult to ascertain if this amount represents optimal value for money. Factors influencing cost include the complexity of the systems being demonstrated, the duration of the demonstration, and the specific technical expertise required. The cost-plus-fixed-fee structure also means the final cost could deviate from the initial estimate, further complicating direct comparisons.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract of this magnitude?

The primary risks associated with this contract are twofold. Firstly, the sole-source award means the government did not benefit from competitive bidding, potentially leading to a higher price than could have been achieved in a competitive environment. There's a risk that the contractor's pricing is not as aggressive as it might be under competition. Secondly, the cost-plus-fixed-fee (CPFF) structure, while providing flexibility for evolving requirements, carries the risk of cost overruns. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize less cost-conscious behavior if oversight is not rigorous. The government bears the risk of cost increases beyond the initial estimate, and the fixed fee might not adequately compensate for unforeseen complexities if not properly negotiated. Effective oversight is critical to mitigate these risks.

What is the expected effectiveness or outcome of this 'INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION' based on the contract details?

The contract title, 'INTERIM GATEWAY OPERATIONAL READINESS DEMONSTRATION,' suggests the primary objective is to test and validate the operational readiness of a specific system or capability, referred to as the 'Gateway.' The 'Interim' nature implies this might be a preliminary or intermediate stage of testing, possibly before full deployment or a more comprehensive evaluation. The contract's duration of 413 days (approximately 13.5 months) indicates a focused period for this demonstration. While the specific systems and success criteria are not detailed in the provided data, the expected outcome is likely a set of findings, performance metrics, and recommendations regarding the 'Gateway' system's readiness for its intended operational role. This demonstration aims to identify potential issues and confirm capabilities before wider implementation.

How does this contract fit into the broader spending patterns for 'Other Electronic Component Manufacturing' within the Department of Defense?

The contract's classification under NAICS code 334419 ('Other Electronic Component Manufacturing') places it within a specific segment of the defense industrial base. Spending in this category typically supports the development and procurement of specialized electronic parts and sub-assemblies crucial for advanced military systems. While $38.7 million is a substantial amount for a single contract, it represents a fraction of the overall DoD budget. The 'Other' designation suggests it might not fit neatly into more common categories like semiconductors or circuit boards, potentially indicating a niche or custom-developed component. Analyzing its place within broader spending requires comparing it to the total annual expenditure on NAICS 334419 and related electronic manufacturing categories by the DoD, looking for trends in contract types, awardees, and justifications (e.g., sole-source vs. competitive).

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

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

Financial Breakdown

Contract Ceiling: $39,251,277

Exercised Options: $38,698,590

Current Obligation: $38,698,590

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline