DoD's $41.5M contract for AVIPSS IV software support awarded to Northrop Grumman shows fair value, but limited competition signals potential overspending
Contract Overview
Contract Amount: $41,457,609 ($41.5M)
Contractor: Northrop Grumman Systems Corporation
Awarding Agency: Department of Defense
Start Date: 2012-12-13
End Date: 2017-09-30
Contract Duration: 1,752 days
Daily Burn Rate: $23.7K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: COST PLUS FIXED FEE
Sector: IT
Official Description: IGF::OT::IGF SOFTWARE ENHANCEMENT/TESTING/INTEGRATION/ MAINTENANCE FOR THE AUTOMATED VIRTUAL INFORMATION PRODUCTION SUPPORT SYSTEM IV (AVIPSS IV)
Place of Performance
Location: FAIRBORN, GREENE County, OHIO, 45324
State: Ohio Government Spending
Plain-Language Summary
Department of Defense obligated $41.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF SOFTWARE ENHANCEMENT/TESTING/INTEGRATION/ MAINTENANCE FOR THE AUTOMATED VIRTUAL INFORMATION PRODUCTION SUPPORT SYSTEM IV (AVIPSS IV) Key points: 1. The contract's cost-plus-fixed-fee structure, while flexible, can lead to cost overruns if not managed tightly. 2. Awarded under full and open competition, the contract saw two bidders, indicating a moderate level of market engagement. 3. The duration of the contract (over 4 years) suggests a long-term need for these specialized IT services. 4. The primary performance location in Ohio may have implications for regional IT workforce development. 5. Northrop Grumman's established presence in defense contracting suggests a degree of reliability but also potential for complacency. 6. The lack of small business set-aside raises questions about opportunities for smaller, innovative firms in this space.
Value Assessment
Rating: fair
The contract's total value of $41.5 million over approximately 4.8 years averages to about $8.6 million annually. Benchmarking this against similar IT support contracts for complex systems is challenging without more specific service details. However, the cost-plus-fixed-fee (CPFF) pricing structure inherently carries a higher risk of cost escalation compared to fixed-price contracts. While CPFF can be appropriate for research and development or when scope is uncertain, it requires robust oversight to ensure value for money. The provided data does not offer enough detail to definitively benchmark pricing against market rates for comparable services.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. Two bids were received, which suggests a moderate level of competition. While two bidders are better than one, it is less competitive than scenarios with numerous offers, which typically drive prices down more effectively. The limited number of bidders could indicate a specialized market or high barriers to entry for potential competitors.
Taxpayer Impact: With only two bidders, taxpayers may not have benefited from the most aggressive pricing achievable through broader competition. This could translate to higher costs than if more companies had vied for the contract.
Public Impact
The Department of the Air Force benefits from continued support and enhancement of its Automated Virtual Information Production Support System IV (AVIPSS IV). This contract ensures the operational readiness and potential modernization of a critical IT system for military operations. The primary geographic impact is in Ohio, where the contractor's performance is based, potentially supporting local IT jobs. The contract supports specialized IT services, contributing to the broader defense technology sector's capabilities.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-plus-fixed-fee contracts can incentivize higher spending if not rigorously monitored.
- Limited competition (two bidders) may result in suboptimal pricing for the government.
- The long contract duration could lead to vendor lock-in or reduced agility in adopting new technologies.
- Lack of small business participation may limit innovation and access to specialized capabilities.
Positive Signals
- Awarded through full and open competition, ensuring a broad initial solicitation.
- Northrop Grumman is a large, established defense contractor with significant experience.
- The contract addresses a specific, ongoing need for IT system support within the Air Force.
Sector Analysis
This contract falls within the Computer Systems Design Services sector (NAICS 541512), a critical component of the broader IT industry supporting government and defense operations. The market for defense IT support is substantial, characterized by long-term relationships, high security requirements, and specialized technical expertise. Companies like Northrop Grumman are major players in this space, often competing for large, complex system integration and maintenance contracts. Spending benchmarks are difficult without specific service details, but IT support for mission-critical systems often represents a significant portion of defense IT budgets.
Small Business Impact
This contract was not set aside for small businesses, and the data does not indicate any subcontracting requirements for small businesses. The absence of a small business set-aside means that opportunities for smaller, potentially more agile firms to compete directly for this work were limited. This could potentially stifle innovation and reduce the pool of specialized providers available to the government in the long run. It also means that the direct economic benefits to the small business ecosystem from 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 financial oversight and auditing are crucial to ensure costs are reasonable and allocable. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is generally maintained through contract award databases, but detailed performance metrics and cost breakdowns are often considered sensitive or proprietary.
Related Government Programs
- Defense IT Modernization Programs
- Air Force Software Development Contracts
- Mission Support Systems Contracts
- IT Services for Command and Control Systems
Risk Flags
- Cost-Plus-Fixed-Fee structure requires diligent oversight to prevent cost overruns.
- Limited competition may lead to suboptimal pricing.
- Lack of small business participation could limit innovation.
Tags
it-services, software-development, computer-systems-design, department-of-defense, air-force, northrop-grumman, cost-plus-fixed-fee, full-and-open-competition, large-contract, ohio, defense-contracting, it-support
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $41.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF SOFTWARE ENHANCEMENT/TESTING/INTEGRATION/ MAINTENANCE FOR THE AUTOMATED VIRTUAL INFORMATION PRODUCTION SUPPORT SYSTEM IV (AVIPSS 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 $41.5 million.
What is the period of performance?
Start: 2012-12-13. End: 2017-09-30.
What is the track record of Northrop Grumman with similar IT support contracts for the Department of Defense?
Northrop Grumman has a long and extensive history of providing IT services, systems integration, and support to the Department of Defense across various branches and agencies. They are a major defense contractor frequently awarded large-scale contracts for complex systems, including software development, maintenance, and sustainment. Their track record generally indicates a capacity to handle large, mission-critical programs. However, like any large contractor, specific contract performance can vary, and reviews often highlight both successes in delivery and challenges related to cost, schedule, or scope management on individual projects. For AVIPSS IV, assessing Northrop Grumman's specific performance would require examining past performance reviews and delivery metrics for this particular contract or highly comparable ones.
How does the $41.5 million total contract value compare to similar IT support contracts for virtual information production systems?
Directly comparing the $41.5 million total value to 'similar' contracts is challenging without a precise definition of 'virtual information production systems' and detailed service scope. However, for large, long-term IT support and enhancement contracts within the Department of Defense, this value falls within a common range for specialized systems. Contracts for sustainment, modernization, and operational support of complex software systems can easily run into tens of millions of dollars over several years. The average annual value of approximately $8.6 million suggests a significant, ongoing requirement. To provide a more precise benchmark, one would need to identify contracts with comparable system complexity, user base, security requirements, and service level agreements within the DoD or other federal agencies.
What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract structure for this type of service?
The primary risk with a CPFF contract is the potential for cost overruns. While the 'fixed fee' provides the contractor with a defined profit margin, the 'cost plus' portion means the government reimburses the contractor's allowable costs. If the contractor's costs exceed initial estimates, the government pays more. This structure can incentivize contractors to incur higher costs if oversight is not stringent, as their fee remains constant regardless of the actual costs incurred. For the government, effective oversight, detailed cost tracking, and robust negotiation of allowable costs are critical to mitigate this risk and ensure value for money. Unforeseen technical challenges or scope creep can exacerbate these cost risks.
What does the limited competition (two bidders) imply about the potential for price discovery and overall value for taxpayers?
Limited competition, such as the two bidders in this case, generally weakens price discovery. When only a few entities are competing, they may have less incentive to offer their absolute lowest prices, knowing the pool of alternatives is small. This can lead to higher prices than would be achieved in a more robustly competitive environment with multiple bidders. For taxpayers, this means there is a higher risk that the contract price may not reflect the most efficient or cost-effective solution available in the market. While the government still negotiates, the leverage is reduced compared to situations with numerous competing offers, potentially resulting in less value for the funds expended.
How might the lack of small business participation impact innovation in this specific IT support domain?
The absence of a small business set-aside or explicit subcontracting goals for small businesses in this $41.5 million contract could limit the infusion of innovation. Small businesses often bring specialized expertise, agile development methodologies, and disruptive technologies that larger, established contractors may be slower to adopt. By not actively engaging small businesses, the Air Force may miss out on potentially more efficient or advanced solutions. Furthermore, it reduces opportunities for these smaller firms to gain experience and build a track record within the defense IT sector, potentially hindering the growth of a diverse and innovative supplier base for future needs.
What are the implications of the contract's performance location in Ohio for workforce and regional economic impact?
The contract's performance location in Ohio suggests that a portion of the $41.5 million federal spending will directly benefit the regional economy through job creation and support for the local IT workforce. This includes employment for software engineers, system administrators, testers, and support staff. It also implies that businesses in Ohio may see increased demand for related services or supplies. For the federal government, having performance concentrated in a specific region can sometimes simplify oversight but may also limit access to a broader national talent pool. The long-term impact depends on the sustainability of these jobs and the development of specialized IT skills within the Ohio workforce related to defense systems.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 2
Pricing Type: COST PLUS FIXED FEE (U)
Evaluated Preference: NONE
Contractor Details
Parent Company: Northrop Grumman Corporation (UEI: 967356127)
Address: 2340 DULLES CORNER PARK, HERNDON, VA, 20171
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: $44,582,911
Exercised Options: $44,582,911
Current Obligation: $41,457,609
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2012-12-13
Current End Date: 2017-09-30
Potential End Date: 2017-09-30 00:00:00
Last Modified: 2017-03-06
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