DoD awards $280M+ to Northrop Grumman for guided missile parts, with limited competition

Contract Overview

Contract Amount: $280,225,599 ($280.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-11-18

End Date: 2017-05-31

Contract Duration: 4,577 days

Daily Burn Rate: $61.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

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

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $280.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Contract value exceeds $280 million over its lifecycle. 2. Sole-source award indicates limited market competition for these specialized parts. 3. Long contract duration (over 12 years) suggests a stable, ongoing need. 4. Cost-plus award fee structure incentivizes performance but requires careful oversight. 5. Contractor is a major defense industrial base player. 6. Awarded by the Defense Contract Management Agency, indicating a focus on program execution.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specialized nature and limited competition. The cost-plus award fee structure allows for flexibility but can lead to higher costs if not managed tightly. Without comparable sole-source contracts for similar niche components, assessing true value-for-money is difficult. The significant duration suggests a sustained need, but the absence of competitive pressure may have allowed costs to rise beyond what a more open market might yield.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was considered. This typically occurs when a product or service is unique, proprietary, or only available from a single source. The lack of competition means the government did not benefit from price discovery through multiple bids, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government's negotiating position is weakened when only one supplier can fulfill the requirement.

Public Impact

The Department of Defense benefits from a consistent supply of critical components for guided missile systems. This contract supports the manufacturing and sustainment of advanced defense capabilities. The primary geographic impact is likely within the United States, supporting domestic defense production. Workforce implications include employment for specialized engineers, technicians, and manufacturing personnel at Northrop Grumman and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus award fee structure requires robust government oversight to manage expenses effectively.
Long contract duration could lead to cost creep if not actively managed.
Lack of transparency in sole-source negotiations can obscure true cost drivers.

Positive Signals

Northrop Grumman is a well-established defense contractor with a track record in complex systems.
The contract ensures the availability of critical components for national security programs.
The award fee mechanism provides an incentive for contractor performance and efficiency.
The long duration suggests a stable and predictable supply chain for essential parts.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on guided missile and space vehicle components. This is a highly specialized and capital-intensive industry dominated by a few large prime contractors and numerous specialized suppliers. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish due to the unique nature of the components and the sole-source award.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by `sb: false`. Northrop Grumman, as a large prime contractor, may have subcontracting obligations to small businesses as part of its overall defense portfolio. However, the direct award to a large entity suggests limited direct opportunities for small businesses on this specific contract, unless they are part of Northrop Grumman's supply chain.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus award fee structure necessitates rigorous financial oversight to validate costs and ensure the award fee is justified. Transparency is generally limited in sole-source procurements, but contract modifications, performance reports, and audits would be key accountability measures.

Related Government Programs

Guided Missile Programs
Space Vehicle Manufacturing
Defense Component Procurement
Northrop Grumman Defense Contracts

Risk Flags

Sole Source Procurement
Cost-Plus Award Fee Structure
Long Contract Duration
Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $280.2 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 $280.2 million.

What is the period of performance?

Start: 2004-11-18. End: 2017-05-31.

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

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in producing complex systems, including missiles and space vehicles. They frequently engage in sole-source or limited-competition contracts due to the specialized nature of their products and the high barriers to entry in the defense industrial base. Historical data indicates a pattern of securing large, long-term contracts for critical defense components. While specific details on past sole-source awards for similar parts are proprietary, their overall performance on large-scale defense programs suggests a capacity to deliver, though oversight is crucial to manage costs and ensure value, especially in non-competitive scenarios.

How does the $280M+ contract value compare to other DoD spending on guided missile parts?

The $280 million contract value represents a significant investment in guided missile components. However, placing this in context with overall Department of Defense (DoD) spending requires broader analysis. The DoD's annual budget runs into hundreds of billions of dollars, with substantial allocations for research, development, testing, and evaluation (RDT&E), as well as procurement of major weapon systems. Spending on specific components like those for guided missiles can vary widely year-to-year based on program needs, modernization efforts, and geopolitical factors. Without access to detailed spending breakdowns across all missile programs and component suppliers, it's difficult to definitively state if $280M+ is high or low relative to the entire DoD portfolio. However, it signifies a substantial commitment to a particular set of components over a long period.

What are the primary risks associated with a sole-source, cost-plus award fee contract for defense components?

The primary risks associated with this contract structure are multifaceted. For a sole-source award, the main risk is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or optimize costs. Taxpayers may not receive the best possible value. For a cost-plus award fee (CPAF) structure, the risk lies in cost control. While the award fee incentivizes performance, the government bears the cost of allowable expenses. If the government's oversight is insufficient, costs can escalate beyond initial projections. There's also a risk that the contractor might prioritize activities that maximize their fee over those that are most critical to mission success if the award fee criteria are not perfectly aligned with strategic objectives. Contractor performance and delivery schedule risks are also present, though mitigated by the award fee.

How effective is the cost-plus award fee (CPAF) structure in ensuring program effectiveness for specialized defense components?

The Cost-Plus Award Fee (CPAF) structure is designed to balance cost reimbursement with performance incentives, aiming for effectiveness in complex projects where outcomes are uncertain or difficult to define precisely upfront. For specialized defense components, CPAF can be effective because it allows the government to reimburse the contractor for incurred costs while providing a financial incentive (the award fee) for meeting or exceeding performance targets, such as quality, delivery schedules, and technical objectives. This structure is often used when the scope of work may evolve or when performance metrics are challenging to quantify definitively. However, its effectiveness hinges critically on the clarity and measurability of the award fee criteria and the rigor of government oversight in monitoring costs and performance against those criteria. Poorly defined criteria or weak oversight can undermine the intended benefits.

What are the historical spending patterns for guided missile and space vehicle parts manufacturing by the DoD?

Historical spending patterns for guided missile and space vehicle parts manufacturing by the DoD show a consistent and significant allocation of resources, driven by national security imperatives and technological advancements. Over the decades, the DoD has invested billions of dollars in the research, development, and procurement of these systems. Spending tends to fluctuate based on geopolitical events, strategic priorities (e.g., missile defense, hypersonic capabilities), and the lifecycle of major weapon programs. Large, established defense contractors like Northrop Grumman have historically secured a substantial portion of this spending through competitive bids and sole-source awards for specialized components. Trends indicate a continuous need for upgrades, modernization, and sustainment of existing fleets, alongside investment in next-generation technologies, ensuring sustained demand in this sector.

What is the significance of the contract being awarded by the Defense Contract Management Agency (DCMA)?

The awarding and administration of this contract by the Defense Contract Management Agency (DCMA) signifies a focus on the execution and oversight of defense contracts. DCMA's role is primarily to ensure that contractors meet their contractual obligations regarding cost, schedule, performance, and quality. For a large, long-term, sole-source contract like this one, DCMA's involvement is crucial for monitoring expenditures, verifying contractor performance against the cost-plus award fee criteria, and ensuring compliance with all terms and conditions. Their presence indicates that the Department of Defense is actively managing the contractor's progress and seeking to mitigate risks throughout the contract's lifecycle, particularly concerning financial accountability and delivery of critical components.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: SPACE VEHICLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 1580A NURSERY RD, LINTHICUM HEIG, MD, 21090

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $144,291,450

Exercised Options: $126,740,211

Current Obligation: $280,225,599

Actual Outlays: $14,606

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline