DoD awards Northrop Grumman $245M for EPS CAPS Development, a 7-year contract with 4 bidders

Contract Overview

Contract Amount: $245,364,167 ($245.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-11-30

End Date: 2020-01-31

Contract Duration: 2,618 days

Daily Burn Rate: $93.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS INCENTIVE FEE

Sector: IT

Official Description: EPS CAPS DEVELOPMENT CONTRACT

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $245.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: EPS CAPS DEVELOPMENT CONTRACT Key points: 1. Value for money appears fair given the contract's duration and complexity, though detailed cost breakdowns are needed for a definitive assessment. 2. Competition dynamics show a healthy level of interest with 4 bidders, suggesting a competitive environment for this specialized defense IT service. 3. Risk indicators include the Cost Plus Incentive Fee (CPIF) pricing structure, which can incentivize cost overruns if not managed tightly. 4. Performance context is tied to the development of critical defense communication systems, highlighting the strategic importance of this contract. 5. Sector positioning places this contract within the broader defense IT and telecommunications services market, a significant area of federal spending.

Value Assessment

Rating: fair

The total award of $245.36 million over approximately 7 years (November 2012 to January 2020) averages to about $35 million per year. Benchmarking this against similar large-scale defense IT development contracts is challenging without more granular data on the specific services and deliverables. The CPIF contract type suggests that cost controls are a key focus, but the final value could fluctuate based on performance incentives. Without specific cost-per-unit data or comparison to industry standards for similar development efforts, a precise value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with four distinct bidders vying for the opportunity. The presence of multiple bidders indicates a competitive marketplace for this type of defense IT development. A competitive process generally helps ensure that the government receives fair pricing and that contractors are incentivized to offer their best solutions and value. The number of bidders suggests that the requirement was well-defined and accessible to qualified companies.

Taxpayer Impact: A competitive award process for this contract likely resulted in better pricing and more innovative solutions for taxpayers compared to a sole-source or limited competition scenario.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical upgrades to its communication systems. Services delivered include the development and enhancement of the EPS CAPS (Enhanced Position Location Reporting System - Command and Control, Planning, and Scheduling) system. The geographic impact is national, supporting military operations and command structures across various theaters. Workforce implications include specialized IT and engineering roles within Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Incentive Fee (CPIF) contracts can lead to higher final costs if performance targets are not met efficiently.
The long duration of the contract (over 7 years) increases the risk of scope creep or technological obsolescence if not actively managed.
Lack of detailed public information on specific performance metrics makes it hard to assess the true value and effectiveness of the development.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
The contract supports a critical defense capability, suggesting alignment with strategic national security objectives.
Northrop Grumman is a major defense contractor with a track record in complex systems development.

Sector Analysis

This contract falls within the Defense Information Technology (IT) and Telecommunications sector, a substantial segment of federal procurement. The market for developing and maintaining complex command and control systems is dominated by large defense contractors. Spending in this area is driven by the need for secure, reliable, and advanced communication capabilities to support military operations globally. Comparable spending benchmarks would involve other large-scale IT development contracts for C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) systems.

Small Business Impact

There is no indication that this contract included a small business set-aside. As a large prime contract awarded to a major defense corporation, the primary impact on small businesses would likely be through subcontracting opportunities. The extent of small business participation would depend on Northrop Grumman's subcontracting plan and the specific needs of the EPS CAPS development.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the CPIF contract structure, linking contractor profit to performance outcomes. Transparency is limited, as detailed cost breakdowns and performance reports are generally not publicly disclosed for national security reasons. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Communication Systems
Command and Control Systems
IT Development Contracts
Northrop Grumman Contracts
Department of Defense IT Procurement

Risk Flags

Cost Overrun Risk (CPIF)
Technological Obsolescence Risk
Scope Creep Risk
Long-Term Contract Management Challenges

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $245.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. EPS CAPS DEVELOPMENT CONTRACT

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 $245.4 million.

What is the period of performance?

Start: 2012-11-30. End: 2020-01-31.

What is the specific nature of the EPS CAPS system being developed, and what are its key functionalities?

The EPS CAPS (Enhanced Position Location Reporting System - Command and Control, Planning, and Scheduling) system is a critical component of the Department of Defense's communication and situational awareness infrastructure. Its primary function is to provide enhanced capabilities for tracking, managing, and planning the deployment of assets by integrating position location information with command and control functions. This includes enabling commanders to visualize the operational environment, schedule missions, and coordinate forces more effectively. The development contract likely focused on upgrading existing systems, adding new features for improved data analysis, enhancing interoperability with other military networks, and ensuring robust security protocols.

How does the Cost Plus Incentive Fee (CPIF) structure typically work, and what are the potential risks and benefits for the government in this contract?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and receives a fee that is adjusted based on the achievement of predetermined performance objectives. For the government, the benefit is that the contractor is incentivized to control costs and meet specific performance targets, potentially leading to a more efficient outcome than a simple cost-plus contract. The risks include the potential for the target cost to be set too high, leading to excessive profit for the contractor, or for the performance targets to be too easily achievable or, conversely, unattainable, negating the incentive. Close monitoring by the government is crucial to ensure the incentive structure effectively drives desired outcomes without unduly increasing the final cost.

What is Northrop Grumman's track record with similar large-scale defense IT development contracts?

Northrop Grumman has an extensive and well-established track record in developing and delivering complex IT systems and solutions for the Department of Defense and other government agencies. They are a major prime contractor involved in numerous large-scale programs across various domains, including command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR). Their experience spans software development, systems integration, cybersecurity, and platform modernization. While specific details of past performance on contracts directly comparable to EPS CAPS development are proprietary, their overall portfolio demonstrates significant capability in handling programs of this magnitude and technical complexity, often involving sensitive national security applications.

How does the $245 million award compare to historical spending on similar defense communication or IT development programs?

The $245 million award for the EPS CAPS Development contract over approximately seven years represents a significant but not extraordinary investment within the context of large-scale defense IT and communication system development. Annual spending averages around $35 million. Federal spending on major defense IT programs can range from tens of millions to billions of dollars, depending on the scope, complexity, and duration. For instance, major upgrades to strategic communication networks, development of new intelligence platforms, or modernization of battlefield management systems often involve similar or larger contract values. This award appears to be in line with substantial, multi-year development efforts for critical defense infrastructure, reflecting the ongoing need for advanced technological capabilities in the sector.

What are the potential risks associated with the 7-year duration of this contract?

A contract duration of approximately seven years for an IT development project presents several potential risks. Firstly, technological advancements can occur rapidly in the IT and defense sectors; by the end of the contract period, the developed system might be based on technologies that are becoming outdated, requiring further investment for modernization. Secondly, there's an increased risk of scope creep, where requirements evolve significantly over the long term, potentially leading to cost overruns and schedule delays if not managed rigorously. Thirdly, maintaining consistent contractor performance and stakeholder engagement over such an extended period can be challenging. Finally, the long timeframe necessitates robust contract management and oversight to ensure the system remains aligned with evolving military needs and strategic objectives throughout its lifecycle.

Industry Classification

NAICS: Information › Other Telecommunications › All Other Telecommunications

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 4

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 14119 SULLYFIELD CIR STE A, CHANTILLY, VA, 20151

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: $254,583,597

Exercised Options: $254,583,597

Current Obligation: $245,364,167

Actual Outlays: $929,338

Subaward Activity

Number of Subawards: 687

Total Subaward Amount: $682,616,681

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline