DoD's $190M contract for guided missile manufacturing awarded to Northrop Grumman, with 80% of funds obligated

Contract Overview

Contract Amount: $189,776,143 ($189.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2008-10-01

End Date: 2015-03-31

Contract Duration: 2,372 days

Daily Burn Rate: $80.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: DOSSC

Place of Performance

Location: REDONDO BEACH, LOS ANGELES County, CALIFORNIA, 90278

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $189.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: DOSSC Key points: 1. Value for money is difficult to assess due to the lack of competition and limited transparency on pricing structures. 2. The contract was sole-sourced, raising concerns about potential overpayment and lack of market-driven pricing. 3. Significant contract duration (2372 days) suggests a long-term need for these specialized manufacturing services. 4. The contractor, Northrop Grumman, is a major defense industry player with extensive experience in this sector. 5. This contract falls within the 'Guided Missile and Space Vehicle Manufacturing' sector, a critical area for national defense. 6. The high percentage of obligated funds (80%) indicates substantial progress or commitment to the contract's objectives.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the absence of publicly available cost breakdowns. The contract type (Cost Plus Award Fee) can lead to higher costs if not managed rigorously, as the contractor is incentivized to meet certain performance targets, potentially at an increased expense. Without comparable sole-source contracts or detailed pricing data, it's difficult to definitively assess if the $190 million represents a fair market price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust government oversight to ensure fair pricing and prevent potential cost overruns.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, which receives critical components for guided missiles and space vehicles. The services delivered are essential for national security and maintaining the United States' strategic defense capabilities. The geographic impact is primarily within California, where the contractor is located, potentially supporting local jobs and the regional economy. Workforce implications include the employment of skilled engineers, technicians, and manufacturing personnel at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Cost Plus Award Fee structure requires diligent oversight to prevent cost escalation.
Long contract duration increases exposure to potential cost overruns and performance issues over time.

Positive Signals

Awarded to a major defense contractor with a proven track record in aerospace and defense manufacturing.
Contract addresses a critical need for guided missile and space vehicle components, supporting national security.
High obligation rate suggests progress and commitment to fulfilling the contract's objectives.

Sector Analysis

This contract operates within the defense manufacturing sector, specifically focusing on guided missiles and space vehicles. This is a highly specialized and capital-intensive industry dominated by a few large defense contractors. The market size for such components is substantial, driven by government defense spending. Comparable spending benchmarks are difficult to establish due to the proprietary nature of the technology and the sole-source award.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless specific subcontracting plans are mandated and executed.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and program management teams within the Department of the Air Force. Accountability measures would be tied to the performance metrics outlined in the Cost Plus Award Fee structure. Transparency is limited due to the sole-source nature and the classification of defense-related procurements. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Procurement
Air Force Contracts
Northrop Grumman Contracts

Risk Flags

Sole-source award limits price competition.
Cost Plus Award Fee requires diligent oversight to control costs.
Long contract duration increases long-term risk exposure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $189.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. DOSSC

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 $189.8 million.

What is the period of performance?

Start: 2008-10-01. End: 2015-03-31.

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

Northrop Grumman Systems Corporation is a major defense contractor with a long history of securing sole-source contracts for complex defense systems, including missiles and space vehicles. Their track record often involves advanced technology development and production for various branches of the U.S. military. While specific details of past sole-source awards are often classified or proprietary, the company generally demonstrates the technical capability to meet stringent defense requirements. However, the lack of competition inherent in sole-source awards means that performance and cost-effectiveness must be rigorously monitored by the procuring agency to ensure value for taxpayer money. Historical data on their performance on similar contracts would typically be held within the agency's contract management systems and potentially reviewed by oversight bodies.

How does the $190 million value compare to similar guided missile manufacturing contracts?

Direct comparison of the $190 million value is challenging due to the sole-source nature of this contract and the proprietary details surrounding guided missile and space vehicle manufacturing. Contracts in this sector can vary significantly based on the complexity, quantity, technological sophistication, and specific components being produced. Large-scale, sole-source awards to major defense primes like Northrop Grumman for critical systems often represent substantial investments. Without access to pricing data for comparable competed contracts or detailed cost breakdowns for this specific award, it is difficult to benchmark whether $190 million represents a fair market value. The Cost Plus Award Fee structure also introduces variability, making direct price comparisons less straightforward than fixed-price contracts.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract include potential cost overruns and a lack of competitive pressure to ensure optimal pricing. Since the contract was not competed, there's a risk that the government may be paying a premium compared to what could have been achieved through open competition. The Cost Plus Award Fee (CPAF) structure, while incentivizing performance, can also lead to higher costs if not meticulously managed, as the contractor is reimbursed for allowable costs plus a fee that may be adjusted based on performance. Furthermore, the long duration of the contract (2372 days) increases the exposure to risks such as technological obsolescence, changes in requirements, and contractor performance degradation over time. Ensuring robust government oversight and stringent performance management is crucial to mitigate these risks.

How effective is the Cost Plus Award Fee (CPAF) structure in managing performance for this contract?

The Cost Plus Award Fee (CPAF) structure is designed to provide flexibility and incentivize contractor performance by reimbursing costs while offering a performance-based award fee. For a contract involving complex manufacturing like guided missiles, CPAF can be effective if the award fee criteria are clearly defined, measurable, and aligned with critical program objectives. It allows the government to pay for actual costs incurred and provides an incentive for the contractor to exceed minimum performance standards. However, the effectiveness hinges on the government's ability to establish objective performance metrics and diligently monitor progress. If the award criteria are vague or poorly managed, the 'award' portion could become less effective as a true performance incentive, potentially leading to higher overall costs without commensurate gains in efficiency or quality.

What are the historical spending patterns for guided missile and space vehicle manufacturing by the Department of Defense?

The Department of Defense (DoD) consistently allocates significant portions of its budget to the research, development, and procurement of guided missiles and space vehicles. Historical spending patterns show a sustained and substantial investment in these areas, driven by national security imperatives and evolving technological landscapes. Major defense contractors, including Northrop Grumman, are frequent recipients of these funds. Spending levels can fluctuate based on geopolitical events, modernization programs, and specific threat assessments. While precise historical figures for this specific sub-category are often aggregated within broader procurement or R&D accounts, it is evident that this sector represents a multi-billion dollar annual expenditure for the DoD, reflecting its critical importance.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

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: 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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $359,764,457

Exercised Options: $196,834,446

Current Obligation: $189,776,143

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline