DoD's $131.7M missile sustainment contract awarded to Northrop Grumman without competition raises value concerns

Contract Overview

Contract Amount: $131,676,191 ($131.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2015-04-01

End Date: 2015-09-30

Contract Duration: 182 days

Daily Burn Rate: $723.5K/day

Competition Type: NOT COMPETED UNDER SAP

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF DEFENSE SUPPORT PROGRAM SUSTAINMENT CONTRACT

Place of Performance

Location: AZUSA, LOS ANGELES County, CALIFORNIA, 91702

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $131.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF DEFENSE SUPPORT PROGRAM SUSTAINMENT CONTRACT Key points: 1. The contract's cost-plus-fixed-fee structure, combined with a lack of competition, suggests potential for cost overruns and reduced value for taxpayer dollars. 2. Awarded under Other Transaction Authority (OTA), the procurement process bypassed standard competitive bidding, limiting price discovery and potentially increasing costs. 3. The sole-source nature of this award warrants scrutiny regarding the justification for not seeking competitive proposals. 4. The contract duration of 182 days is relatively short, but the total value indicates a significant expenditure for a limited period. 5. The absence of small business participation raises questions about broader economic impact and opportunities for smaller firms in the defense supply chain. 6. The specific services provided under this sustainment contract require further clarification to assess performance and necessity.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and the specific, potentially specialized, services provided under the 'Guided Missile and Space Vehicle Manufacturing' NAICS code. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex projects, can lead to higher costs if not managed rigorously, especially without competitive pressure. The reported value of $131.7 million for a 182-day period suggests a high per-diem cost, necessitating a detailed review of the cost elements and the fixed fee to ensure it reflects a fair return for the services rendered.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under 'Other Transaction Authority' (OTA) and explicitly stated as 'NOT COMPETED UNDER SAP' (Simplified Acquisition Procedures), indicating a sole-source or limited competition procurement. The justification for not conducting a full and open competition is not provided, which is a significant concern. Without competitive proposals, it is challenging to ascertain if the government received the best possible pricing and technical solution. The lack of bidders means there was no market-driven price discovery.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for the services rendered. Without a competitive process, there is less assurance that the selected contractor offered the most cost-effective solution available in the market.

Public Impact

The primary beneficiaries are the Department of Defense, specifically units relying on the sustained operational capability of guided missiles and space vehicles. The contract ensures the continued readiness and operational effectiveness of critical defense assets. The geographic impact is likely concentrated within the operational theaters or support bases where these missile and space vehicles are deployed or maintained. Workforce implications may include specialized technical personnel employed by Northrop Grumman and its subcontractors involved in sustainment and maintenance activities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer funds.
The sole-source award under OTA bypasses standard procurement regulations, potentially limiting transparency and accountability.
Cost-plus-fixed-fee contracts can incentivize cost growth if not closely monitored.
The specific nature of 'sustainment' for missile and space vehicles requires detailed understanding to assess necessity and efficiency.
No small business participation was indicated, potentially limiting opportunities for smaller firms in this high-value contract.

Positive Signals

Northrop Grumman is an established defense contractor with significant experience in aerospace and defense systems.
The contract aims to ensure the sustainment of critical defense assets, contributing to national security.
The fixed-fee component of the CPFF contract provides some level of cost certainty for the government, provided the scope is well-defined.
The short duration (182 days) might indicate a focused effort or a bridge contract, potentially mitigating long-term cost risks.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the sustainment of guided missile and space vehicle systems. This is a highly specialized area within defense manufacturing, characterized by high barriers to entry, significant R&D investment, and long product lifecycles. The market is dominated by a few large prime contractors. Spending in this sub-sector is driven by national security requirements, technological advancements, and geopolitical factors. Comparable spending benchmarks are difficult to establish without detailed service scope, but sustainment contracts for complex weapon systems often represent a substantial portion of a platform's total lifecycle cost.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and there is no indication of small business subcontracting goals (ss: false). This suggests that the prime contract was awarded directly to a large business, Northrop Grumman. Consequently, there are no direct subcontracting opportunities for small businesses flowing from this specific award as reported. This could mean that the specialized nature of the work is beyond the typical capabilities of small businesses, or that the prime contractor did not prioritize small business inclusion in its proposal or execution plan for this particular contract.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. The 'ov' section would detail specific oversight mechanisms, such as performance reviews, audits, and compliance checks. Given the sole-source nature and CPFF structure, rigorous oversight is crucial to manage costs and ensure performance. Transparency is assessed by the availability of contract details and justifications for the procurement method. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Missile Defense Systems
Space Launch Services
Aerospace Manufacturing
Defense Logistics and Sustainment
Guided Missile Programs
Space Vehicle Development

Risk Flags

Sole-source award without clear justification.
Potential for cost overruns due to CPFF structure and lack of competition.
Limited transparency in procurement process (OTA, not competed).
No stated small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $131.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF DEFENSE SUPPORT PROGRAM SUSTAINMENT 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 $131.7 million.

What is the period of performance?

Start: 2015-04-01. End: 2015-09-30.

What specific sustainment activities are covered under this contract, and how were they justified as necessary?

The contract, valued at approximately $131.7 million, is for the sustainment of guided missile and space vehicles. Specific activities typically include maintenance, repair, overhaul, logistics support, technical assistance, and potentially upgrades or modifications to ensure the continued operational readiness of these complex systems. The justification for these activities would stem from the operational requirements of the Department of Defense, ensuring that critical assets remain functional and effective for their intended missions. Without access to the contract's Statement of Work (SOW) or Performance Work Statement (PWS), the precise nature of 'sustainment' remains broad. However, for high-value, specialized assets like missiles and space vehicles, ongoing sustainment is crucial for mission success and safety, often involving specialized technical expertise and proprietary data.

What is the rationale behind awarding this contract solely to Northrop Grumman without competition?

The provided data indicates the contract was 'NOT COMPETED UNDER SAP' and awarded under 'Other Transaction Authority' (OTA), suggesting a sole-source or limited competition scenario. The specific rationale for bypassing full and open competition is not detailed in the provided data. Typically, sole-source awards are justified when only one responsible source can provide the required supplies or services, such as when the item is unique, proprietary, or requires highly specialized expertise possessed by only one entity. Alternatively, OTA allows for more flexible procurement methods, sometimes used for rapid prototyping or research and development, which might have been deemed applicable. However, the significant value ($131.7M) for a sustainment contract raises questions about whether a competitive process could have yielded better value or if the justification for sole-sourcing is robust.

How does the Cost Plus Fixed Fee (CPFF) pricing structure impact the overall value and risk for the government in this contract?

The Cost Plus Fixed Fee (CPFF) pricing structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used for complex projects where the scope is not fully defined or is subject to change, as is common in sustainment and R&D. For the government, the primary benefit is flexibility to adapt to evolving requirements. However, the risk lies in potential cost overruns; if costs escalate beyond initial estimates, the government pays more. The fixed fee provides some incentive for the contractor to control costs, as the fee does not increase with costs, but it does not eliminate the risk of inefficiency. Without competitive pressure, the government must rely heavily on robust oversight and negotiation to ensure the 'cost' component is reasonable and the 'fee' represents fair profit for the effort.

What are the potential implications of this contract's value and duration on future spending for similar sustainment services?

This contract, valued at $131.7 million over 182 days (approximately 6 months), represents a significant expenditure for sustainment services. The high dollar amount for a relatively short period suggests either very intensive, specialized support is required, or that this may be a bridge contract to a larger, longer-term effort. If this is indicative of the ongoing cost for sustainment of these systems, future spending could be substantial. The lack of competition and the CPFF structure also set a precedent that may influence future sole-source or limited-competition awards in this domain. Without more context on the specific systems being sustained and the market for such services, it's difficult to predict precise future spending, but it highlights a potentially high-cost area for the DoD.

Are there any performance metrics or benchmarks associated with this contract to measure Northrop Grumman's effectiveness?

The provided data does not include specific performance metrics or benchmarks for this contract. In CPFF contracts, performance is typically defined through a Statement of Work (SOW) or Performance Work Statement (PWS) which outlines deliverables, quality standards, and timelines. Effectiveness is often measured against these requirements. For sustainment contracts, key performance indicators (KPIs) might include system availability rates, mean time between failures (MTBF), response times for support requests, and successful completion of maintenance actions. The government, through the contracting officer and technical representatives, is responsible for monitoring Northrop Grumman's performance against these contractual obligations. The absence of explicit metrics in the summary data means a deeper dive into the contract's SOW/PWS would be necessary to assess how performance is being measured and assured.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED UNDER SAP

Solicitation Procedures: SIMPLIFIED ACQUISITION

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1100 W HOLLYVALE ST, AZUSA, CA, 91702

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: $149,329,226

Exercised Options: $140,789,763

Current Obligation: $131,676,191

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline