DoD's $47.8M contract for guided missile manufacturing awarded to Northrop Grumman Systems Corporation

Contract Overview

Contract Amount: $47,784,119 ($47.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2021-06-24

End Date: 2024-09-19

Contract Duration: 1,183 days

Daily Burn Rate: $40.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MK21-2

Place of Performance

Location: CHANDLER, MARICOPA County, ARIZONA, 85286

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $47.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: MK21-2 Key points: 1. Contract awarded via full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Incentive Fee (CPIF), which can incentivize cost control. 3. Northrop Grumman Systems Corporation, a large defense contractor, is the sole awardee. 4. The contract duration is over three years, indicating a significant, long-term requirement. 5. The contract falls under Guided Missile and Space Vehicle Manufacturing, a critical defense sector. 6. The base award amount is $40.4M, with potential for higher costs based on performance incentives.

Value Assessment

Rating: good

Benchmarking the value of this specific contract is challenging without detailed cost breakdowns and performance metrics. However, the CPIF contract type aims to align contractor and government interests, potentially leading to better value if incentives are structured effectively. The base award of $40.4M for a multi-year guided missile manufacturing effort appears within a reasonable range for complex defense systems, though a deeper dive into the specific technological requirements and production volumes would be needed for a definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The number of bidders is not specified, but the competitive nature of the award process is a positive sign for price discovery and potentially achieving a fair market price. The government likely sought proposals that offered the best combination of technical capability, schedule, and cost.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down costs and encourage innovation, leading to more efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Air Force, receiving critical missile systems. Services delivered include the manufacturing of guided missiles and potentially related space vehicles. The geographic impact is primarily at the contractor's facility in Arizona, with potential downstream effects on the national defense supply chain. Workforce implications include skilled manufacturing and engineering jobs at Northrop Grumman and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

CPIF contracts can lead to cost overruns if incentive targets are not met or if the base cost is underestimated.
Reliance on a single large contractor for critical defense components can pose supply chain risks.
The complexity of guided missile manufacturing may involve inherent technical risks that could impact schedule and cost.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
The CPIF structure incentivizes contractor performance and cost management.
Northrop Grumman is an established defense contractor with significant experience in this domain.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and critical segment of the aerospace and defense industry. It involves complex engineering, advanced materials, and stringent quality control. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve analyzing other large-scale missile production contracts within the DoD, which often run into hundreds of millions or billions of dollars over their lifecycle.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. While Northrop Grumman is a large business, there may be opportunities for small businesses to participate as subcontractors within the supply chain. The extent of small business subcontracting will depend on Northrop Grumman's own procurement practices and any flow-down requirements from the government.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force contracting and program management offices. Accountability measures are built into the CPIF structure, linking contractor payment to performance. Transparency is generally maintained through contract awards databases and reporting requirements, though specific cost details and performance metrics may be considered sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Air Force Missile Programs
Guided Missile Manufacturing
Defense Procurement
Aerospace Manufacturing Contracts

Risk Flags

Potential for cost overruns due to CPIF structure
Technical complexity and associated risks
Supply chain vulnerability for specialized components
Long contract duration increases exposure to changing requirements

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. MK21-2

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 $47.8 million.

What is the period of performance?

Start: 2021-06-24. End: 2024-09-19.

What is Northrop Grumman's track record with similar Cost Plus Incentive Fee (CPIF) contracts for missile systems?

Northrop Grumman has extensive experience with CPIF contracts across various defense programs. Historically, their performance on such contracts has varied, with some instances demonstrating successful cost control and performance achievement, while others have faced challenges related to cost growth or schedule delays. Analyzing specific past performance on missile system CPIF contracts would require access to detailed contract performance reports and historical data. However, their established presence in the defense sector suggests a capacity to manage the complexities inherent in these types of agreements, though vigilance in oversight remains crucial for taxpayers.

How does the $40.4M base award compare to the total contract value and potential incentives?

The $40.4M base award represents the initial estimated cost for the contract's performance period. The total contract value can increase significantly based on the achievement of incentive targets defined within the Cost Plus Incentive Fee (CPIF) structure. Without the specific incentive clauses and target metrics, it's impossible to determine the maximum potential value. However, CPIF contracts are designed to share cost savings or overruns between the government and the contractor, with the goal of achieving performance objectives at a reasonable cost. The final cost could be higher or lower than the base award depending on how well Northrop Grumman meets these performance and cost goals.

What are the primary risks associated with this specific guided missile manufacturing contract?

Key risks include potential cost overruns inherent in CPIF contracts if incentive targets are not met or if initial cost estimates are inaccurate. Technical risks are also significant, given the complexity of guided missile systems, which could lead to production delays or performance issues. Supply chain disruptions for specialized components could impact manufacturing schedules. Furthermore, reliance on a single large contractor like Northrop Grumman for critical defense assets introduces strategic supply chain risk. Finally, the long duration of the contract (over three years) increases exposure to evolving technological requirements and geopolitical factors.

What is the historical spending trend for Guided Missile and Space Vehicle Manufacturing by the Department of Defense?

The Department of Defense consistently allocates substantial funding towards Guided Missile and Space Vehicle Manufacturing, reflecting its critical role in national security. Annual spending in this category typically ranges in the tens of billions of dollars, driven by modernization programs, new system development, and sustainment of existing fleets. Trends are influenced by geopolitical threats, technological advancements, and budgetary priorities. While specific year-over-year figures fluctuate, there is a sustained, high-level investment in this sector to maintain military readiness and technological superiority.

How does the 'full and open competition' award mechanism impact price discovery for this contract?

Awarding this contract through 'full and open competition' is intended to maximize price discovery by allowing all responsible sources to submit proposals. This competitive environment encourages bidders to offer their most competitive pricing and technical solutions to win the contract. The presence of multiple bidders, even if not specified here, generally leads to a more robust understanding of the market rate for the goods or services. This process helps the government ascertain a fair and reasonable price, as the bids submitted reflect the collective market assessment of costs and capabilities, ultimately benefiting taxpayer value.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1575 SOUTH PRICE RD, CHANDLER, AZ, 85286

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: $47,784,119

Exercised Options: $47,784,119

Current Obligation: $47,784,119

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $404,559

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA881819D0002

IDV Type: IDC

Timeline