Northrop Grumman awarded $109.8M for R&D, with a significant portion allocated to cost-plus-fixed-fee arrangements

Contract Overview

Contract Amount: $109,768,573 ($109.8M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2016-08-23

End Date: 2024-01-26

Contract Duration: 2,712 days

Daily Burn Rate: $40.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: IGF::OT::IGF STRAFE

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $109.8 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: IGF::OT::IGF STRAFE Key points: 1. The contract's value of $109.8 million over its duration indicates substantial investment in research and development. 2. The use of Cost Plus Fixed Fee (CPFF) pricing suggests a need for flexibility in R&D projects where final costs may be uncertain. 3. The contract was awarded under full and open competition, implying a broad market search and potential for competitive pricing. 4. The duration of the contract (2712 days) points to a long-term research objective. 5. The primary NAICS code (541712) categorizes this as Research and Development in Physical, Engineering, and Life Sciences, excluding Biotechnology. 6. The contract's performance is managed by the Defense Contract Management Agency, indicating a focus on defense-related research.

Value Assessment

Rating: fair

Benchmarking the value of this R&D contract is challenging without specific project details. However, the $109.8 million award over approximately 7.4 years suggests a significant investment. The CPFF structure, while common in R&D, can lead to higher costs if not managed tightly, as the contractor is reimbursed for allowable costs plus a fixed fee. Comparing this to similar large-scale, long-duration R&D contracts within the defense sector would provide better context for value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that the Department of Defense sought proposals from all responsible sources. With 3 bidders identified, this suggests a reasonable level of competition for this specialized R&D requirement. The competitive process should have helped in price discovery, although the CPFF structure means the final cost is not fixed upfront.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to more cost-effective solutions and better pricing, even with cost-reimbursement elements.

Public Impact

The primary beneficiaries are likely the Department of Defense, which will receive the results of the research and development. The services delivered are advanced research and development in physical, engineering, and life sciences. The geographic impact is primarily within California, where the contractor is located, and potentially extends to defense installations. Workforce implications include employment for scientists, engineers, and support staff at Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can incentivize contractors to incur costs, as they are reimbursed for allowable expenses.
The long duration of the contract may present challenges in adapting to evolving technological landscapes or strategic priorities.
Lack of specific performance metrics makes it difficult to assess the efficiency and effectiveness of the R&D efforts.
The substantial award amount necessitates robust oversight to ensure funds are used appropriately and efficiently.

Positive Signals

Awarded under full and open competition, suggesting a robust selection process.
Northrop Grumman is a major defense contractor with extensive experience in R&D, indicating a capable awardee.
The contract's focus on R&D aligns with the DoD's need for technological advancement.
The fixed fee component of the CPFF contract provides some cost certainty for the contractor's profit.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. The defense industry heavily relies on R&D to maintain technological superiority. Comparable spending benchmarks would involve looking at other large-scale, long-term R&D contracts awarded by the DoD to major aerospace and defense firms, often in the hundreds of millions of dollars range.

Small Business Impact

There is no indication that this contract was set aside for small businesses, nor is there information on subcontracting plans. Given the nature of the R&D and the prime contractor, it is possible that small businesses could be involved as subcontractors, but this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight is likely conducted by the Defense Contract Management Agency (DCMA), which is responsible for contract administration. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, including cost reporting and milestone achievement. Transparency would depend on the DoD's public disclosure policies regarding R&D contracts, which can sometimes be limited due to national security considerations.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Aerospace and Defense R&D
Engineering Services Contracts

Risk Flags

Long contract duration may lead to technological obsolescence.
CPFF structure carries inherent cost escalation risk for the government.
Lack of specific performance metrics in summary data hinders effectiveness assessment.
Potential for scope creep in long-term R&D projects.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $109.8 million to NORTHROP GRUMMAN SYSTEMS CORP. IGF::OT::IGF STRAFE

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $109.8 million.

What is the period of performance?

Start: 2016-08-23. End: 2024-01-26.

What specific research and development areas does this contract cover?

The provided data indicates the contract falls under NAICS code 541712, 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)'. However, the specific sub-fields or technologies being researched are not detailed. This could range from advanced materials, propulsion systems, sensor technology, artificial intelligence applications in engineering, or other complex scientific endeavors critical to national defense. Further analysis would require access to the contract's SOW (Statement of Work) or technical exhibits.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other R&D contract types in terms of risk and potential cost overruns?

CPFF contracts are common in R&D because the scope of work can be uncertain and evolve. The contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure shifts some cost risk to the government, as the final cost is not fixed. Compared to Fixed Price contracts, CPFF offers more flexibility for the contractor to explore different avenues without being penalized for unforeseen costs, but it can lead to higher overall spending if not managed diligently. Incentive Fee contracts or Cost Plus Incentive Fee (CPIF) contracts might offer better value by linking profit to performance targets, but CPFF is often used when performance metrics are difficult to define upfront.

What is Northrop Grumman's track record with similar large-scale R&D contracts for the Department of Defense?

Northrop Grumman is a major defense contractor with a long history of performing complex R&D programs for the DoD. They have consistently been awarded large contracts across various domains, including aerospace, defense systems, and advanced technologies. Their track record generally indicates a capacity to manage large, technically challenging projects. However, like any large contractor, specific contract performance can vary, and a detailed review of their past performance on similar CPFF R&D contracts, including any past performance issues or successes, would be necessary for a comprehensive assessment.

What are the potential implications of the 2712-day contract duration on technological relevance and adaptability?

A contract duration of 2712 days (approximately 7.4 years) for R&D presents both opportunities and challenges. On one hand, it allows for sustained focus and deep exploration of complex research problems, potentially leading to significant breakthroughs. On the other hand, technology evolves rapidly. The risk is that the research objectives or developed technologies might become outdated or less relevant by the time the contract concludes. Effective program management, including regular reviews and potential scope adjustments, is crucial to ensure the R&D remains aligned with evolving defense needs and technological advancements throughout its long duration.

How does the $109.8 million total award compare to typical R&D spending for similar defense initiatives?

The $109.8 million award for R&D is substantial but falls within the range of significant investments the Department of Defense makes in advanced technology development. Major defense contractors frequently receive awards of this magnitude, and sometimes much higher, for critical research programs. To provide a precise comparison, one would need to identify specific R&D categories (e.g., AI, hypersonics, cybersecurity) and benchmark against other contracts within those same categories. However, in the broader context of defense R&D, this award signifies a major program rather than a minor research grant.

What oversight mechanisms are typically in place for Cost Plus Fixed Fee R&D contracts of this magnitude?

For a contract of this size and type, oversight typically involves rigorous monitoring by the contracting officer and administrative contracting officer (ACO) representatives, often from the Defense Contract Management Agency (DCMA). Key oversight areas include detailed review of incurred costs to ensure allowability, allocability, and reasonableness; monitoring of progress against milestones and the overall R&D plan; review of the contractor's management systems (e.g., accounting, property control); and ensuring compliance with contract terms and conditions. Regular progress reports, audits, and potentially site visits are standard components of oversight to manage the government's financial risk inherent in CPFF contracts.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Solicitation ID: 00000000B0000

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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: $109,768,573

Exercised Options: $109,768,573

Current Obligation: $109,768,573

Actual Outlays: $1,382,566

Subaward Activity

Number of Subawards: 432

Total Subaward Amount: $236,345,969

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline