Northrop Grumman awarded $25M for submarine support services, including alterations and installations for USS Key West

Contract Overview

Contract Amount: $25,010,657 ($25.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2010-03-30

End Date: 2016-09-30

Contract Duration: 2,376 days

Daily Burn Rate: $10.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: SUBMARINE SUPPORT SERVICES ALTERATION INSTALLATIONS USS KEY WEST (SSN 722)

Place of Performance

Location: PEARL HARBOR, HONOLULU County, HAWAII, 96860

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $25.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: SUBMARINE SUPPORT SERVICES ALTERATION INSTALLATIONS USS KEY WEST (SSN 722) Key points: 1. Contract value appears reasonable for specialized engineering services on a naval vessel. 2. Full and open competition suggests a competitive bidding process was utilized. 3. The contract duration of approximately 6.5 years indicates a long-term need for these services. 4. The 'Cost Plus Award Fee' (CPAF) contract type incentivizes performance but requires careful oversight. 5. The primary service category is engineering, aligning with the technical nature of submarine maintenance. 6. The contract was awarded by the Department of Defense, a major consumer of complex engineering services.

Value Assessment

Rating: good

The contract value of $25 million for submarine support services, including alterations and installations, seems within a reasonable range for specialized naval engineering. Benchmarking against similar complex engineering contracts for naval vessels would provide a more precise value assessment. The CPAF structure allows for performance-based incentives, which can drive efficiency, but necessitates robust monitoring to ensure costs remain justified by outcomes. The pricing structure should be evaluated against industry standards for similar technical services.

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 presence of two bids suggests a moderate level of competition for this specialized service. While two bidders are better than one, a higher number of bidders typically leads to more robust price discovery and potentially lower costs for the government.

Taxpayer Impact: The full and open competition, despite having only two bidders, provides a baseline for fair pricing. Taxpayers benefit from the assurance that the contract was not awarded without exploring multiple options, which helps mitigate the risk of overpayment.

Public Impact

The primary beneficiaries are the U.S. Navy and its submarine fleet, ensuring operational readiness. Services include critical alterations and installations necessary for maintaining and upgrading submarine capabilities. The contract's geographic impact is primarily linked to naval bases and shipyards where the USS Key West operates. Workforce implications include specialized engineers, technicians, and support staff required for complex naval projects.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Cost Plus Award Fee' structure requires diligent oversight to ensure costs are controlled and award fees are justified by performance.
Limited competition (two bidders) may not have fully optimized price discovery.
The long contract duration could present risks if technology or operational needs change significantly.

Positive Signals

Awarded under full and open competition, indicating a structured procurement process.
The contract type (CPAF) includes incentives for contractor performance, potentially leading to better outcomes.
The services provided are critical for national defense and naval asset maintenance.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industry's complex needs for naval vessel maintenance and upgrades. The market for specialized naval engineering is characterized by high barriers to entry due to technical expertise, security clearances, and established relationships with defense agencies. Comparable spending benchmarks would likely be found within other large-scale defense contracts for ship maintenance, overhaul, and modernization.

Small Business Impact

The contract details indicate that small business participation was not a primary set-aside criterion, as the awardee is a large corporation and the contract was awarded under full and open competition. There is no explicit mention of subcontracting goals for small businesses within the provided data. The impact on the small business ecosystem is likely minimal unless Northrop Grumman actively engages small businesses as subcontractors for specialized components or services.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, compliance with contract terms, and proper cost accounting. The 'Cost Plus Award Fee' structure necessitates rigorous performance monitoring and evaluation to justify any award fees paid. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance evaluations may be internal.

Related Government Programs

Naval Vessel Maintenance and Repair
Submarine Modernization Programs
Defense Engineering Services Contracts
Department of Defense Procurement

Risk Flags

Potential for cost overruns due to CPAF structure
Limited competition may impact price optimization
Long contract duration introduces long-term risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. SUBMARINE SUPPORT SERVICES ALTERATION INSTALLATIONS USS KEY WEST (SSN 722)

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 $25.0 million.

What is the period of performance?

Start: 2010-03-30. End: 2016-09-30.

What is Northrop Grumman's track record with similar naval engineering contracts?

Northrop Grumman has an extensive history of supporting naval programs, including shipbuilding, maintenance, and modernization. They are a major defense contractor with significant experience in complex systems integration and engineering for various naval platforms, including submarines. Their track record generally includes successful execution of large-scale contracts, though like any major contractor, they have faced scrutiny on specific projects regarding cost and schedule. A detailed review of their past performance on similar submarine support contracts, including any past performance evaluations or disputes, would be necessary for a comprehensive assessment.

How does the $25 million contract value compare to similar submarine support services?

The $25 million contract value for alterations and installations on a specific submarine (USS Key West) appears to be a moderate figure for specialized naval engineering services. However, a direct comparison is challenging without knowing the exact scope of work, the specific alterations, and the duration of the services. Contracts for major overhauls or life-extension programs for submarines can range from tens to hundreds of millions of dollars. This contract likely covers specific upgrades or repairs rather than a full-scale overhaul. Benchmarking against contracts for similar types of alterations and installations on comparable submarine classes would provide better context for value assessment.

What are the primary risks associated with this 'Cost Plus Award Fee' (CPAF) contract?

The primary risks with a CPAF contract involve ensuring that the government receives good value for money and that costs are controlled. The 'cost-plus' aspect means the contractor is reimbursed for allowable costs, plus a fee that is a percentage of the costs and can be adjusted based on performance. The risk lies in potential cost overruns if not managed tightly. The 'award fee' component incentivizes performance, but it requires a robust and objective performance evaluation system by the government to ensure award fees are earned legitimately. Without strong oversight, there's a risk of paying for performance that doesn't fully meet expectations or paying inflated costs.

How effective is 'full and open competition' with only two bidders in ensuring competitive pricing?

Full and open competition is the preferred method for maximizing competition and achieving fair pricing. However, when only two bidders submit proposals, the level of competition is limited. While it's better than a sole-source award, it may not drive prices down as effectively as a scenario with multiple, competing bids. The government relies on the bidders' desire to win the contract to offer competitive pricing. In this case, the two bidders likely engaged in a competitive process, but the potential for even better pricing might have been missed if more firms were capable and chose not to bid or were unaware of the opportunity.

What is the historical spending pattern for submarine support services by the Department of Defense?

The Department of Defense consistently allocates significant funding towards the maintenance, modernization, and support of its submarine fleet. Historical spending patterns show a continuous investment in ensuring submarine readiness, which includes hull maintenance, system upgrades, component replacements, and specialized alterations. This spending is driven by the strategic importance of submarines and the long service life of these vessels, often requiring substantial upkeep over decades. Annual spending can fluctuate based on specific program needs, major overhauls, and new technology integration, but it represents a substantial and ongoing portion of the defense budget.

What are the implications of the contract's duration (2376 days) on its overall value and risk?

A contract duration of 2376 days (approximately 6.5 years) indicates a long-term requirement for the specified submarine support services. This extended period can offer value by providing stability for both the contractor and the government, allowing for specialized teams to develop expertise and efficiencies. However, it also introduces risks. Technological advancements, changes in naval strategy, or unforeseen operational requirements could make the contracted services less relevant or necessitate modifications. Managing scope creep and ensuring the contract remains aligned with evolving needs over such a long period requires proactive contract management and potential for contract modifications.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Solicitation ID: N0002409R3020

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 2340 DULLES CORNER BLVD, HERNDON, VA, 20171

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $124,295,323

Exercised Options: $86,928,637

Current Obligation: $25,010,657

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4091

IDV Type: IDC

Timeline