Northrop Grumman awarded $148.9M for IT infrastructure hosting, with 2 bids received

Contract Overview

Contract Amount: $148,915,833 ($148.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: General Services Administration

Start Date: 2013-09-23

End Date: 2019-03-23

Contract Duration: 2,007 days

Daily Burn Rate: $74.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: IGF::CT::IGF THE CONTRACTOR SHALL PROVIDE THE PRODUCTION ENVIRONMENT TO OPERATE THE SYSTEM, INCLUDING PRIMARY AND BACKUP FACILITIES. THIS SHALL INCLUDE, HOSTING THE CURRENT DTS SOFTWARE, PHYSICAL ARCHITECTURE DESIGN, PROVIDING ALL NECESSARY COMPUTING NETWORKING, AND TELECOMMUNICATION HARDWARE, AS WELL AS ALL SOFTWARE REQUIRED FOR OPERATING SYSTEMS, NETWORK OPERATIONS AND MANAGEMENT, AND ANY OTHER COMMERCIAL, NON-APPLICATION SOFTWARE NEEDED TO ENABLE OPERATION OF DTS. THE GOVERNMENT CURRENTLY PROVIDES THE HARDWARE AND INFORMATION ASSETS REQUIRED, FOR HOSTING THE SYSTEM. THE GOVERNMENT MAY MOVE TOWARD HOSTING AS A SERVICE IN THE LONGER TERM BUT THE CONTRACTOR DURING THE TERM OF THIS TASK ORDER, BUT INITIALLY THE CONTRACTOR SHALL BE REQUIRED TO USE THE HARDWARE AND SOFTWARE PROVIDED BY THE GOVERNMENT

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

General Services Administration obligated $148.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::CT::IGF THE CONTRACTOR SHALL PROVIDE THE PRODUCTION ENVIRONMENT TO OPERATE THE SYSTEM, INCLUDING PRIMARY AND BACKUP FACILITIES. THIS SHALL INCLUDE, HOSTING THE CURRENT DTS SOFTWARE, PHYSICAL ARCHITECTURE DESIGN, PROVIDING ALL NECESSARY COMPUTING NETWORKING, AND TELECOMMUNICA… Key points: 1. Contract focuses on providing and managing IT production environments, including hardware and software. 2. Government currently supplies the necessary hardware, with a potential shift to 'hosting as a service' in the future. 3. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. 4. Competition was full and open, indicating a broad market search, but only two bids were submitted. 5. The contract duration is substantial, spanning over five years, requiring sustained performance. 6. This award falls under IT infrastructure and computer systems design services.

Value Assessment

Rating: fair

The contract value of $148.9 million over approximately five years for IT hosting services appears within a reasonable range for large-scale government IT infrastructure. However, without specific benchmarks for the exact services provided (e.g., data center capacity, managed services level), a precise value-for-money assessment is challenging. The Cost Plus Fixed Fee (CPFF) contract type introduces some risk, as it allows for reimbursement of costs plus a fixed fee, potentially leading to higher final costs if the contractor's expenses exceed initial estimates. Comparing this to similar GSA IT infrastructure contracts would provide a clearer picture of its cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting the government sought proposals from all responsible sources. However, only two bids were received. This limited number of bidders, despite the open competition, could indicate a specialized market or high barriers to entry for potential competitors. While open competition is generally preferred, a low number of bids might suggest that the solicitation requirements were very specific or that the market for such comprehensive IT hosting services is concentrated among a few large providers.

Taxpayer Impact: While open competition was utilized, the low number of bidders may have limited the government's ability to secure the most competitive pricing. Taxpayers benefit from the initial broad search, but the final price could have been more favorable with greater competition.

Public Impact

Federal agencies utilizing the DTS software will benefit from a stable and operational IT environment. The contract ensures the continuous availability of critical IT systems, supporting agency operations. Services include hosting, hardware and software management, and network operations, crucial for government IT functions. The contract supports IT professionals employed by Northrop Grumman Systems Corporation. Geographic impact is primarily within the operational scope of the General Services Administration's Federal Acquisition Service.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns if not closely monitored.
Limited number of bidders (2) in a full and open competition may indicate potential market concentration or high entry barriers.
The transition to 'hosting as a service' is a long-term consideration that requires careful planning and execution.
Dependence on government-provided hardware initially could create integration challenges or limit contractor flexibility.

Positive Signals

Awarded under full and open competition, maximizing potential vendor pool.
Contractor is a well-established entity with significant experience in government IT services.
Clear definition of services, including primary and backup facilities, ensures operational resilience.
Government retains control over hardware provision, allowing for strategic asset management.

Sector Analysis

This contract falls within the Computer Systems Design Services sector, a significant part of the broader IT services market. The market for government IT infrastructure and hosting is substantial, driven by the need for secure, reliable, and scalable systems. Comparable spending benchmarks for large-scale IT hosting and managed services contracts with federal agencies often run into hundreds of millions of dollars over several years. This contract's value is consistent with the scale of IT operations managed by agencies like those served by GSA.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale IT infrastructure contract, it is likely that the prime contractor, Northrop Grumman Systems Corporation, will engage in subcontracting. However, the extent to which small businesses will participate as subcontractors is not detailed in the provided information. The focus on a large prime contractor suggests that opportunities for small businesses might be limited unless specific subcontracting plans are mandated and enforced.

Oversight & Accountability

Oversight for this contract would primarily fall under the General Services Administration (GSA), specifically its Federal Acquisition Service. GSA has established procurement regulations and contract management processes. The Inspector General's office for GSA would likely have jurisdiction for audits and investigations related to potential fraud, waste, or abuse. Transparency is facilitated through contract award databases like FPDS, but detailed performance metrics and ongoing oversight activities are typically internal to the agency.

Related Government Programs

GSA IT Schedule 70
Cloud Computing Services
Data Center Operations
Managed Network Services
IT Infrastructure Support

Risk Flags

Cost Plus Fixed Fee contract type
Low number of bidders (2) in Full and Open Competition
Potential for vendor lock-in due to specialized infrastructure management
Dependence on government-provided hardware could lead to compatibility or obsolescence issues

Frequently Asked Questions

What is this federal contract paying for?

General Services Administration awarded $148.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::CT::IGF THE CONTRACTOR SHALL PROVIDE THE PRODUCTION ENVIRONMENT TO OPERATE THE SYSTEM, INCLUDING PRIMARY AND BACKUP FACILITIES. THIS SHALL INCLUDE, HOSTING THE CURRENT DTS SOFTWARE, PHYSICAL ARCHITECTURE DESIGN, PROVIDING ALL NECESSARY COMPUTING NETWORKING, AND TELECOMMUNICATION HARDWARE, AS WELL AS ALL SOFTWARE REQUIRED FOR OPERATING SYSTEMS, NETWORK OPERATIONS AND MANAGEMENT, AND ANY OTHER COMMERCIAL, NON-APPLICATION SOFTWARE NEEDED TO ENABLE OPERATION OF DTS. THE GOVERNMENT CURRENTLY PRO

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: General Services Administration (Federal Acquisition Service).

What is the total obligated amount?

The obligated amount is $148.9 million.

What is the period of performance?

Start: 2013-09-23. End: 2019-03-23.

What is the historical spending pattern for IT hosting and infrastructure services by the General Services Administration?

The General Services Administration (GSA) has a long history of significant spending on IT hosting and infrastructure services, reflecting its role in providing centralized IT solutions and managing government-wide acquisition. Annual spending can fluctuate based on specific large-scale procurements, technology refresh cycles, and shifts in service delivery models (e.g., towards cloud computing). Historically, GSA's IT spending has been in the billions of dollars annually, encompassing a wide range of services from network operations to data center management and cloud services. Analyzing GSA's budget justifications and historical contract awards data (e.g., through FPDS) would reveal trends in spending allocation across different IT categories, including infrastructure hosting, and identify major contract vehicles and their associated values over time. This specific contract, valued at approximately $148.9 million over five years, represents a notable but not extraordinary portion of GSA's overall IT expenditure in that period.

How does the Cost Plus Fixed Fee (CPFF) contract structure impact cost control for IT infrastructure services?

The Cost Plus Fixed Fee (CPFF) contract structure is designed to reimburse the contractor for all allowable costs incurred during performance, plus a predetermined fixed fee representing profit. For IT infrastructure services, this structure can be beneficial when the scope of work is not precisely defined or is expected to evolve, allowing flexibility. However, it carries inherent risks for cost control. The government bears the risk of cost overruns, as the contractor is incentivized to incur costs to maximize the base upon which the fee is calculated, although the fee itself is fixed. Effective cost control under CPFF relies heavily on robust government oversight, detailed cost accounting standards, and clear definitions of allowable costs. Without stringent monitoring and management, CPFF contracts can lead to expenditures significantly exceeding initial estimates, making it crucial for the government to actively manage the contractor's spending and ensure efficiency.

What are the potential risks associated with Northrop Grumman Systems Corporation's track record in similar government IT contracts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in large-scale government IT programs. While generally possessing a strong track record, potential risks associated with their performance in similar contracts can include issues related to cost overruns, schedule delays, and technical performance challenges, particularly in complex system integration projects. Past performance reviews and contract audit agency reports for Northrop Grumman, if publicly available, would offer specific insights. Risks can also arise from the inherent complexity of managing large IT infrastructures, cybersecurity vulnerabilities, and the need for continuous adaptation to evolving technological landscapes. Evaluating their history with CPFF contracts, their ability to meet stringent security requirements, and their responsiveness to government directives are key areas for risk assessment.

How does the limited number of bidders (two) affect the government's ability to achieve competitive pricing for IT hosting services?

A limited number of bidders, even in a full and open competition, can significantly impact the government's ability to achieve competitive pricing. When only two companies submit proposals, the competitive pressure is inherently lower than if there were, for example, five or more bidders. This can lead to less aggressive pricing strategies from the bidders, as they face less risk of losing the contract to a competitor offering a substantially lower price. The government may not benefit from the full spectrum of market-driven price reductions. While the government negotiates, the lack of robust competition can reduce its leverage. This situation might arise if the market for the specific services is concentrated, if the barriers to entry are high (e.g., specialized expertise, security clearances, infrastructure requirements), or if the solicitation requirements were highly tailored, inadvertently limiting the pool of capable and interested vendors.

What are the implications of the government providing the hardware for this IT hosting contract?

The government providing the hardware for this IT hosting contract has several implications. Firstly, it means the contractor, Northrop Grumman, is primarily responsible for the management, operation, and maintenance of existing government-owned assets, rather than procuring and owning the infrastructure themselves. This can reduce the contractor's upfront capital investment and potentially simplify their financial model. However, it can also introduce complexities related to asset management, compatibility issues between contractor-provided software and government hardware, and potential delays if hardware upgrades or replacements are needed. The government retains control over its capital assets but may face challenges in ensuring the hardware remains current and optimally configured for the services being provided. This arrangement also influences the long-term strategy, as the government considers moving towards a 'hosting as a service' model.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 7575 COLSHIRE DR, MCLEAN, VA, 22102

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: $161,506,080

Exercised Options: $161,506,080

Current Obligation: $148,915,833

Subaward Activity

Number of Subawards: 1532

Total Subaward Amount: $552,747,407

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS00Q09BGD0056

IDV Type: GWAC

Timeline