Northrop Grumman's $63.8M contract for custom programming services saw significant cost overruns, raising value concerns

Contract Overview

Contract Amount: $63,882,562 ($63.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Health and Human Services

Start Date: 2004-09-01

End Date: 2008-12-31

Contract Duration: 1,582 days

Daily Burn Rate: $40.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: MULTIPLE CONTRACT TYPES

Place of Performance

Location: ATLANTA, DEKALB County, GEORGIA, 30329

State: Georgia Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $63.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: MULTIPLE CONTRACT TYPES Key points: 1. The contract experienced substantial cost growth, indicating potential issues with initial pricing or scope management. 2. Full and open competition was utilized, suggesting a competitive environment that should ideally drive favorable pricing. 3. The contract's duration and multiple delivery orders suggest a complex, evolving project. 4. Performance context is limited, but the cost growth warrants scrutiny of project execution and oversight. 5. This contract falls within the IT services sector, specifically custom computer programming. 6. The significant cost increase relative to the initial award value is a key risk indicator.

Value Assessment

Rating: questionable

The contract's final cost significantly exceeded the initial award value, suggesting potential underestimation or scope creep. Benchmarking against similar custom programming contracts is difficult without more detailed performance data, but the substantial cost growth raises questions about the initial pricing strategy and the contractor's ability to manage costs effectively within the defined parameters. The Cost Plus Fixed Fee (CPFF) structure, while allowing for flexibility, can sometimes lead to higher overall costs if not tightly managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. This competitive process should theoretically lead to a fair market price. However, the subsequent cost growth suggests that either the initial competitive bids did not accurately anticipate the final project needs, or that post-award management and change orders led to increased costs despite the initial competition.

Taxpayer Impact: Taxpayers benefit from competitive bidding as it generally leads to lower prices. However, the significant cost increases in this contract suggest that the initial competitive advantage may have been eroded by factors such as scope changes or unforeseen complexities, potentially leading to a less than optimal outcome for taxpayers.

Public Impact

The primary beneficiaries are likely the Centers for Disease Control and Prevention (CDC) through the development of custom computer programming solutions. The services delivered are custom computer programming, essential for supporting the agency's data management and operational needs. The contract's geographic impact is centered in Georgia, where the contractor is located. Workforce implications include employment for IT professionals involved in custom software development and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth from initial award to final cost indicates potential issues with budgeting, scope management, or contractor performance.
The Cost Plus Fixed Fee (CPFF) contract type, while flexible, can incentivize cost increases if not rigorously overseen.
Lack of detailed performance metrics makes it difficult to fully assess the value delivered for the increased expenditure.
The long duration of the contract (over 4 years) increases the potential for unforeseen challenges and cost escalations.

Positive Signals

Awarded under full and open competition, suggesting a robust initial vetting of potential contractors.
The contract supported critical IT functions for the CDC, indicating alignment with agency mission objectives.
Multiple delivery orders suggest adaptability to evolving project requirements.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically custom computer programming services. This is a broad and dynamic market driven by the need for specialized software solutions across all industries. The market size for custom software development is substantial, with government agencies being significant consumers due to unique operational requirements. Comparable spending benchmarks would involve analyzing IT service contracts awarded by other federal agencies for similar custom development work, considering factors like complexity, duration, and required expertise.

Small Business Impact

There is no indication that this contract involved small business set-asides, nor is there information on subcontracting plans. The primary contractor, Northrop Grumman Systems Corporation, is a large aerospace and defense company. Therefore, the direct impact on the small business ecosystem is likely minimal unless significant subcontracting opportunities were extended to smaller firms, which is not specified.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the contracting officer and the program management office within the CDC. Accountability measures would be tied to contract performance clauses and financial reporting. Transparency is assessed through the availability of contract data, such as award amounts and contract types. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's lifecycle.

Related Government Programs

Custom Computer Programming Services
IT Services
Software Development
Information Technology Support Services

Risk Flags

Cost Growth
Potential Scope Creep
Contract Duration
Limited Performance Data

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $63.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. MULTIPLE CONTRACT TYPES

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (Centers for Disease Control and Prevention).

What is the total obligated amount?

The obligated amount is $63.9 million.

What is the period of performance?

Start: 2004-09-01. End: 2008-12-31.

What was the primary driver for the significant cost increase from the initial award value to the final cost?

The provided data indicates a substantial increase from the initial award value to the final cost, but does not specify the primary driver. Potential reasons for such cost growth in a Cost Plus Fixed Fee (CPFF) contract include unforeseen technical challenges, scope creep through contract modifications or delivery orders, changes in labor rates, or underestimation of project complexity during the initial bidding phase. Without detailed contract modification histories or performance reports, it is difficult to pinpoint the exact cause. However, the duration of the contract (over 4 years) suggests that evolving requirements or extended development cycles could have contributed significantly to the final expenditure.

How does the final cost of this contract compare to similar custom computer programming services procured by the federal government?

Benchmarking this contract's final cost against similar federal procurements for custom computer programming services is challenging without more granular data on the specific services rendered, the complexity of the solutions developed, and the contractor's labor rates. However, a cost increase of this magnitude (from initial award to final cost) is often a signal for further investigation into value for money. Generally, contracts that experience significant cost growth may indicate issues with initial pricing, scope management, or unforeseen technical hurdles. To perform a robust comparison, one would need to analyze contracts with similar North American Industry Classification System (NAICS) codes (like 541511), similar contract types (CPFF), and comparable project durations and objectives across different agencies.

What were the key performance indicators (KPIs) for this contract, and how did the contractor perform against them?

The provided data does not include specific Key Performance Indicators (KPIs) or details on the contractor's performance against them. For a contract of this nature, typical KPIs might include adherence to project timelines, successful delivery of software functionalities, system performance benchmarks (e.g., uptime, response times), user satisfaction, and defect rates. The significant cost growth suggests that either the initial KPIs were not sufficiently stringent, or that performance challenges led to increased effort and costs. A thorough assessment would require access to performance reports, acceptance criteria, and any formal evaluations conducted by the agency during the contract's lifecycle.

What is the track record of Northrop Grumman Systems Corporation in delivering custom computer programming services for the federal government?

Northrop Grumman Systems Corporation is a large, established defense and aerospace contractor with a broad range of capabilities, including IT services. Their track record with the federal government is extensive, encompassing numerous large-scale contracts across various agencies. While they possess significant technical expertise, like any large contractor, their performance can vary by contract. For custom computer programming services specifically, their success would depend on the specific project's complexity, the team assigned, and the agency's program management. Analyzing past performance on similar IT contracts, including any past performance evaluations or disputes, would provide a more detailed picture of their capabilities in this specific service area.

Were there any identified risks or challenges associated with this contract, and how were they managed?

The data provided does not explicitly list identified risks or challenges for this contract. However, the significant cost growth from the initial award to the final cost strongly implies that unforeseen risks or challenges materialized during the contract's performance period. These could have included technical complexities, integration issues with existing systems, changes in regulatory requirements, or difficulties in acquiring necessary resources. Effective risk management would have involved proactive identification, assessment, and mitigation strategies implemented by both the contractor and the contracting agency. The CPFF contract type suggests a degree of flexibility was built in to handle uncertainties, but the extent of cost increase indicates these might have been substantial or poorly managed.

What is the historical spending pattern for custom computer programming services at the Centers for Disease Control and Prevention (CDC)?

The provided data focuses on a single contract and does not offer insight into the CDC's overall historical spending patterns for custom computer programming services. To analyze historical spending, one would need to examine contract databases (like USASpending.gov) for all contracts awarded by the CDC under relevant NAICS codes (e.g., 541511) over several fiscal years. This would reveal trends in contract volume, average award values, dominant contract types, and key contractors. Understanding these patterns is crucial for contextualizing individual contract performance and identifying potential shifts in procurement strategies or technology needs within the agency.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 12011 SUNSET HILLS RD, RESTON, VA, 20190

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $618,326,133

Exercised Options: $618,326,133

Current Obligation: $63,882,562

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: HHSD200200403409I

IDV Type: IDC

Timeline