DoD's $1.5B contract for IRBM Targets awarded to Northrop Grumman, with 5+ years remaining

Contract Overview

Contract Amount: $1,503,664,138 ($1.5B)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2011-03-07

End Date: 2026-09-30

Contract Duration: 5,686 days

Daily Burn Rate: $264.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: IRBM TARGETS

Place of Performance

Location: CHANDLER, MARICOPA County, ARIZONA, 85248

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $1.50 billion to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IRBM TARGETS Key points: 1. Value for money assessed through fixed-price incentive structure, aiming to control costs while incentivizing performance. 2. Competition dynamics indicate a full and open process, suggesting a competitive environment for this critical defense need. 3. Risk indicators include contract type (fixed-price incentive) which shifts some cost risk to the contractor. 4. Performance context is within the Missile Defense Agency's mission to counter ballistic missile threats. 5. Sector positioning is within the guided missile and space vehicle manufacturing industry, a specialized defense segment.

Value Assessment

Rating: good

The total contract value of $1.5 billion over its lifespan suggests a significant investment in a critical capability. Benchmarking against similar complex missile system development contracts is challenging due to the specialized nature of Intercontinental Ballistic Missile (ICBM) targets. However, the fixed-price incentive (FPI) contract type indicates an effort to balance cost control with performance incentives, which is a common and generally effective approach for programs with evolving technical requirements. The award amount appears reasonable given the scope and duration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple capable contractors had the opportunity to bid. The presence of 4 bids suggests a healthy level of competition for this specialized defense requirement. A competitive process generally leads to better price discovery and potentially more innovative solutions, benefiting the government.

Taxpayer Impact: Taxpayers benefit from a competitive award process that is expected to yield a more favorable price and potentially higher quality deliverables for this crucial missile defense capability.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, who receive critical assets for testing and validating missile defense systems. Services delivered include the development, production, and sustainment of Intercontinental Ballistic Missile (IRBM) targets. The geographic impact is primarily within the United States, with potential testing occurring at various DoD facilities. Workforce implications include highly skilled engineering, manufacturing, and technical roles within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 5 years remaining) could lead to potential cost overruns if not managed effectively.
Reliance on a single prime contractor for such a critical system warrants close monitoring of performance and financial stability.
The specialized nature of the technology may limit future competition if capabilities become highly concentrated.

Positive Signals

Fixed-price incentive contract structure aligns contractor and government interests towards cost efficiency and performance.
Awarded under full and open competition, indicating a robust initial selection process.
Long-term contract provides stability for critical R&D and production in a vital defense sector.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and capital-intensive segment of the aerospace and defense industry. Companies in this space require significant R&D investment, advanced manufacturing capabilities, and stringent quality control. Spending in this sector is driven by national security priorities and technological advancements in missile technology and defense systems. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of IRBM targets, but this contract represents a substantial investment within this niche.

Small Business Impact

This contract does not appear to have specific small business set-aside provisions, as indicated by 'sb': false. However, Northrop Grumman, as the prime contractor, is likely to engage small businesses through subcontracting opportunities within its extensive supply chain. The impact on the small business ecosystem will depend on the specific subcontracting plans and the diversity of suppliers utilized by the prime.

Oversight & Accountability

Oversight for this contract is primarily managed by the Department of Defense and the Missile Defense Agency, with contract officers and technical representatives monitoring performance, cost, and schedule. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse. Transparency is facilitated through contract awards databases and reporting requirements, though detailed programmatic data may be sensitive.

Related Government Programs

Missile Defense Systems
Ballistic Missile Defense Program
Strategic Weapons Systems
Aerospace Manufacturing Contracts
Advanced Target Systems

Risk Flags

Long contract duration
High contract value
Specialized technology
Single prime contractor dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.50 billion to NORTHROP GRUMMAN SYSTEMS CORPORATION. IRBM TARGETS

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 (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $1.50 billion.

What is the period of performance?

Start: 2011-03-07. End: 2026-09-30.

What is Northrop Grumman's track record with similar large-scale missile system development contracts?

Northrop Grumman has a long and extensive history in developing complex aerospace and defense systems, including various missile programs and space technologies. They have been a key player in U.S. defense initiatives for decades, contributing to programs such as the B-2 bomber, various satellite systems, and components of missile defense. Their experience includes managing large, multi-year, high-value contracts with evolving technical requirements. While specific details on past IRBM target programs are often classified, their overall portfolio demonstrates a capability to handle the technical and programmatic challenges associated with advanced weapon systems. Past performance reviews and contract awards data from the DoD would provide more granular insights into their specific successes and challenges in delivering complex missile-related systems on time and within budget.

How does the $1.5 billion total contract value compare to historical spending on similar IRBM target programs?

Direct historical comparisons for Intercontinental Ballistic Missile (IRBM) target programs are challenging due to the specialized and often classified nature of such systems. The $1.5 billion figure represents the total potential value over the contract's duration, including all options and potential modifications. This amount reflects the significant investment required for the research, development, testing, and production of advanced targets capable of simulating sophisticated threats. Without access to specific historical program data for comparable IRBM targets, it's difficult to provide a precise benchmark. However, given the complexity and strategic importance of missile defense, such a contract value is not unexpected for a program of this scale and duration within the defense sector.

What are the primary risks associated with this fixed-price incentive (FPI) contract type for IRBM targets?

The primary risks associated with a Fixed-Price Incentive (FPI) contract for Intercontinental Ballistic Missile (IRBM) targets revolve around cost control and contractor performance. While FPI contracts aim to incentivize cost savings by sharing any savings or overruns between the government and contractor beyond target costs, they still carry inherent risks. If the contractor underestimates costs or encounters unforeseen technical challenges, the government may end up paying more than initially anticipated, especially if the ceiling price is reached. Conversely, if the contractor achieves significant cost savings, the government benefits. The risk for the government lies in ensuring the target cost is realistic and that the incentive sharing mechanism effectively drives performance without excessive cost escalation. Close monitoring of contractor cost accounting and technical progress is crucial to mitigate these risks.

How effective is the competition level (4 bidders) in ensuring value for money for taxpayers?

A competition involving four bidders for a specialized defense contract like this is generally considered a positive indicator for value for money. It suggests that the market has multiple capable suppliers, preventing a situation of sole-source reliance where prices could be inflated. The competitive process allows the Missile Defense Agency to solicit and evaluate multiple technical approaches and pricing structures. This comparison helps in identifying the most cost-effective solution that meets the stringent performance requirements. While four bidders indicate healthy competition, the ultimate value for money also depends on the thoroughness of the evaluation process and the negotiation strategies employed by the agency to ensure the selected proposal offers the best overall value, balancing cost, technical merit, and risk.

What are the potential long-term implications of this contract on the IRBM target market and future competition?

This contract, awarded to Northrop Grumman, could have significant long-term implications for the Intercontinental Ballistic Missile (IRBM) target market. As a large, multi-year award, it provides the prime contractor with substantial resources and a stable demand, potentially allowing them to invest further in specialized manufacturing capabilities and R&D. This could solidify their position as a leader in this niche. However, it might also create barriers to entry for smaller or newer competitors who lack the scale or established relationships to compete effectively on such large programs. The long duration could also mean that the market remains relatively concentrated, impacting future competition unless specific measures are taken to foster broader industry participation or technology development.

Are there any specific performance metrics or milestones tied to this contract that indicate program effectiveness?

While the provided data does not detail specific performance metrics or milestones, fixed-price incentive (FPI) contracts inherently tie contractor payment and profit to achieving defined cost and performance targets. For a program developing IRBM targets, effectiveness would likely be measured by the successful development, testing, and delivery of targets that accurately simulate adversary threats. Key performance indicators (KPIs) would typically include factors such as target reliability, fidelity in simulating specific threat characteristics, successful integration with testing infrastructure, and adherence to delivery schedules. The Missile Defense Agency would have established criteria for evaluating the technical performance and operational utility of the delivered targets, which would form the basis for assessing program effectiveness and contractor success.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HQ014710R0017

Offers Received: 4

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $1,931,628,598

Exercised Options: $1,590,913,208

Current Obligation: $1,503,664,138

Actual Outlays: $118,065,835

Subaward Activity

Number of Subawards: 6296

Total Subaward Amount: $2,316,424,413

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline