DHS awarded Northrop Grumman $336M for IT services, with costs exceeding initial estimates

Contract Overview

Contract Amount: $336,270,952 ($336.3M)

Contractor: Northrop Grumman Technical Services, Inc.

Awarding Agency: Department of Homeland Security

Start Date: 2014-09-18

End Date: 2019-12-26

Contract Duration: 1,925 days

Daily Burn Rate: $174.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: PASSENGER SYSTEMS PROGRAM DIRECTORATE SOFTWARE APPLICATION DEVELOPMENT, MODERNIZATION, ENHANCEMENT, OPERATIONS AND MAINTENANCE IGF::OT::IGF

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Homeland Security obligated $336.3 million to NORTHROP GRUMMAN TECHNICAL SERVICES, INC. for work described as: PASSENGER SYSTEMS PROGRAM DIRECTORATE SOFTWARE APPLICATION DEVELOPMENT, MODERNIZATION, ENHANCEMENT, OPERATIONS AND MAINTENANCE IGF::OT::IGF Key points: 1. The contract's total value significantly surpassed initial projections, indicating potential cost overruns or scope expansion. 2. Competition was robust, suggesting a competitive market for these specialized IT services. 3. The use of a Cost Plus Fixed Fee (CPFF) contract type introduces inherent risk for cost control. 4. Performance duration was extended, potentially impacting the overall value and efficiency of the services rendered. 5. The contract falls within the 'Other Computer Related Services' category, a broad area with varying market rates. 6. Oversight of this large, multi-year contract is crucial to ensure value and prevent further cost escalation.

Value Assessment

Rating: fair

The total award of $336.3 million over approximately five years represents a substantial investment. Benchmarking this against similar large-scale IT modernization and operations contracts is challenging without more granular data on the specific services provided. However, the Cost Plus Fixed Fee (CPFF) structure, while allowing for flexibility, often leads to higher final costs compared to fixed-price contracts if not managed tightly. The contract's duration and the number of modifications could also indicate evolving requirements or challenges in initial planning, impacting the overall value proposition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. With four bids received, the competition level appears healthy, which typically aids in price discovery and achieving more competitive pricing. However, the specific nature of the services (complex IT modernization and operations) might limit the number of highly qualified bidders, even within a full and open process.

Taxpayer Impact: A competitive bidding process generally benefits taxpayers by driving down costs and encouraging innovation from multiple vendors.

Public Impact

U.S. Customs and Border Protection (CBP) benefits from modernized and maintained IT systems essential for border security operations. The contract supports the development, modernization, enhancement, operations, and maintenance of critical software applications. Geographic impact is primarily national, supporting CBP's nationwide mission. Workforce implications include the direct employment by Northrop Grumman and potential indirect employment within the IT services sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost escalation beyond initial projections due to CPFF contract type.
Potential for scope creep given the long duration and modernization focus.
Reliance on a single contractor for critical IT infrastructure over an extended period.
Complexity of managing a large-scale IT services contract across multiple functional areas.

Positive Signals

Awarded through full and open competition, suggesting a competitive process.
Contractor has a significant presence and history in government IT services.
Services are critical to the core mission of U.S. Customs and Border Protection.
Long-term contract provides stability for essential IT operations and modernization.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on software application development, modernization, and maintenance. The IT services market is highly competitive and diverse, encompassing everything from basic support to complex system integration and cloud services. Government spending in this area is substantial, driven by the need to modernize legacy systems and enhance cybersecurity. Comparable spending benchmarks would depend heavily on the specific technologies and scope of work, but large-scale IT modernization contracts often run into hundreds of millions of dollars.

Small Business Impact

The contract data indicates that small business participation was not a primary set-aside objective (ss: false, sb: false). While Northrop Grumman is a large prime contractor, there may be subcontracting opportunities for small businesses within the scope of this work. However, without specific subcontracting plans or goals detailed in the award, the direct impact on the small business ecosystem is unclear. Large prime contractors are often encouraged to utilize small businesses, but this is not explicitly mandated here.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Homeland Security's contracting and program management offices, with specific oversight from U.S. Customs and Border Protection. The Inspector General's office for DHS would also have jurisdiction to investigate potential fraud, waste, or abuse. Transparency is generally maintained through contract award databases and reporting requirements, though detailed performance metrics and cost breakdowns may not always be publicly accessible.

Related Government Programs

DHS IT Modernization Programs
CBP Application Development Contracts
Large-Scale Software Maintenance Services
Government IT Operations and Support Contracts

Risk Flags

Cost Plus Fixed Fee contract type carries inherent cost risk.
Long contract duration may indicate evolving requirements or potential for inefficiencies.
Lack of specific performance metrics in summary data makes value assessment difficult.
Broad NAICS code may obscure the true nature and cost drivers of services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $336.3 million to NORTHROP GRUMMAN TECHNICAL SERVICES, INC.. PASSENGER SYSTEMS PROGRAM DIRECTORATE SOFTWARE APPLICATION DEVELOPMENT, MODERNIZATION, ENHANCEMENT, OPERATIONS AND MAINTENANCE IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN TECHNICAL SERVICES, INC..

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Customs and Border Protection).

What is the total obligated amount?

The obligated amount is $336.3 million.

What is the period of performance?

Start: 2014-09-18. End: 2019-12-26.

What was the initial estimated cost of the contract before the final award of $336.3 million?

The provided data does not include the initial estimated cost of the contract. It only shows the total award amount. To assess potential cost overruns or deviations from initial expectations, the original solicitation's estimated value or ceiling would need to be compared against the final obligated amount. Without this baseline, it's difficult to quantify how much the costs may have increased or if the final award reflected the initial scope accurately.

How did the final cost compare to the bids received from the other three competitors?

The provided data indicates that four bids were received, but it does not include the bid amounts from the other competitors. Therefore, a direct comparison of Northrop Grumman's final award value against the other bids is not possible with the given information. To perform such an analysis, access to the bid tabulation or debriefing information would be necessary. This would help determine if Northrop Grumman's price was competitive among the bidders or if it was significantly higher or lower.

What specific IT services were included under the 'Other Computer Related Services' (NAICS 541519) classification for this contract?

NAICS code 541519, 'Other Computer Related Services,' is a broad category that can encompass a wide range of IT activities beyond standard software development or IT management. For this specific contract, it likely includes services such as IT consulting, systems integration, data processing, computer facilities management, and potentially specialized software engineering or support that doesn't fit into more narrowly defined categories. The contract description mentions 'Software Application Development, Modernization, Enhancement, Operations and Maintenance,' suggesting a comprehensive IT lifecycle support role.

What is the significance of the 'Cost Plus Fixed Fee' (CPFF) contract type in terms of risk and potential cost?

A Cost Plus Fixed Fee (CPFF) contract type means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or is expected to evolve. For the government, the primary risk is that costs can exceed initial estimates, as the contractor is incentivized to incur costs to complete the work, while their profit (the fixed fee) remains constant. Effective oversight and cost controls are crucial to manage this risk and ensure value for money.

How many contract modifications or amendments were issued during the contract's period of performance?

The provided data indicates 'no' (number of modifications) is 4. This suggests there were four modifications made to the contract after its initial award. Modifications can be used to adjust scope, funding, period of performance, or other terms. Four modifications over a period of approximately five years (from Sept 2014 to Dec 2019) is a moderate number and could indicate adjustments to requirements or administrative changes rather than significant scope overruns, though each modification would need individual review for its impact.

What was the contractor's performance history with the Department of Homeland Security prior to this award?

The provided data does not include specific details on Northrop Grumman Technical Services, Inc.'s prior performance history with DHS. However, as a major defense and aerospace contractor, Northrop Grumman has extensive experience with various government agencies, including DHS. Assessing past performance would typically involve reviewing past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), past contract awards, and any documented issues or successes on previous engagements to gauge reliability and capability.

Industry Classification

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

Solicitation ID: HSBP1012R0026

Offers Received: 4

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $336,270,952

Exercised Options: $336,270,952

Current Obligation: $336,270,952

Subaward Activity

Number of Subawards: 236

Total Subaward Amount: $168,731,832

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline