DoD's $78.8M contract for advanced electronics development awarded to Northrop Grumman, with a significant portion for R&D

Contract Overview

Contract Amount: $78,828,653 ($78.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2006-05-17

End Date: 2014-02-28

Contract Duration: 2,844 days

Daily Burn Rate: $27.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: TAS::17 1804::TAS 200608!200367!1700!M67854!COMMANDING GENERAL !M6785406C2023 !A!N! !N! ! !20060517!20060930!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000004882543!N!N!000004882543!AC63!RDTE/ELECTRONICS&COMMUNICATION EQ-ADV TECH DEV !S1 !SERVICES !000 !NOT DISCERNABLE !541511!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!V!1!001!N!1A!Z!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!N! ! ! !Y!1727!M67854!0001! !

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171, UNITED STATES OF AMERICA

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $78.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: TAS::17 1804::TAS 200608!200367!1700!M67854!COMMANDING GENERAL !M6785406C2023 !A!N! !N! ! !20060517!20060930!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!66000!073!06!SAN DIE… Key points: 1. Contract awarded for advanced technology development in electronics and communication equipment. 2. Significant portion of the contract value allocated to Research, Development, Test, and Evaluation (RDTE). 3. Contractor has a substantial track record with the Department of Defense. 4. The contract's duration spans over 8 years, indicating a long-term need. 5. Pricing structure is Cost Plus Incentive Fee, which can lead to cost overruns if not managed carefully. 6. The contract was not competitively procured, raising questions about potential value for money.

Value Assessment

Rating: fair

The contract value of $78.8 million over nearly 8 years suggests a substantial investment in advanced technology. However, without comparable sole-source contracts for similar R&D efforts, it is difficult to definitively benchmark the value. The Cost Plus Incentive Fee (CPIF) structure, while allowing for flexibility in research, carries inherent risks of cost escalation if performance targets are not met efficiently. The lack of competition makes a direct price comparison impossible, necessitating a deeper dive into the contractor's cost proposals and the reasonableness of the fee structure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competition from other potential vendors. This approach is typically used when a specific contractor possesses unique capabilities or when there are urgent needs that preclude a full and open competition. The lack of competition means that the government did not benefit from the price discovery mechanisms that typically occur in a competitive bidding process, potentially leading to a higher price than might have been achieved otherwise.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without multiple offers, there is less assurance that the negotiated price represents the best possible value.

Public Impact

The primary beneficiary is the Department of Defense, which will receive advanced electronics and communication equipment. The contract supports the development of cutting-edge technologies crucial for national security. The geographic impact is centered around the contractor's facilities in Reston, Virginia, and potentially San Diego, California, where the work is performed. The contract likely supports a specialized workforce in the defense technology sector, including engineers and researchers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
CPIF contract type introduces risk of cost overruns if not managed effectively.
Long contract duration (nearly 8 years) increases exposure to changing technological landscapes and potential obsolescence.
Limited transparency into the specific R&D milestones and performance metrics driving the incentive fee.

Positive Signals

Award to a large, established defense contractor (Northrop Grumman) suggests a high level of technical capability and experience.
Focus on advanced technology development aligns with modernization efforts within the DoD.
Contract duration indicates a sustained commitment to a critical capability area.
The contract is for research and development, which is essential for future technological superiority.

Sector Analysis

This contract falls within the broader Information Technology and Defense sectors, specifically focusing on the development of advanced electronics and communication equipment. The market for defense electronics is highly specialized, with a few large prime contractors dominating the landscape. Spending in this area is driven by the need for technological superiority and modernization of military systems. Comparable spending benchmarks would typically involve other RDTE contracts for similar defense systems or components, often awarded through competitive processes or specific sole-source justifications.

Small Business Impact

This contract does not appear to have a small business set-aside component. Given the nature of advanced R&D in electronics and communication equipment, it is likely that the prime contractor, Northrop Grumman, will perform the majority of the work. There may be opportunities for small businesses to participate as subcontractors, but this is not explicitly detailed in the provided data. The lack of a set-aside suggests that the primary focus was on securing specialized capabilities rather than promoting small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, likely involving the Defense Contract Management Agency (DCMA) given the 'sa' field. Accountability measures would be tied to the Cost Plus Incentive Fee (CPIF) structure, requiring the contractor to meet specific performance targets to earn full profit. Transparency is limited by the sole-source nature and the proprietary aspects of R&D, but contract modifications, performance reports, and financial audits would be standard oversight mechanisms.

Related Government Programs

Department of Defense Research, Development, Test, and Evaluation (RDTE)
Advanced Electronics Development
Communication Systems
Northrop Grumman Defense Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost Plus Incentive Fee structure
Long contract duration
Lack of detailed performance metrics in summary data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $78.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. TAS::17 1804::TAS 200608!200367!1700!M67854!COMMANDING GENERAL !M6785406C2023 !A!N! !N! ! !20060517!20060930!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000004882543!N!N!000004882543!AC63!RDTE/ELECTRONICS&COMMUNICATION EQ-ADV TECH DEV !S1 !SERVICES !000 !NOT DISCERNABLE !541511!E!

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 $78.8 million.

What is the period of performance?

Start: 2006-05-17. End: 2014-02-28.

What is the specific breakdown of the $78.8 million between Research, Development, Test, and Evaluation (RDTE) and other cost categories?

The provided data indicates that the contract's primary purpose is 'RDTE/ELECTRONICS&COMMUNICATION EQ-ADV TECH DEV'. While a precise dollar breakdown between R, D, T, and E is not explicitly stated, the contract's description strongly suggests that the vast majority of the $78.8 million is allocated to these research and development activities. The 'AC63' in the TAS field often denotes Research, Development, Test, and Evaluation funding. The nature of 'Advanced Technology Development' inherently means a significant investment in the research and development phases, with testing and evaluation following as the technology matures. Without further detailed financial reporting from the contract, it's assumed the bulk of the funding is dedicated to these RDTE efforts.

What are the key performance metrics and incentive targets associated with the Cost Plus Incentive Fee (CPIF) structure?

The specific key performance metrics and incentive targets for this Cost Plus Incentive Fee (CPIF) contract are not detailed in the provided summary data. CPIF contracts are designed to motivate the contractor to control costs while achieving specific performance objectives. These objectives could relate to technical performance (e.g., achieving certain efficiency levels, reliability standards, or functional capabilities), delivery schedules, or other program milestones. The 'incentive' part means the contractor's fee (profit) is adjusted based on how well they meet or exceed these pre-defined targets. Without access to the contract's Statement of Work (SOW) and the detailed contract clauses, the exact metrics remain undisclosed in this overview.

What is Northrop Grumman's track record with similar advanced electronics development contracts for the DoD?

Northrop Grumman has a long and extensive track record of developing advanced electronics and communication systems for the Department of Defense. As a major defense contractor, they are involved in numerous programs across various military branches, including fighter jets, naval systems, and strategic missile programs, all of which rely heavily on sophisticated electronics. Their experience spans decades, encompassing research, design, integration, and sustainment of complex electronic warfare systems, radar, communication suites, and avionics. This specific contract likely leverages their established expertise and existing technological base in areas such as signal processing, secure communications, and advanced sensor technology, making them a logical choice for this sole-source award.

How does the $78.8 million spending compare to other DoD advanced electronics R&D contracts over a similar period?

The $78.8 million contract value for advanced electronics R&D, awarded in 2006 and spanning nearly 8 years, represents a significant but not extraordinary investment within the context of overall DoD R&D spending. The DoD's annual R&D budget typically runs into the tens of billions of dollars. Contracts of this magnitude are common for developing specialized systems or components. To provide a precise comparison, one would need to analyze other RDTE contracts awarded around the same time for similar technologies (e.g., advanced radar, electronic warfare, secure communications) and consider factors like the specific technological maturity, program scope, and whether they were competitively bid or sole-source. This contract's value is substantial enough to indicate a critical technological need but falls within the range of major development efforts.

What are the potential risks associated with a sole-source Cost Plus Incentive Fee (CPIF) contract for advanced technology development?

Sole-source CPIF contracts for advanced technology development carry several inherent risks. Firstly, the lack of competition means the government may not achieve the lowest possible price, as there's no market pressure to drive down costs. Secondly, the CPIF structure, while incentivizing performance, can lead to cost overruns if the incentive targets are poorly defined, overly ambitious, or if the contractor prioritizes achieving targets over genuine cost efficiency. For advanced technology, R&D is inherently uncertain, making it difficult to set precise cost and performance baselines, thus increasing the risk of cost growth. Finally, the long duration of such contracts (nearly 8 years here) can expose the project to technological obsolescence or shifts in strategic priorities, potentially rendering the developed technology less relevant by completion.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

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

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline