Northrop Grumman awarded $67.4M for GWLR system development, a sole-source contract with cost-plus incentives
Contract Overview
Contract Amount: $67,406,633 ($67.4M)
Contractor: Northrop Grumman Systems Corporation
Awarding Agency: Department of Defense
Start Date: 2015-08-28
End Date: 2018-08-31
Contract Duration: 1,099 days
Daily Burn Rate: $61.3K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: GWLR SYSTEM DEVELOPMENT&DEMONSTRATION IGF::OT::IGF
Place of Performance
Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090
State: Maryland Government Spending
Plain-Language Summary
Department of Defense obligated $67.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: GWLR SYSTEM DEVELOPMENT&DEMONSTRATION IGF::OT::IGF Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Cost-plus incentive fee structure may incentivize cost overruns. 3. Contract duration of 1099 days suggests a complex, long-term development effort. 4. The system is for Search, Detection, Navigation, Guidance, Aeronautical, and Nautical instruments. 5. Awarded by the Defense Contract Management Agency, indicating a defense-related need. 6. The contract was not competed, raising questions about best value. 7. Northrop Grumman is a major defense contractor with a significant track record.
Value Assessment
Rating: questionable
Benchmarking the value of this sole-source, cost-plus incentive fee contract is challenging due to the lack of competitive bids. The cost-plus nature, while allowing for flexibility in development, can lead to higher final costs compared to fixed-price contracts. Without comparable sole-source awards for similar systems, it's difficult to definitively assess if the $67.4 million represents a fair price. The incentive fee structure, however, suggests an attempt to align contractor performance with cost and schedule objectives, which is a positive sign within the constraints of non-competitive procurement.
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 multiple vendors. This typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that price discovery through market forces was not utilized, potentially leading to a higher price than if multiple bids had been solicited. The justification for sole-source procurement would need to be robust to ensure taxpayer value.
Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that can arise from competitive bidding processes. This can result in higher overall expenditure for the government.
Public Impact
The primary beneficiaries are the Department of Defense, which will receive the GWLR system. The system is intended to enhance search, detection, navigation, guidance, and related aeronautical/nautical capabilities. The geographic impact is likely within defense operations, potentially global. Workforce implications include specialized engineering and technical roles at Northrop Grumman.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pressure on pricing.
- Cost-plus incentive fee structure can lead to cost overruns if not managed tightly.
- Lack of transparency in the justification for sole-source procurement.
- Long contract duration (1099 days) increases exposure to changing requirements or economic conditions.
- Potential for scope creep in cost-plus contracts.
Positive Signals
- Northrop Grumman is an established defense contractor with relevant expertise.
- Incentive fee structure aims to align contractor performance with government objectives.
- The contract addresses critical defense capabilities in navigation and detection.
- Awarded by a specialized defense agency (DCMA) suggesting oversight.
Sector Analysis
This contract falls within the aerospace and defense sector, specifically in the manufacturing of navigation, guidance, and control systems. The market for such specialized defense electronics is dominated by a few large, established players like Northrop Grumman. Spending in this sub-sector is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other large-scale defense system development contracts, often awarded through competitive processes.
Small Business Impact
There is no indication that this contract involved small business set-asides. As a sole-source award to a large prime contractor, the primary impact on small businesses would be through potential subcontracting opportunities. The extent of small business participation would depend on Northrop Grumman's subcontracting plan and the availability of qualified small businesses for specific components or services.
Oversight & Accountability
Oversight for this contract would likely be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures would be embedded within the cost-plus incentive fee structure, linking contractor compensation to performance metrics. Transparency regarding the justification for the sole-source award and the specific incentive targets would be crucial for assessing accountability.
Related Government Programs
- Defense Navigation Systems
- Aeronautical and Nautical Instrument Manufacturing
- Search and Detection Systems
- Guidance Systems Development
- Cost-Plus Incentive Fee Contracts
Risk Flags
- Sole-source award
- Cost-plus contract type
- Long contract duration
- Lack of competitive bidding justification
Tags
defense, department-of-defense, northrop-grumman, sole-source, cost-plus-incentive-fee, system-development, navigation-systems, detection-systems, aeronautical-instruments, nautical-instruments, definitive-contract, maryland
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $67.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. GWLR SYSTEM DEVELOPMENT&DEMONSTRATION IGF::OT::IGF
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 $67.4 million.
What is the period of performance?
Start: 2015-08-28. End: 2018-08-31.
What is the specific justification for awarding this contract on a sole-source basis?
The provided data does not include the specific justification for the sole-source award. Typically, sole-source procurements are justified under circumstances such as the existence of only one responsible source, urgent and compelling needs, or when a specific technology or capability is uniquely held by a single contractor. For a contract of this magnitude and duration, a detailed justification document would normally be required by federal procurement regulations, outlining why competitive bidding was not feasible or advantageous. Without this justification, it is difficult to fully assess the necessity and potential value implications of the non-competitive award.
How does the cost-plus incentive fee (CPIF) structure compare to other contract types for similar defense system development?
Cost-plus incentive fee (CPIF) contracts are common in defense system development where the final costs are uncertain and performance objectives are complex. Unlike fixed-price contracts, CPIF allows for cost reimbursement plus a fee that is adjusted based on performance against targets (e.g., cost, schedule, technical performance). This structure aims to incentivize the contractor to control costs and meet objectives. However, it carries a higher risk of cost overruns compared to fixed-price contracts if targets are not well-defined or if the government does not maintain rigorous oversight. Other contract types like Cost Plus Fixed Fee (CPFF) or Firm Fixed Price (FFP) might be used depending on the level of cost certainty and risk appetite.
What are the key performance indicators (KPIs) tied to the incentive fee for this contract?
The specific Key Performance Indicators (KPIs) tied to the incentive fee for the GWLR system development contract are not detailed in the provided data. In a CPIF contract, these KPIs are crucial for determining the final fee earned by the contractor. They typically relate to achieving specific technical milestones, adhering to development schedules, and controlling costs within agreed-upon ranges. The government and contractor negotiate these targets before the contract is finalized. Effective KPIs should be measurable, achievable, relevant, and time-bound (SMART) to ensure alignment with program goals and provide meaningful incentives for performance.
What is Northrop Grumman's track record with similar sole-source, cost-plus incentive fee defense contracts?
Northrop Grumman is a major defense contractor with extensive experience in developing complex systems, often utilizing cost-plus incentive fee (CPIF) contracts. While specific details on their track record with *sole-source* CPIF contracts for similar systems are not provided here, their history includes numerous large-scale defense programs. Analyzing their past performance on such contracts would involve reviewing contract close-out data, audit reports, and any documented instances of cost overruns or performance issues. Generally, large contractors like Northrop Grumman have established processes for managing CPIF contracts, but the success of these contracts heavily depends on the specific program, government oversight, and the clarity of negotiated targets.
How does the $67.4 million award compare to historical spending on similar navigation and detection systems?
Comparing the $67.4 million award for the GWLR system development to historical spending on similar systems is challenging without more specific data on the system's capabilities and the nature of historical procurements. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' category is broad. However, $67.4 million for a development and demonstration contract over approximately three years (1099 days) is a significant investment, typical for complex defense technology. To provide a meaningful comparison, one would need to identify contracts for systems with comparable technological sophistication, scope, and developmental phase, ideally from the same agency or with similar requirements, and adjust for inflation and technological obsolescence.
What are the potential risks associated with the 1099-day contract duration?
A contract duration of 1099 days (approximately three years) for system development presents several potential risks. Firstly, the longer timeframe increases the likelihood of requirement changes due to evolving threats, technological advancements, or shifts in defense strategy. Managing these changes within a cost-plus framework can lead to scope creep and increased costs. Secondly, extended durations can expose the project to economic fluctuations, such as inflation or changes in funding priorities, which might impact budget availability. Lastly, maintaining consistent oversight and contractor focus over such a long period requires sustained effort from the contracting agency to ensure the project stays on track and delivers the intended capabilities effectively.
Industry Classification
NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Solicitation ID: M6785414R0215
Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE (V)
Evaluated Preference: NONE
Contractor Details
Parent Company: Northrop Grumman Corporation
Address: 1580A W NURSERY RD, LINTHICUM HEIGHTS, MD, 21090
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: $68,321,405
Exercised Options: $68,321,405
Current Obligation: $67,406,633
Subaward Activity
Number of Subawards: 761
Total Subaward Amount: $648,089,582
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2015-08-28
Current End Date: 2018-08-31
Potential End Date: 2018-08-31 00:00:00
Last Modified: 2023-01-27
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