Northrop Grumman awarded $40.5M for engineering support, with limited competition impacting price discovery

Contract Overview

Contract Amount: $40,495,759 ($40.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2024-04-30

End Date: 2028-04-03

Contract Duration: 1,434 days

Daily Burn Rate: $28.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SUPPORT SERVICES FOR ECP'S, DREX, ERM TESTING SUPPORT, PROGRAM MANAGEMENT, INS-M CODE COMPLIANCE, AND TTG IMPLEMENTATION FOR THE REG TASK ORDER.

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $40.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING SUPPORT SERVICES FOR ECP'S, DREX, ERM TESTING SUPPORT, PROGRAM MANAGEMENT, INS-M CODE COMPLIANCE, AND TTG IMPLEMENTATION FOR THE REG TASK ORDER. Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed tightly. 2. The limited competition nature of this award raises concerns about achieving the best possible value for taxpayer dollars. 3. The duration of the contract (over 3 years) suggests a need for sustained engineering and program management support. 4. The specific technical areas covered indicate a focus on advanced defense systems and regulatory compliance. 5. The contract's value is significant, requiring robust oversight to ensure performance and cost control.

Value Assessment

Rating: fair

Benchmarking this contract's value is challenging without more detailed cost breakdowns. However, the $40.5 million award over approximately 3.8 years suggests an average annual value of roughly $10.6 million. Given the specialized nature of engineering support for defense programs like ECP's and DREX, this figure may be within a reasonable range, but the lack of competitive bidding prevents a definitive assessment of optimal value for money. The cost-plus-fixed-fee structure necessitates close monitoring of actual costs against the fixed fee to ensure efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or when urgency precludes a full and open competition. The lack of multiple bidders means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, meaning taxpayers may not be receiving the most cost-effective solution available.

Public Impact

The Department of the Navy benefits from specialized engineering and program management expertise for critical defense systems. Services include support for ECP's, DREX, ERM testing, program management, INS-M code compliance, and TTG implementation. The contract supports advanced technological development and maintenance within the defense sector. Workforce implications include the employment of specialized engineers and technical personnel at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated costs for taxpayers.
Cost-plus-fixed-fee contracts require diligent oversight to prevent cost overruns.
The specialized nature of the services could create vendor lock-in.

Positive Signals

Northrop Grumman is a major defense contractor with extensive experience.
The contract addresses critical needs in advanced defense systems and program management.
The fixed fee component provides some level of cost predictability.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on engineering and technical support services for advanced defense programs. The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' indicates a focus on sophisticated systems. The market for such specialized engineering support is characterized by high barriers to entry due to technical expertise, security clearances, and established relationships with government agencies. Spending in this area is substantial, driven by ongoing modernization and maintenance of national defense capabilities.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have significant subcontracting requirements for small businesses indicated in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal, unless Northrop Grumman voluntarily engages small businesses for specific components or services not detailed here.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting and program management offices. Given the cost-plus-fixed-fee structure, rigorous monitoring of expenditures, performance metrics, and adherence to the Statement of Work will be crucial. Transparency may be limited due to the sole-source nature, but internal government oversight mechanisms should ensure accountability. There is no specific mention of an Inspector General's direct jurisdiction over this particular task order, but the DoD IG generally has broad oversight authority.

Related Government Programs

Department of Defense Research and Development
Naval Systems Engineering Support
Advanced Defense Technology Programs
Program Management Services
Defense Contract Management

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENGINEERING SUPPORT SERVICES FOR ECP'S, DREX, ERM TESTING SUPPORT, PROGRAM MANAGEMENT, INS-M CODE COMPLIANCE, AND TTG IMPLEMENTATION FOR THE REG TASK ORDER.

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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $40.5 million.

What is the period of performance?

Start: 2024-04-30. End: 2028-04-03.

What is Northrop Grumman's track record with similar sole-source, cost-plus-fixed-fee contracts within the Department of Defense?

Northrop Grumman Systems Corporation has a long history of performing complex engineering, development, and sustainment services for the Department of Defense, often through sole-source or limited-competition contracts due to the specialized nature of their offerings. Their experience spans major defense platforms and programs. Cost-plus-fixed-fee (CPFF) contracts are a common vehicle for R&D and complex services where costs are not easily predictable. While CPFF contracts offer flexibility, they also require robust government oversight to manage costs effectively and prevent contractor inefficiencies from driving up the final price. Northrop Grumman's extensive portfolio suggests they are adept at managing such contracts, but historical performance data, including any instances of cost overruns or disputes on similar CPFF awards, would be necessary for a comprehensive assessment of their reliability and value proposition in this specific instance.

How does the estimated cost of this contract compare to similar engineering support services for advanced defense systems?

Directly comparing the $40.5 million cost for this specific task order is difficult without detailed cost breakdowns and a clear understanding of the scope of work for comparable contracts. However, the average annual value of approximately $10.6 million for specialized engineering support for programs like ECP's and DREX, which involve advanced systems and testing, appears to be within a plausible range for the defense industry. The lack of competition, however, means this figure cannot be benchmarked against market-driven pricing. Typically, contracts for similar complex systems integration, testing, and program management services awarded through full and open competition might yield lower prices due to competitive pressures. The cost-plus-fixed-fee structure also means the final cost could deviate from initial estimates, making a definitive value comparison challenging without post-award cost data.

What are the primary risks associated with this sole-source, cost-plus-fixed-fee contract award?

The primary risks associated with this sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs for the government than if multiple bidders had vied for the contract. This lack of price discovery means taxpayers may not be getting the best value. Secondly, the CPFF structure, while providing flexibility for unpredictable costs, carries inherent risks of cost escalation. If not rigorously managed and overseen by the government, the contractor may have less incentive to control costs, potentially leading to expenditures exceeding initial estimates. Additionally, reliance on a single contractor for critical support functions can create vendor lock-in and reduce future contracting flexibility.

How effective is the Department of the Navy likely to be in overseeing this contract, given its sole-source and CPFF nature?

The effectiveness of the Department of the Navy's oversight will depend heavily on the resources, expertise, and diligence of the contracting and program management teams assigned to this task order. Sole-source awards require proactive government engagement to ensure the scope is well-defined and the contractor is held accountable, as there's no competitive benchmark. For CPFF contracts, rigorous auditing of incurred costs, performance monitoring against milestones, and proactive risk management are essential. The Navy has established processes for contract oversight, but the complexity of the systems supported and the potential for cost growth necessitate dedicated attention. Without specific details on the oversight plan, it's difficult to definitively assess effectiveness, but the inherent risks of sole-source CPFF contracts demand heightened vigilance.

What are the historical spending patterns for engineering support services within the Navy for similar advanced systems?

Historical spending patterns for engineering support services within the Navy for similar advanced systems are substantial and generally increasing, driven by modernization efforts and the complexity of new platforms. While specific figures for ECP's, DREX, and TTG implementation are not publicly itemized in aggregate, the Navy consistently allocates significant portions of its budget to R&D, systems engineering, and technical support for its fleet. Contracts for these services often range from millions to hundreds of millions of dollars, depending on the program's scale and duration. Spending is typically concentrated with large, established defense contractors like Northrop Grumman, often through sole-source or limited-competition vehicles due to specialized requirements. Analyzing past spending on comparable programs would reveal trends in contract types, durations, and average annual values, providing context for the current $40.5 million award.

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: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $40,495,759

Exercised Options: $40,495,759

Current Obligation: $40,495,759

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $367,224

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: M6785420G0032

IDV Type: BOA

Timeline