DoD awards $59.6M contract for G/ATOR system spares to Northrop Grumman, raising competition concerns

Contract Overview

Contract Amount: $59,652,044 ($59.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-04-01

End Date: 2028-11-24

Contract Duration: 2,064 days

Daily Burn Rate: $28.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: SPARES FOR G/ATOR FIELDED AND TEST SYSTEMS.

Place of Performance

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

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $59.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: SPARES FOR G/ATOR FIELDED AND TEST SYSTEMS. Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract duration of over 5 years suggests a long-term need for these critical spares. 3. Northrop Grumman, as the incumbent, likely possesses unique knowledge of the G/ATOR system. 4. The firm-fixed-price structure shifts some risk to the contractor but doesn't guarantee optimal pricing without competition. 5. Focus on spares indicates ongoing operational use and maintenance requirements for fielded systems. 6. The award is for a specific system, suggesting specialized manufacturing and supply chain needs.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized components involved. Without competitive bids, it's difficult to ascertain if the $59.6 million represents a fair market price. However, the firm-fixed-price contract type provides some cost certainty. The long duration suggests a significant quantity of spares will be procured over time, making price vigilance crucial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the competitive bidding process, which typically leads to better price discovery and potentially lower costs for the government. The lack of competition here may be due to the specialized nature of the G/ATOR system and Northrop Grumman's role as the original equipment manufacturer.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the most cost-effective pricing available. Without multiple bids, there's a risk of paying a premium for these essential system spares.

Public Impact

The U.S. Department of the Navy benefits from the continued availability of critical spare parts for its G/ATOR (Ground-based Mobile Radar) systems. This contract ensures the operational readiness and sustainment of advanced radar systems used for search, detection, navigation, and guidance. The geographic impact is primarily within Maryland, where Northrop Grumman's facility is located, but the ultimate benefit is to Navy operational units wherever they are deployed. Workforce implications include continued employment for skilled manufacturing and logistics personnel at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher prices.
Lack of transparency in pricing due to no competitive bidding.
Long contract duration could mask inefficiencies if not closely monitored.

Positive Signals

Firm-fixed-price contract shifts some cost risk to the contractor.
Award ensures continued operational readiness of critical defense systems.
Northrop Grumman's established expertise with the G/ATOR system may ensure quality and timely delivery.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced radar systems and their sustainment. The market for such specialized defense components is often dominated by a few large prime contractors like Northrop Grumman, who possess the intellectual property and manufacturing capabilities. Spending on system spares is a critical, albeit often less visible, aspect of overall defense procurement, ensuring the longevity and effectiveness of fielded weapon systems.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the sole-source nature and the specialized components for the G/ATOR system, it is unlikely that subcontracting opportunities for small businesses will be mandated or significant, unless Northrop Grumman voluntarily includes them in its supply chain for specific parts.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting and program management offices. The firm-fixed-price nature provides some cost control, but the lack of competition necessitates rigorous performance monitoring to ensure quality and delivery schedules are met. Transparency could be enhanced through post-award audits or by making more detailed justifications for the sole-source award publicly available.

Related Government Programs

G/ATOR System Procurement
Naval Radar Systems
Defense Logistics and Sustainment
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns without competitive pressure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $59.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. SPARES FOR G/ATOR FIELDED AND TEST SYSTEMS.

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 $59.7 million.

What is the period of performance?

Start: 2023-04-01. End: 2028-11-24.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source awards are justified when only one responsible source is available or capable of providing the required goods or services. For specialized defense systems like the G/ATOR, this often stems from proprietary technology, unique manufacturing capabilities held by the original equipment manufacturer (OEM), or the need for seamless integration with existing fielded systems. Northrop Grumman, as the likely OEM, would possess the necessary technical data, tooling, and expertise. A formal justification document (e.g., a Justification and Approval, J&A) would detail these reasons, often citing national security interests or the impracticality of developing a competitive source.

How does the firm-fixed-price (FFP) contract type benefit the government in this sole-source scenario?

While a sole-source award limits competitive pricing, the firm-fixed-price (FFP) contract type still offers significant benefits to the government. Under FFP, the contractor agrees to a total price for the defined scope of work. This means Northrop Grumman assumes the primary risk for cost overruns. If their costs to produce the spares are higher than anticipated, their profit margin decreases, but the government's payment remains fixed. This provides budget certainty and protects the government from unexpected price increases, which is particularly valuable when competition is absent and price negotiation leverage is reduced.

What are the potential risks associated with procuring spares for a complex system like G/ATOR on a sole-source basis?

The primary risk of a sole-source award for G/ATOR spares is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, Northrop Grumman may not be incentivized to offer the lowest possible price. Additionally, there's a risk of complacency, where the contractor might not prioritize efficiency or innovation in production or delivery. Over time, the government could become overly reliant on a single supplier, potentially limiting future flexibility in sourcing or negotiating upgrades. Ensuring the quality and timely delivery also relies heavily on the contractor's performance without the external validation that competition provides.

Can we benchmark the value of this contract against similar procurements or market rates?

Benchmarking this $59.6 million contract for G/ATOR spares is difficult without more specific data on the types and quantities of spares included. The Ground Support Equipment, Aircraft/Platform, and Test Equipment (G/ATOR) is a sophisticated system, and its spare parts are likely specialized and costly to manufacture. Comparisons would ideally be made against previous contracts for the same or similar G/ATOR spares, or against contracts for spares for comparable radar systems from other manufacturers. However, the sole-source nature of this award complicates direct price comparisons, as competitive market rates may not be fully reflected.

What is Northrop Grumman's track record with the G/ATOR system and similar defense contracts?

Northrop Grumman has a significant track record with the G/ATOR system, as they are the prime contractor responsible for its development and production. Their history with this specific platform suggests deep technical expertise and familiarity with its components and operational requirements. Generally, Northrop Grumman is a major defense contractor with extensive experience in producing complex systems for the U.S. military across various domains, including radar, aerospace, and defense electronics. Their performance on past contracts would be a key factor in the Department of the Navy's decision to award this sole-source contract, assuming they met or exceeded expectations.

How does this spending fit into the broader context of Department of the Navy radar system investments?

This $59.6 million contract for G/ATOR spares represents a crucial component of the Department of the Navy's sustainment strategy for its advanced sensor capabilities. The G/ATOR system is a multi-mission radar designed for various roles, including air defense, counter-battery fire locating, and air traffic control. Investments in spares are essential to ensure these systems remain operational and ready for deployment, supporting the Navy's mission requirements across different platforms and operational theaters. This spending complements larger investments in acquiring new radar systems and upgrading existing ones, ensuring the long-term viability and effectiveness of the Navy's radar enterprise.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $59,652,044

Exercised Options: $59,652,044

Current Obligation: $59,652,044

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $8,288,342

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