DoD's $39.6M contract for AN/APR-39D(V)2 system design and NRE awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $39,565,291 ($39.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-05-31

End Date: 2017-12-30

Contract Duration: 2,039 days

Daily Burn Rate: $19.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: AN/APR-39D(V)2 DESIGN AND NRE

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $39.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: AN/APR-39D(V)2 DESIGN AND NRE Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. The contract's cost-plus-incentive-fee structure aims to align contractor and government interests but requires robust oversight. 3. Limited competition suggests potential risks related to contractor performance and innovation. 4. The duration of the contract (2039 days) indicates a long-term commitment to this specific system. 5. Northrop Grumman's role as a sole-source provider highlights potential vendor lock-in. 6. The absence of small business set-asides or subcontracting requirements may limit opportunities for smaller firms.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The cost-plus-incentive-fee (CPIF) pricing structure, while intended to incentivize performance, can lead to higher costs if not managed carefully. Without comparable contract data or market analysis, it's difficult to definitively assess if the $39.6 million represents a fair price for the design and non-recurring engineering (NRE) services provided. The government's ability to negotiate favorable terms is diminished in a sole-source environment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors vying for the contract. The lack of competition means there was no direct price comparison or market pressure to drive down costs, potentially leading to a less favorable outcome for the government in terms of price and terms.

Taxpayer Impact: Taxpayers may have paid a premium for this system due to the absence of competitive pressure. The government's negotiating position is weakened when only one contractor is considered.

Public Impact

The primary beneficiaries are the Department of Defense, which receives the AN/APR-39D(V)2 system, a crucial component for threat detection. The contract delivers design and non-recurring engineering services, laying the groundwork for future production and deployment of the system. The geographic impact is primarily within Illinois, where Northrop Grumman Systems Corporation is located, and wherever the system is ultimately deployed by the DoD. Workforce implications include employment for engineers, technicians, and support staff at Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-incentive-fee contracts require diligent oversight to prevent cost overruns.
Lack of competition may reduce incentives for innovation and efficiency from the contractor.
No explicit small business subcontracting goals were identified, potentially limiting opportunities for smaller enterprises.

Positive Signals

Northrop Grumman is an established defense contractor with significant experience in complex systems.
The CPIF contract structure, if managed effectively, can align contractor efforts with government objectives.
The AN/APR-39D(V)2 system is critical for military operations, indicating a strategic need.
The contract duration suggests a long-term commitment and potential for follow-on production contracts.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex technological requirements, and significant government procurement. Contracts for specialized systems like the AN/APR-39D(V)2 are often awarded to a limited number of prime contractors. The market size for such advanced electronic warfare systems is substantial, driven by ongoing military modernization and evolving threat landscapes. This contract fits within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sub-sector, which is a critical component of national defense spending.

Small Business Impact

This contract does not appear to have been set aside for small businesses, nor does it explicitly mention small business subcontracting requirements. The sole-source nature of the award further limits the direct involvement of small businesses unless they are subcontractors to Northrop Grumman. This could mean missed opportunities for small businesses to participate in the development and potential production phases of this defense system, impacting their growth and contribution to the defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the relevant Department of Defense program office. Accountability measures are embedded within the Cost Plus Incentive Fee (CPIF) structure, which links contractor profit to performance metrics. Transparency is limited due to the sole-source nature of the award; however, contract modifications, performance reports, and financial audits would be subject to internal government review and potentially Inspector General oversight.

Related Government Programs

AN/APR-39 Radar Warning Receiver
Electronic Warfare Systems
DoD Aircraft Survivability Equipment
Northrop Grumman Defense Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns in CPIF contracts
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. AN/APR-39D(V)2 DESIGN AND NRE

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 $39.6 million.

What is the period of performance?

Start: 2012-05-31. End: 2017-12-30.

What is the historical spending trend for the AN/APR-39D(V)2 system or similar threat detection systems by the Department of Defense?

Analyzing historical spending on the AN/APR-39D(V)2 system and similar threat detection systems by the DoD is crucial for understanding cost trends and identifying potential anomalies. While specific historical data for this exact contract's NRE phase is limited to the $39.6 million awarded, the AN/APR-39 family of systems has seen continuous development and upgrades over many years. Previous contracts for earlier versions or production runs would provide context. Without access to a comprehensive database of all prior AN/APR-39 contracts, including their value, duration, and competitive nature, a precise trend analysis is difficult. However, the DoD's overall investment in electronic warfare and situational awareness systems is substantial and generally increasing, driven by evolving geopolitical threats. Comparing this sole-source NRE award to any prior competitive bids for similar capabilities or to the total lifecycle cost of deployed systems would offer a more complete picture of the government's investment.

How does the cost-plus-incentive-fee (CPIF) structure in this contract compare to other contract types used for system design and NRE in the defense sector?

The Cost-Plus-Incentive-Fee (CPIF) contract type used here is common for research, development, and complex system design efforts where costs are uncertain and performance objectives are critical. Unlike fixed-price contracts, CPIF allows for cost reimbursement plus a fee that is adjusted based on the contractor's performance against pre-defined targets (e.g., cost, schedule, technical performance). This contrasts with Cost-Plus-Fixed-Fee (CPFF), where the fee is fixed, or Cost-Plus-Award-Fee (CPAF), where the fee is determined by subjective government evaluation. Fixed-price contracts (like FFP or FP-EPA) offer more cost certainty but are less suitable for R&D with high unknowns. The CPIF structure aims to incentivize Northrop Grumman to control costs and meet performance goals, sharing potential savings or overruns with the government based on agreed-upon formulas. Its effectiveness hinges on well-defined targets and robust government oversight to prevent contractor gaming of the system.

What are the specific performance metrics and incentive targets associated with the CPIF structure for this AN/APR-39D(V)2 contract?

The specific performance metrics and incentive targets for the CPIF structure in this AN/APR-39D(V)2 contract are not publicly detailed in the provided data. Typically, for a CPIF contract involving system design and NRE, these metrics would focus on key areas such as achieving specific technical performance milestones (e.g., system sensitivity, accuracy, reliability), adhering to development schedules, and managing costs within target ranges. The incentive fee would be adjusted based on how well Northrop Grumman meets or exceeds these pre-negotiated targets. For instance, if the system meets all technical requirements and is delivered ahead of schedule or under budget, the contractor would earn a higher incentive fee, up to a pre-determined maximum. Conversely, if targets are missed, the fee would be reduced, potentially down to a minimum level. The exact weighting and formulas for these adjustments are critical components of the contract's terms and conditions, requiring careful negotiation and monitoring by the contracting agency.

What is Northrop Grumman's track record with the AN/APR-39 system family and similar electronic warfare systems?

Northrop Grumman Systems Corporation has a significant and established track record in the development and production of electronic warfare (EW) systems, including the AN/APR-39 family of radar warning receivers. As a major defense contractor, the company possesses extensive experience in designing, integrating, and supporting complex avionics and EW suites for various military platforms. Their involvement with the AN/APR-39 system likely spans multiple generations and upgrades, demonstrating a deep understanding of its capabilities and operational requirements. This long-standing relationship suggests a high degree of technical expertise and program familiarity. While specific performance details on past contracts are often proprietary, Northrop Grumman's continued selection for critical defense programs like this indicates a generally positive assessment of their capabilities and reliability by the Department of Defense.

Given the sole-source nature, what mechanisms are in place to ensure fair pricing and prevent contractor overreach?

Despite the sole-source award, several mechanisms are intended to ensure fair pricing and prevent contractor overreach. The Cost-Plus-Incentive-Fee (CPIF) structure itself is a key mechanism, as it ties a portion of the contractor's profit to performance against agreed-upon targets, incentivizing cost control. The government, through its contracting officers and technical representatives, conducts rigorous oversight, including auditing contractor costs and progress. Negotiation of the initial target cost and fee, along with the incentive sharing ratios, is critical. Furthermore, the government reserves the right to conduct technical reviews, audits, and potentially invoke contract clauses related to defective pricing or performance issues. While competition is the most effective price control, these contractual and oversight measures serve as the primary safeguards in a sole-source scenario.

What are the potential risks associated with relying on a single contractor (Northrop Grumman) for the design and NRE of this critical defense system?

Relying on a single contractor like Northrop Grumman for the design and NRE of the AN/APR-39D(V)2 system presents several potential risks. Firstly, there's the risk of vendor lock-in, where the government becomes heavily dependent on Northrop Grumman for future upgrades, maintenance, and production, potentially limiting future sourcing options and negotiating leverage. Secondly, without competitive pressure, there's a risk that innovation might stagnate, or that costs could be higher than if multiple vendors were competing. Performance risks also exist; if Northrop Grumman encounters unforeseen technical difficulties or management issues, the program schedule and budget could be significantly impacted, with limited alternative contractors available to step in. Finally, a sole-source award can sometimes indicate a lack of available qualified sources or a failure in market research, which itself could be a systemic risk.

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

Solicitation ID: N0001911R0043

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 600 HICKS RD, ROLLING MEADOWS, IL, 60008

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: $40,228,946

Exercised Options: $39,683,831

Current Obligation: $39,565,291

Subaward Activity

Number of Subawards: 555

Total Subaward Amount: $85,559,093

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline