DoD's $57.6M Engineering and Software Sustainment Contract Awarded to Northrop Grumman

Contract Overview

Contract Amount: $57,555,373 ($57.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-09-27

End Date: 2020-03-31

Contract Duration: 2,742 days

Daily Burn Rate: $21.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: ENGINEERING AND SOFTWARE SUSTAINMENT

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92127

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $57.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING AND SOFTWARE SUSTAINMENT Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Long contract duration of over 7 years suggests potential for cost overruns. 3. Cost-plus-fixed-fee structure may incentivize contractor to increase costs. 4. Research and Development NAICS code indicates a focus on innovation and technical services. 5. Contractor, Northrop Grumman, is a major defense contractor with extensive experience. 6. The contract's value is significant within the R&D sector for the Navy.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific R&D focus. The cost-plus-fixed-fee (CPFF) pricing structure, while common in R&D, can lead to higher overall costs compared to fixed-price contracts if not carefully managed. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The extended duration also increases the risk of cost escalation over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the unique capabilities or technology required for the service. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to a higher price for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to lower costs. The government did not benefit from the potential cost savings that a competitive bidding process could have yielded.

Public Impact

The Department of the Navy benefits from continued engineering and software sustainment for critical systems. This contract supports advanced research and development activities within the defense sector. The primary beneficiaries are the military personnel who rely on the sustained functionality of these systems. Work is likely concentrated in California, where Northrop Grumman has significant operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost growth without strict oversight.
Long contract duration increases the risk of scope creep and cost overruns.
Lack of transparency in the sole-source justification process.

Positive Signals

Award to a large, established defense contractor suggests a high likelihood of technical capability.
Sustainment focus indicates a commitment to maintaining critical defense infrastructure.
Contract supports R&D, potentially leading to technological advancements for national security.

Sector Analysis

This contract falls within the Research and Development in the Physical, Engineering, and Life Sciences sector, specifically NAICS code 541712. This is a critical area for defense innovation, involving complex engineering and software development. The market is dominated by large aerospace and defense firms, with significant government spending allocated to R&D contracts to maintain technological superiority.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Given the sole-source nature and the prime contractor being Northrop Grumman, a large corporation, the likelihood of significant subcontracting opportunities for small businesses is uncertain and depends on Northrop Grumman's internal subcontracting strategy. There is no explicit mechanism here to ensure small business participation.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting officers and program managers. The CPFF structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable. Transparency may be limited due to the sole-source nature, but contract performance reviews and audits would be standard oversight mechanisms. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

Defense Research and Development
Aerospace Engineering Services
Software Development and Sustainment
Naval Systems Support
Northrop Grumman Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $57.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENGINEERING AND SOFTWARE SUSTAINMENT

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 $57.6 million.

What is the period of performance?

Start: 2012-09-27. End: 2020-03-31.

What is Northrop Grumman's track record with similar sole-source R&D contracts for the Department of Defense?

Northrop Grumman has a long history of securing sole-source contracts with the Department of Defense, particularly for complex R&D and sustainment programs where their specialized expertise is deemed essential. Analyzing their past performance on similar sole-source awards would involve reviewing contract histories for cost performance, schedule adherence, and technical delivery. While specific data for this contract is limited, Northrop Grumman's extensive experience suggests a capacity to handle such requirements. However, the absence of competition in sole-source awards means that performance metrics are often evaluated internally by the agency rather than through direct market comparison, making objective assessment challenging without access to detailed performance reports.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for R&D services?

The Cost Plus Fixed Fee (CPFF) contract type is common in R&D where the scope of work can be uncertain and evolve. Under CPFF, the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of costs incurred, and cost-reimbursement contracts with incentive fees, which aim to align contractor and government interests through performance metrics. While CPFF provides flexibility for R&D, it carries a higher risk of cost overruns for the government compared to fixed-price contracts, as the contractor is incentivized to incur costs to achieve the fixed fee. Effective oversight is crucial to manage costs under CPFF agreements.

What are the potential risks associated with a sole-source award for engineering and software sustainment?

The primary risk of a sole-source award is the lack of price competition, which can lead to the government paying a higher price than if the contract were competed. This reduces the government's bargaining power and potentially leads to less favorable terms. Another risk is complacency; without competitive pressure, the contractor might be less motivated to innovate or improve efficiency. Furthermore, sole-source awards can raise concerns about fairness and transparency in the procurement process. If the justification for sole-sourcing is flawed or if alternative solutions were overlooked, taxpayers may not be receiving the best value for their investment. This necessitates robust justification and oversight from the awarding agency.

What is the typical duration for R&D sustainment contracts of this nature, and how does this contract's duration compare?

The duration for R&D sustainment contracts can vary significantly based on the complexity of the systems being supported and the nature of the R&D involved. Contracts can range from a few years to over a decade, especially if they involve long-term research goals or the sustainment of systems with extended lifecycles. This contract, with a duration of approximately 7.5 years (from Sept 2012 to Mar 2020), is on the longer side, particularly for R&D. Longer durations can be justified for complex, multi-phase research projects or when ensuring continuity of critical sustainment is paramount. However, extended periods also increase the risk of cost escalation and the potential for the technology or requirements to become outdated.

How does the $57.6 million total award value compare to annual spending on similar R&D services by the Department of the Navy?

The $57.6 million total award value for this engineering and software sustainment contract represents a significant investment by the Department of the Navy in R&D. While precise comparisons require access to detailed historical spending data across all Navy R&D programs, this figure is substantial. The Navy, like other branches of the DoD, allocates billions annually to R&D to maintain technological superiority. Contracts of this magnitude are typical for major system sustainment and advanced research initiatives. Benchmarking this specific value against the Navy's overall R&D budget or against other contracts for similar services (if competed) would provide a clearer picture of its relative size and cost-effectiveness.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

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: N0001912R0045

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 17066 GOLDENTOP RD, SAN DIEGO, CA, 92127

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

Financial Breakdown

Contract Ceiling: $59,560,452

Exercised Options: $59,560,452

Current Obligation: $57,555,373

Subaward Activity

Number of Subawards: 38

Total Subaward Amount: $4,096,169

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline