Northrop Grumman awarded $35M for aircraft parts, a sole-source contract with cost-plus incentives

Contract Overview

Contract Amount: $35,028,430 ($35.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-12-20

End Date: 2020-04-30

Contract Duration: 2,688 days

Daily Burn Rate: $13.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: DESIGN, DEVELOPMENT, AND TEST

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $35.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: DESIGN, DEVELOPMENT, AND TEST Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Cost-plus incentive fee structure may incentivize cost overruns. 3. Long contract duration (2688 days) suggests a complex, ongoing need. 4. Awarded to a single, large defense contractor, potentially limiting market entry for others. 5. Focus on design, development, and testing indicates a high-risk, innovative phase. 6. Geographic concentration in California for contract performance.

Value Assessment

Rating: fair

The contract's total value of $35 million over nearly 7.5 years averages to approximately $4.7 million annually. Without specific benchmarks for similar design, development, and testing contracts for aircraft parts, it's difficult to definitively assess value for money. The cost-plus incentive fee (CPIF) structure, while intended to align contractor and government interests, can sometimes lead to higher final costs than fixed-price contracts if not managed rigorously. The lack of competition further complicates a direct value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. Reasons for sole-sourcing are not provided but could stem from unique capabilities, proprietary technology, or urgent needs. The absence of a competitive bidding process means that the government did not benefit from multiple offers, which typically drives down prices and fosters innovation through market forces. This limits the government's ability to explore alternative solutions or secure the most cost-effective option.

Taxpayer Impact: Sole-source awards mean taxpayers may not be receiving the best possible price, as the absence of competition removes a key mechanism for cost control.

Public Impact

Benefits the Department of Defense by providing essential aircraft parts and related services. Supports the development and testing of advanced aircraft components. Impacts the aerospace manufacturing sector, particularly in California. Sustains jobs within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus incentive fee structure carries inherent risk of cost escalation.
Long contract duration could mask inefficiencies if not closely monitored.

Positive Signals

Award to a major defense contractor suggests capability to handle complex requirements.
Focus on design, development, and testing indicates investment in future capabilities.
CPIF structure, if well-managed, can incentivize performance and efficiency.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft parts manufacturing and development. The market for such specialized components is often dominated by a few large, established players due to high barriers to entry, including significant R&D investment, stringent quality requirements, and security clearances. Spending in this area is critical for maintaining military readiness and advancing technological capabilities. Comparable spending benchmarks are difficult to ascertain without more specific details on the type of aircraft and technology involved.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by `sb: false`. The prime contractor, Northrop Grumman, is a large corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specifics of such arrangements are not detailed here. The absence of a direct set-aside means opportunities for small businesses are likely indirect, through subcontracts, rather than direct prime contract awards.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), as indicated by the `sa` field. DCMA is responsible for ensuring contractors meet performance, quality, and delivery requirements. The cost-plus incentive fee structure necessitates close financial oversight to ensure costs are reasonable and that incentives are appropriately applied. Transparency is generally limited for sole-source defense contracts, with detailed information often classified or restricted.

Related Government Programs

Aircraft Manufacturing
Defense Procurement
Aerospace Research and Development
Component Manufacturing
Cost-Plus Contracts

Risk Flags

Sole-source award limits price competition.
Cost-plus contract type carries inherent risk of cost overruns.
Lack of detailed performance metrics in summary data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $35.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. DESIGN, DEVELOPMENT, AND TEST

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 $35.0 million.

What is the period of performance?

Start: 2012-12-20. End: 2020-04-30.

What specific aircraft systems or platforms does this contract support?

The provided data does not specify the exact aircraft systems or platforms this contract supports. The North American Industry Classification System (NAICS) code '336413' covers 'Other Aircraft Parts and Auxiliary Equipment Manufacturing.' This broad category suggests the contract could relate to a wide range of components, potentially including engines, avionics, structural parts, or specialized testing equipment for various military aircraft. Further investigation into contract details or related procurement documents would be necessary to identify the specific platforms.

What were the justifications for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED,' signifying a sole-source award. Specific justifications, such as the existence of unique capabilities, proprietary technology, lack of available alternatives, or urgent and compelling needs, are not included in the dataset. Typically, sole-source justifications are documented by the contracting agency and are subject to review. Without access to these justifications, it is impossible to definitively state why competition was precluded for this $35 million contract.

How does the cost-plus incentive fee (CPIF) structure compare to other contract types for similar R&D efforts?

Cost-plus incentive fee (CPIF) contracts are common for research and development (R&D) efforts where the final costs are uncertain. Unlike fixed-price contracts, CPIF allows the contractor to recover allowable costs plus a negotiated fee that is adjusted based on performance against targets (e.g., cost, schedule, performance). Compared to cost-plus-fixed-fee (CPFF), CPIF offers greater incentive for the contractor to control costs. However, compared to firm-fixed-price (FFP) contracts, CPIF carries higher cost risk for the government. For R&D, CPIF is often preferred over FFP due to the inherent unpredictability of innovation, but it requires robust government oversight to manage effectively.

What is the historical spending trend for this specific contract or similar contracts awarded to Northrop Grumman?

The provided data represents a single definitive contract awarded on December 20, 2012, with an end date of April 30, 2020, totaling $35,028,429.72. This data point does not provide a historical trend for this specific contract, as it covers the entire period of performance. To assess historical spending trends, one would need to examine previous contracts for similar services awarded to Northrop Grumman or analyze the cumulative spending on this specific contract over its duration, if such granular data were available. Without additional historical contract data, trend analysis is not possible.

What are the key performance indicators (KPIs) used to manage the incentive fee for this contract?

The provided data does not specify the key performance indicators (KPIs) used to manage the incentive fee for this Cost Plus Incentive Fee (CPIF) contract. In a CPIF arrangement, the fee is adjusted based on the contractor's performance relative to pre-defined targets. These targets commonly include cost objectives (actual cost vs. target cost), performance objectives (meeting technical specifications or capabilities), and sometimes schedule objectives. The specific metrics and their weighting would have been negotiated and detailed in the contract's 'Special Contract Requirements' or similar sections.

What is the significance of the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code in the context of this contract?

The NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' categorizes the primary business activity of the contractor under this award. This code signifies that the contract is for the production or development of components, subassemblies, and auxiliary equipment used in aircraft, excluding complete aircraft or engines. This could encompass a wide array of items such as landing gear, avionics, control systems, structural components, or specialized testing apparatus, indicating the contract's focus on supporting the broader aerospace manufacturing ecosystem beyond just airframes or powerplants.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment 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: N0001912R0011

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $36,703,163

Exercised Options: $36,703,163

Current Obligation: $35,028,430

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $1,492,380

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline