Northrop Grumman awarded $491M for tech support, analysis, and DMS, with limited competition

Contract Overview

Contract Amount: $490,958,950 ($491.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2016-09-23

End Date: 2021-03-31

Contract Duration: 1,650 days

Daily Burn Rate: $297.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TECH SUPPORT, ANALYSIS&STUDIES AND DMS

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $491.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: TECH SUPPORT, ANALYSIS&STUDIES AND DMS Key points: 1. Contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. Significant duration of the contract (1650 days) suggests a long-term need for these services. 3. The 'Cost Plus Fixed Fee' structure may incentivize cost overruns if not closely monitored. 4. Services encompass critical areas of search, detection, navigation, guidance, and related systems. 5. The contract's value places it among substantial federal procurements in its sector. 6. Lack of small business involvement indicated, potentially limiting broader economic impact.

Value Assessment

Rating: questionable

Benchmarking the value of this $491 million contract is challenging without detailed cost breakdowns and comparisons to similar, competitively bid contracts. The 'Cost Plus Fixed Fee' (CPFF) contract type, while common for complex R&D or services where costs are uncertain, carries inherent risks of cost escalation. Without competitive pressure, the pricing may not reflect the most economical option available to the government. Further analysis of the fixed fee and the contractor's cost performance would be necessary to definitively assess value for money.

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 justified when only one vendor possesses the necessary capabilities, technology, or security clearances, or in cases of urgent need. The lack of competition means the government did not benefit from the price discovery and innovation that typically arise from a bidding process, potentially leading to higher costs.

Taxpayer Impact: Sole-source awards limit taxpayer benefit by foregoing potential cost savings that could have been achieved through a competitive bidding process. This means taxpayers may be paying a premium for the services rendered.

Public Impact

The Department of Defense is the primary beneficiary, receiving essential technical support and analysis. Services likely support the development, maintenance, and operation of critical defense systems. The contract's impact is national, supporting defense infrastructure and readiness. Workforce implications include specialized technical and analytical roles within Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost Plus Fixed Fee structure requires diligent oversight to manage potential cost overruns.
Lack of small business participation may limit broader economic benefits and innovation.
Long contract duration necessitates sustained monitoring of performance and evolving needs.

Positive Signals

Award to a major defense contractor suggests access to specialized expertise and capabilities.
Contract addresses critical defense functions related to navigation and guidance systems.
Defined contract period provides a clear framework for service delivery.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the aerospace and defense industry. This industry is characterized by high R&D investment, long product cycles, and significant government procurement. Spending in this area is often driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other large, sole-source or limited-competition contracts for complex defense systems and associated support services.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it appear to involve significant subcontracting to small businesses (sb=false, ss=false). This suggests that the primary contractor, Northrop Grumman, is handling the majority of the work internally. Consequently, the direct economic impact on the small business ecosystem is likely minimal, missing opportunities for set-asides to foster competition and innovation among smaller firms in this specialized sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to scrutinize costs and ensure the fixed fee remains appropriate. Transparency is facilitated through contract reporting mechanisms, but the sole-source nature limits public visibility into the competitive rationale. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Systems Development
Aerospace Manufacturing
Navigation and Guidance Systems
Technical Support Services
Defense Analysis and Studies

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $491.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. TECH SUPPORT, ANALYSIS&STUDIES AND DMS

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 $491.0 million.

What is the period of performance?

Start: 2016-09-23. End: 2021-03-31.

What is Northrop Grumman's track record with similar sole-source Cost Plus Fixed Fee contracts within the Department of Defense?

Northrop Grumman, as a major defense contractor, has a long history of engaging in Cost Plus Fixed Fee (CPFF) contracts, often awarded on a sole-source or limited-competition basis due to the specialized nature of defense systems. Analyzing their past performance on similar contracts would involve reviewing historical contract data for cost performance relative to initial estimates, the frequency of contract modifications, and any documented instances of cost overruns or disputes. CPFF contracts inherently require robust government oversight to manage risks associated with cost uncertainty. While CPFF can be necessary for complex, R&D-intensive projects where final costs are difficult to predict, it places a premium on the government's ability to effectively monitor expenditures and ensure the fixed fee remains justified throughout the contract's lifecycle. A review of publicly available contract awards and performance reports for Northrop Grumman would likely reveal numerous instances of such arrangements, highlighting the need for diligent program management and financial scrutiny.

How does the $491 million value compare to other federal contracts for similar technical support and analysis services?

The $491 million value for technical support, analysis, and DMS places this contract within the upper echelon of federal procurements for specialized services. To benchmark its value, one would compare it against other large-scale contracts awarded to major defense contractors for similar functions, such as systems engineering, software development, and operational support for complex defense platforms. Contracts awarded through full and open competition for comparable services often provide a more reliable indicator of market rates. However, given this contract's sole-source nature and specific focus on navigation, guidance, and related systems, direct comparisons might be limited. It is essential to consider the contract type (CPFF), duration (1650 days), and the specific deliverables. Without access to detailed cost breakdowns and competitive bidding data, assessing whether $491 million represents optimal value is difficult, but its scale suggests a significant, long-term requirement.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee contract of this magnitude?

The primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract of this magnitude are twofold: lack of price competition and potential for cost escalation. A sole-source award means the government did not leverage competitive bidding to secure the best possible price, potentially leading to a higher cost than if multiple vendors had vied for the contract. The CPFF structure, while useful for projects with uncertain costs, allows the contractor to recoup all allowable costs plus a fixed fee. This can create a disincentive for the contractor to control costs rigorously, as increased costs directly translate to higher overall contract value (though the fee itself is fixed). Effective risk mitigation requires stringent government oversight, detailed cost audits, clear performance metrics, and robust negotiation of the fixed fee and contract terms to ensure accountability and value for taxpayer dollars.

What is the historical spending trend for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' by the Department of Defense?

Historical spending by the Department of Defense (DoD) in the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code (334511) has consistently been substantial, reflecting the critical role these technologies play in national security and military operations. This sector encompasses a wide range of products and services, from advanced radar and sonar systems to GPS technology and flight control instruments. Spending trends are often influenced by geopolitical factors, modernization programs, and the development of new defense platforms. Over the years, the DoD has allocated billions of dollars to this category, with significant portions often going to large, established defense contractors like Northrop Grumman. Analyzing historical data reveals a pattern of sustained investment, often characterized by large, complex contracts, many of which may involve sole-source or limited-competition awards due to the specialized nature of the technology and the contractor base.

How does the contract's duration (1650 days) impact the assessment of its value and risk?

The contract's duration of 1650 days (approximately 4.5 years) is significant and has several implications for assessing its value and risk. A longer duration suggests a stable, long-term requirement for the services provided, potentially indicating critical and ongoing support needs for defense systems. From a value perspective, a longer contract can offer cost efficiencies through economies of scale and reduced administrative burden compared to multiple short-term contracts. However, it also increases the risk of cost escalation over time, especially with a Cost Plus Fixed Fee structure, as unforeseen expenses can accumulate. Furthermore, a long duration necessitates robust contract management to ensure the services remain relevant and effective as technology and operational needs evolve. It also means that the government is committed to a substantial financial outlay over an extended period, underscoring the importance of initial due diligence and ongoing performance monitoring.

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: N0001914R6000

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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: $497,200,823

Exercised Options: $496,976,123

Current Obligation: $490,958,950

Actual Outlays: $67,433,388

Subaward Activity

Number of Subawards: 3285

Total Subaward Amount: $2,538,205,365

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline