DoD's $32.9M contract for missile manufacturing awarded to Northrop Grumman, a sole-source procurement

Contract Overview

Contract Amount: $32,915,637 ($32.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2016-09-30

End Date: 2019-10-30

Contract Duration: 1,125 days

Daily Burn Rate: $29.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FUNDING IN SUPPORT OF FMS TARGETS

Place of Performance

Location: CHANDLER, MARICOPA County, ARIZONA, 85286

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $32.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FUNDING IN SUPPORT OF FMS TARGETS Key points: 1. The contract's value of $32.9 million represents a significant investment in guided missile and space vehicle manufacturing. 2. Awarded as a sole-source procurement, this contract bypasses competitive bidding, raising questions about potential price efficiencies. 3. The firm-fixed-price structure aims to transfer risk to the contractor, but the lack of competition may limit cost savings. 4. Northrop Grumman's established role in defense manufacturing suggests a high level of technical capability for this specialized area. 5. The contract duration of 1125 days indicates a medium-term commitment to supporting specific defense needs. 6. The absence of small business set-asides or subcontracting requirements suggests this contract is focused on large-scale prime contractor capabilities.

Value Assessment

Rating: questionable

Benchmarking the value of this $32.9 million contract is challenging without specific details on the deliverables. However, the sole-source nature of the award means that direct price comparisons to competitively bid contracts are not feasible. The firm-fixed-price (FFP) type suggests that the contractor bears the risk of cost overruns, which can be a positive indicator of value if the price is reasonable. Without more information on the specific missile systems or components being procured, it's difficult to definitively assess if the pricing reflects fair market value or if potential savings were forgone due to the lack of competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, Northrop Grumman Systems Corporation, was solicited. This approach is typically used when only one responsible source is available or when a compelling justification exists for excluding other potential bidders. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than might be achieved in an open market.

Taxpayer Impact: Taxpayers may have paid a premium for this procurement due to the absence of competitive pressure to drive down prices. The government's ability to negotiate the best possible price is diminished when only one offer is considered.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical missile and space vehicle components or systems. This contract supports the manufacturing of guided missiles and space vehicles, essential for national defense capabilities. The contract's performance is located in Arizona (AZ), indicating a contribution to the regional defense industrial base and workforce in that state. The contract supports specialized manufacturing jobs within Northrop Grumman, likely requiring skilled engineers, technicians, and production personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Sole-source awards can reduce transparency in pricing and negotiation.
Limited visibility into alternative technological solutions or efficiencies from other potential suppliers.

Positive Signals

Firm-fixed-price contract structure transfers cost overrun risk to the contractor.
Award to an established contractor like Northrop Grumman suggests technical expertise and reliability.
Contract supports critical defense capabilities, aligning with national security objectives.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and critical segment of the aerospace and defense industry. This sector is characterized by high barriers to entry, significant research and development investment, and stringent quality and performance requirements. Spending in this area is driven by national security needs and technological advancements. Comparable spending benchmarks are difficult to establish without knowing the specific systems, but this $32.9 million contract represents a moderate investment within the broader defense procurement landscape for advanced weaponry.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions, nor is there an indication of mandatory subcontracting goals for small businesses. The award to a large prime contractor like Northrop Grumman suggests that the focus is on the prime's capabilities rather than leveraging the broader small business industrial base for this specific procurement. This could limit opportunities for small businesses to participate directly or indirectly in this contract's execution.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. As a definitive contract, it is subject to standard government oversight mechanisms. Transparency regarding the specific justifications for the sole-source award and the negotiation process would be key to assessing accountability. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Strategic Weapons Programs
Space Launch Vehicles
Advanced Munitions Manufacturing
Aerospace Component Production

Risk Flags

Sole-source award lacks competitive pricing pressure.
Limited public information on specific deliverables.
Potential for higher costs due to lack of competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FUNDING IN SUPPORT OF FMS TARGETS

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 $32.9 million.

What is the period of performance?

Start: 2016-09-30. End: 2019-10-30.

What specific guided missile or space vehicle systems are being procured under this contract?

The provided data indicates the contract is for 'Guided Missile and Space Vehicle Manufacturing' (NAICS code 336414) but does not specify the exact systems. Northrop Grumman is a major defense contractor involved in various missile programs, including strategic missiles, tactical missiles, and space launch systems. Without further details, it's impossible to identify the precise end-item. This lack of specificity is common in high-level contract awards but limits a granular understanding of the procurement's purpose and technological focus.

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

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can satisfy the agency's needs, or in cases of urgent and compelling need where competition is not feasible. For a company like Northrop Grumman, which possesses specialized capabilities in advanced defense manufacturing, the justification might stem from proprietary technology, unique manufacturing processes, or the need for seamless integration with existing platforms. A detailed justification document, often available through contract award notices, would provide the precise rationale.

How does the firm-fixed-price (FFP) structure mitigate risk in this sole-source contract?

The firm-fixed-price (FFP) contract type shifts the primary risk of cost overruns to the contractor, Northrop Grumman. This means that the agreed-upon price is fixed, regardless of the contractor's actual costs incurred during performance. While this structure incentivizes the contractor to control costs efficiently, the absence of competition in a sole-source award means the government may not have achieved the lowest possible FFP. The government's risk is primarily related to the contractor's ability to meet performance specifications within that fixed price, rather than cost escalation.

What is Northrop Grumman's track record in producing guided missile and space vehicle systems?

Northrop Grumman has a long and extensive track record in the defense industry, including significant contributions to guided missile and space vehicle programs. They are a key player in developing and manufacturing a wide range of systems, from strategic deterrents like the B-21 bomber and ICBM components to tactical missiles and satellite technology. Their experience encompasses complex design, integration, testing, and production, making them a frequent recipient of large, sole-source contracts in these specialized areas due to their established expertise and infrastructure.

Are there any comparable competitively awarded contracts for similar missile manufacturing services?

Directly comparable competitively awarded contracts are difficult to identify without knowing the specific missile systems procured here. However, the defense sector frequently sees competitive solicitations for various missile components, subsystems, and even complete systems. When competition exists, prices can vary significantly based on technological complexity, production volume, and market dynamics. The absence of competition for this $32.9 million award suggests either a highly specialized niche, proprietary technology, or a specific strategic rationale that precluded broader bidding, making direct price-to-price comparisons with competitive awards problematic.

What are the potential implications of this contract on future defense spending in this sector?

This contract, awarded to a major defense contractor for critical missile manufacturing, signals continued investment in advanced defense capabilities. Sole-source awards, while sometimes necessary, can set precedents and influence future procurement strategies. If this contract is for a system deemed essential and without viable alternatives, it reinforces Northrop Grumman's position in this market segment. It may also highlight areas where the defense industrial base relies on a limited number of specialized suppliers, potentially impacting future competition and innovation strategies.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001916R0022

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1575 SOUTH PRICE RD, CHANDLER, AZ, 85286

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: $32,915,637

Exercised Options: $32,915,637

Current Obligation: $32,915,637

Subaward Activity

Number of Subawards: 161

Total Subaward Amount: $142,021,168

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline