DoD's $73M Northrop Grumman contract for engineering services lacked competition, raising value concerns

Contract Overview

Contract Amount: $73,275,187 ($73.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2016-12-23

End Date: 2021-09-30

Contract Duration: 1,742 days

Daily Burn Rate: $42.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF ENGINEERING/SOFTWARE SUSTAINMENT

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $73.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IGF::OT::IGF ENGINEERING/SOFTWARE SUSTAINMENT Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The cost-plus-fixed-fee structure may incentivize higher spending without a strong performance link. 3. A lack of competition raises concerns about whether the government received the best possible value. 4. The contract duration of nearly five years suggests a long-term need for these engineering services. 5. The significant dollar value warrants scrutiny of cost controls and performance metrics. 6. The absence of small business involvement is noted, with no set-aside or subcontracting reported.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and cost-plus-fixed-fee structure. Without competitive bids, it's difficult to ascertain if the $73.3 million price reflects fair market value. The cost-plus-fixed-fee (CPFF) award type means the contractor is reimbursed for allowable costs plus a fixed fee, which can sometimes lead to less incentive for cost efficiency compared to fixed-price contracts. While Northrop Grumman is a major defense contractor, the lack of competition prevents a direct comparison to similar services procured competitively.

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. The data indicates 'NOT COMPETED' and an 'unknown' competition type. This suggests that the Department of the Navy determined that only one source, Northrop Grumman Systems Corporation, was capable of fulfilling the requirement. Such awards typically require justification, often citing reasons like unique capabilities, urgent needs, or the unavailability of other sources. The lack of competition means potential bidders were excluded, and the government did not benefit from a range of proposals and pricing.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. It also limits opportunities for other businesses to secure government contracts.

Public Impact

The Department of Defense, specifically the Department of the Navy, is the primary beneficiary, receiving engineering and software sustainment services. The services provided are critical for maintaining and supporting existing systems, ensuring operational readiness. The contract's impact is primarily within the defense sector, supporting military operations and technological infrastructure. While specific workforce implications are not detailed, such contracts typically support a cadre of specialized engineers and technical personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayers.
Cost-plus-fixed-fee structure may not strongly incentivize cost control.
Lack of transparency in the justification for sole-source award.
No small business participation reported, missing opportunities for smaller firms.
Long contract duration without clear performance benchmarks could mask inefficiencies.

Positive Signals

Awarded to a large, established defense contractor with a track record.
Contract addresses critical engineering and software sustainment needs for the Navy.
Definitive contract provides a clear framework for service delivery over its term.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS code 541330), a significant segment of the federal procurement landscape, particularly within the Department of Defense. The market for defense engineering services is dominated by large, specialized contractors capable of handling complex, long-term projects. Spending in this area is driven by the need to maintain and upgrade sophisticated military platforms and systems. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of sustainment and software support, but overall federal spending on engineering services runs into billions annually.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of subcontracting requirements for small businesses. The absence of small business participation means that opportunities for smaller, specialized firms to contribute to this significant defense contract were not pursued. This limits the potential economic benefit to the small business ecosystem and reduces the government's ability to leverage the innovation and agility often found in smaller companies.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, the justification and approval process would have been subject to specific regulations and potentially higher levels of review. Transparency is limited due to the non-competitive nature. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution and cost management.

Related Government Programs

Department of Defense Engineering Services
Naval Systems Sustainment Contracts
Software Engineering Support
Cost-Plus-Fixed-Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award lacks competition.
Cost-plus-fixed-fee structure may reduce cost control incentives.
No small business participation.
Long contract duration requires sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IGF::OT::IGF ENGINEERING/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 $73.3 million.

What is the period of performance?

Start: 2016-12-23. End: 2021-09-30.

What specific engineering and software sustainment services does this contract cover for the Department of the Navy?

The contract, identified by the data 'IGF::OT::IGF ENGINEERING/SOFTWARE SUSTAINMENT', likely covers a broad range of technical support activities essential for the operational readiness and longevity of naval systems. This could include maintaining, updating, and troubleshooting complex software integrated into various naval platforms (ships, aircraft, submarines, etc.). Engineering services might encompass design modifications, system integration, performance analysis, technical documentation, and lifecycle support. The 'IGF' designation might refer to a specific program or system requiring ongoing technical expertise. Without more detailed contract line item information, the precise scope remains generalized but centers on ensuring the continued functionality and effectiveness of critical naval technology through specialized engineering and software maintenance.

Why was this contract awarded on a sole-source basis instead of being competed?

The provided data indicates the contract was 'NOT COMPETED' and awarded as a 'SOLE SOURCE'. This implies that the Department of the Navy formally determined that Northrop Grumman Systems Corporation was the only responsible source capable of providing the required engineering and software sustainment services. Common justifications for sole-source awards include unique technical capabilities, proprietary technology, urgent and compelling needs where competition is impractical, or situations where only one contractor possesses the necessary expertise or access to perform the work. A formal justification and approval (J&A) document would typically be required to document the rationale for not competing the award, outlining why other sources were deemed unsuitable or unavailable.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact cost control and value for money?

The Cost Plus Fixed Fee (CPFF) contract type reimburses the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fixed fee provides some level of profit certainty for the contractor, the primary cost driver (allowable costs) can fluctuate. This structure may offer less incentive for the contractor to aggressively control costs compared to fixed-price contracts, as cost overruns are generally reimbursed. However, the 'fixed fee' component does cap the contractor's profit. For value for money, effective oversight is crucial to ensure that costs are reasonable and allocable, and that the services delivered meet the required performance standards. Without strong government oversight and clearly defined performance metrics, CPFF contracts can potentially lead to higher overall expenditures.

What is the significance of the contract's duration (1742 days) in relation to its scope and potential risks?

A duration of 1742 days, approximately 4.77 years, indicates a long-term commitment for engineering and software sustainment services. This extended period suggests the services are critical for the ongoing operation and maintenance of specific naval systems, implying a stable, albeit potentially evolving, requirement. The long duration increases the risk associated with cost escalation over time, especially under a CPFF structure. It also means that market conditions, technological advancements, and the contractor's performance will be evaluated over an extended period. Risks include potential obsolescence of supported systems, changes in military requirements, or the contractor's ability to maintain performance and cost-effectiveness throughout the contract's life. Conversely, it provides stability for critical support functions.

Are there any indications of performance issues or successes associated with Northrop Grumman Systems Corporation on similar contracts?

The provided data does not include specific performance metrics or historical performance records for Northrop Grumman Systems Corporation related to this particular contract or others. However, as a major defense contractor, Northrop Grumman has a long history of performing complex, large-scale contracts for the Department of Defense. Assessing their performance on this specific contract would require reviewing contract performance reports, quality assurance reviews, and any past performance evaluations that may exist within the Department of the Navy's procurement systems. Without access to that detailed information, it's impossible to definitively state their track record on this specific engagement, though their status suggests they are generally considered capable of handling such requirements.

How does this contract fit into the broader context of Department of the Navy's spending on engineering and software sustainment?

This $73.3 million contract represents a component of the Department of the Navy's substantial investment in maintaining its technological edge and operational readiness. Spending on engineering services and software sustainment is a critical, ongoing necessity for any modern military force, particularly one as technologically advanced as the Navy. Such contracts are essential for ensuring that complex systems, from combat platforms to communication networks, remain functional, secure, and effective throughout their lifecycle. While $73.3 million is a significant sum, it must be viewed within the context of the Navy's overall annual budget, which runs into the tens of billions of dollars, encompassing shipbuilding, R&D, personnel, and operations. This contract addresses a specific, vital need within that larger financial framework.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001916R0073

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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: $77,978,653

Exercised Options: $74,179,256

Current Obligation: $73,275,187

Subaward Activity

Number of Subawards: 244

Total Subaward Amount: $57,642,733

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline