DoD awards Northrop Grumman $172.6M contract for missile targets and spares, with limited competition

Contract Overview

Contract Amount: $172,677,741 ($172.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2018-03-14

End Date: 2024-12-20

Contract Duration: 2,473 days

Daily Burn Rate: $69.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FRP 11-13 CONTRACT. AWARD OF FRP 11 TARGETS AND SPARES

Place of Performance

Location: CHANDLER, MARICOPA County, ARIZONA, 85286

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $172.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FRP 11-13 CONTRACT. AWARD OF FRP 11 TARGETS AND SPARES Key points: 1. Contract value of $172.6 million over six years suggests significant investment in missile defense capabilities. 2. Sole-source award to Northrop Grumman raises questions about competitive pricing and potential for cost overruns. 3. Long contract duration of nearly seven years (2473 days) may indicate complex program requirements or a lack of readily available alternatives. 4. The contract is for guided missile and space vehicle manufacturing, a critical but specialized sector. 5. Awarded by the Department of the Navy, this contract supports strategic defense initiatives. 6. The fixed-price nature of the contract aims to control costs, but the lack of competition could undermine this.

Value Assessment

Rating: questionable

The contract value of $172.6 million for missile targets and spares appears substantial. However, without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The sole-source nature raises concerns about whether the government secured the best possible value. Further analysis would be needed to compare the unit costs of the targets and spares to industry standards or previous procurements of similar items.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was considered. This significantly limits the opportunity for price discovery and potentially leads to higher costs for the government compared to a fully competed contract. The rationale for a sole-source award, such as unique capabilities or proprietary technology, would need to be thoroughly justified.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition. Without multiple bids, there is less pressure on the contractor to offer the most competitive price, potentially leading to inefficient use of public funds.

Public Impact

The primary beneficiaries are the Department of the Navy and the broader U.S. defense apparatus, which will receive critical missile targets and spares for training and operational readiness. The services delivered include the manufacturing of guided missile and space vehicle components, essential for maintaining and advancing missile defense systems. The contract is based in Arizona (AZ), indicating a concentration of defense manufacturing and related employment in that state. This contract supports specialized jobs within the guided missile and space vehicle manufacturing sector, contributing to the high-tech defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices and reduced value for taxpayer money.
Sole-source awards can stifle innovation by not encouraging new entrants or alternative solutions.
Long-term contracts without re-competition can create vendor lock-in and reduce flexibility.
The specialized nature of missile components means limited options for alternative suppliers, potentially justifying sole-sourcing but requiring strict oversight.

Positive Signals

The contract is with a well-established defense contractor, Northrop Grumman, suggesting a degree of reliability and expertise.
The firm fixed-price contract type is designed to provide cost certainty and mitigate financial risk for the government.
The award supports critical national defense capabilities, ensuring readiness and technological advancement in missile systems.

Sector Analysis

The guided missile and space vehicle manufacturing sector (NAICS 336414) is a highly specialized and capital-intensive segment of the aerospace and defense industry. It involves the design, development, and production of complex systems for military and space applications. Spending in this sector is often characterized by long procurement cycles, high research and development costs, and a limited number of prime contractors due to stringent technical requirements and security clearances. This contract fits within this niche, focusing on essential components for missile defense.

Small Business Impact

This contract does not appear to have a small business set-aside component (SS: false, SB: false). Given the specialized nature of guided missile and space vehicle manufacturing, it is likely that the prime contractor, Northrop Grumman, will be responsible for fulfilling the majority of the work. There may be opportunities for small businesses to act as subcontractors, but this is not explicitly detailed in the provided data. The absence of set-asides suggests a focus on large, established defense manufacturers for this specific procurement.

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, scrutiny may be higher to ensure fair pricing and adherence to contract terms. The Defense Contract Audit Agency (DCAA) may conduct audits to verify costs. Transparency is limited due to the non-competitive nature, but contract modifications and performance reports would be subject to internal review and potentially public reporting through systems like FPDS.

Related Government Programs

Missile Defense Systems
Strategic Weapons Programs
Aerospace Manufacturing
Defense Procurement
Guided Missile Manufacturing

Risk Flags

Sole-source award lacks competitive pricing pressure.
Long contract duration may indicate program complexity or limited alternatives.
Specialized manufacturing sector with few potential bidders.
Potential for cost overruns if not closely managed, despite FFP.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $172.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FRP 11-13 CONTRACT. AWARD OF FRP 11 TARGETS AND SPARES

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 $172.7 million.

What is the period of performance?

Start: 2018-03-14. End: 2024-12-20.

What is the historical spending by the Department of the Navy on guided missile and space vehicle manufacturing, and how does this contract compare?

Historical spending data for the Department of the Navy (DoN) in the guided missile and space vehicle manufacturing sector (NAICS 336414) would provide crucial context for this $172.6 million award. Analyzing past contracts awarded by the DoN for similar components, such as missile targets, spares, or related systems, would allow for a comparison of contract values, durations, and pricing structures. For instance, if the DoN has previously awarded multiple competitive contracts for comparable items at significantly lower total values or shorter durations, it would raise concerns about the value proposition of this sole-source contract. Conversely, if historical spending patterns show a consistent reliance on sole-source awards for highly specialized components like these, it might suggest market limitations. Without specific historical data points, it's challenging to definitively assess if $172.6 million represents an outlier or a typical investment for such capabilities.

What specific justification was provided for awarding this contract on a sole-source basis to Northrop Grumman?

The justification for a sole-source award typically stems from unique capabilities, proprietary technology, or the lack of adequate competition within a specific market segment. For guided missile and space vehicle manufacturing, this could involve highly specialized technical expertise, existing infrastructure, or intellectual property that only Northrop Grumman possesses. The Department of the Navy would have had to document this justification, often through a Justification and Approval (J&A) document, which outlines why full and open competition is not feasible or not in the government's best interest. This document would detail the specific capabilities of Northrop Grumman that are essential for meeting the requirement and explain why no other responsible source can provide the same or a substantially similar product or service. Without access to this J&A, the rationale behind the sole-source decision remains speculative.

How does the firm fixed-price (FFP) contract type mitigate risk for the government in a sole-source scenario like this?

The Firm Fixed-Price (FFP) contract type is generally considered the most advantageous for the government in terms of cost risk, especially in sole-source situations. Under an FFP contract, the contractor, Northrop Grumman, assumes the primary responsibility for all costs incurred and agrees to a set price for the work. This means that any cost overruns experienced by the contractor do not impact the government's payment, which remains fixed at the agreed-upon amount. This structure incentivizes the contractor to manage its costs efficiently and effectively to maximize profit. While the lack of competition might still allow for a higher initial price than in a competitive scenario, the FFP structure provides a clear ceiling and predictability for the government's expenditure, preventing unexpected cost increases that could occur with cost-reimbursement contracts.

What are the potential implications of this contract for the future development and availability of missile defense technologies?

This contract for missile targets and spares awarded to Northrop Grumman has several potential implications for the future of missile defense technologies. Firstly, it signifies continued investment by the Department of the Navy in maintaining and advancing its missile defense capabilities, which is crucial given the evolving threat landscape. Secondly, by awarding a sole-source contract, the Navy is likely relying on Northrop Grumman's specific expertise and technological advancements in this niche area. This could foster deeper collaboration and innovation between the Navy and the contractor, potentially leading to the development of more sophisticated targets and improved defense systems. However, it also means that alternative technological pathways or innovations from other potential suppliers might not be explored or integrated as readily, potentially limiting the diversity of future solutions.

What is the typical duration for contracts in the guided missile and space vehicle manufacturing sector, and how does this contract's duration compare?

Contracts in the guided missile and space vehicle manufacturing sector often have longer durations compared to simpler procurements due to the complexity of the products, extensive testing requirements, and the strategic nature of defense systems. Durations can range from a few years to over a decade, especially for major weapon system development or sustainment programs. This contract, with a duration of 2473 days (approximately 6.7 years), falls within the upper range of typical contract lengths for complex defense manufacturing. Such extended periods are often necessary to accommodate research, development, production, integration, and sustainment phases. The length suggests a long-term need for these specific missile targets and spares, possibly tied to the lifecycle of the platforms they support or the ongoing evolution of threat-detection and response capabilities.

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: N0001916R3500

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: $174,201,217

Exercised Options: $172,677,741

Current Obligation: $172,677,741

Actual Outlays: $19,866,500

Subaward Activity

Number of Subawards: 1494

Total Subaward Amount: $1,646,030,812

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline