DoD's $27.4M contract for aircraft parts awarded to Northrop Grumman, lacking competition

Contract Overview

Contract Amount: $27,402,669 ($27.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2021-05-26

End Date: 2028-03-20

Contract Duration: 2,490 days

Daily Burn Rate: $11.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LAST TIME BUY

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $27.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: LAST TIME BUY Key points: 1. Value for money is questionable due to sole-source award. 2. Competition dynamics are absent, potentially leading to higher costs. 3. Risk indicators include lack of competition and sole-source nature. 4. Performance context is limited without competitive benchmarks. 5. Sector positioning is within aircraft parts manufacturing, a critical defense area.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without competitive bidding. As a sole-source award, there's no direct comparison to market rates or other potential suppliers. The firm fixed-price structure offers some cost certainty, but the absence of competition raises concerns about whether the government secured the best possible price. Benchmarking against similar sole-source awards for specialized aircraft components would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified for unique capabilities or urgent needs, they limit price discovery and can reduce the incentive for contractors to offer their most competitive pricing.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most cost-effective solution available in the market.

Public Impact

The Department of the Navy benefits from the acquisition of critical aircraft parts. Services delivered include the supply of specialized aircraft components. Geographic impact is primarily centered in California, where the contractor is located. Workforce implications are likely within Northrop Grumman's manufacturing and supply chain operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Sole-source awards can reduce accountability for cost efficiency.
Limited transparency in the procurement process.

Positive Signals

Firm fixed-price contract provides cost certainty.
Awardee is an established defense contractor with relevant experience.

Sector Analysis

This contract falls within the Other Aircraft Parts and Auxiliary Equipment Manufacturing sector, a critical component of the aerospace and defense industry. This sector is characterized by high technical requirements, specialized manufacturing processes, and often, a limited number of qualified suppliers for specific components. The market size for defense-related aircraft parts is substantial, driven by ongoing military readiness and modernization efforts. This contract represents a specific procurement within that larger ecosystem.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Northrop Grumman voluntarily engages small businesses in its supply chain for this specific contract. Further investigation into subcontracting plans would be needed to assess any indirect impact.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the firm fixed-price structure, which caps the government's liability. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Component Procurement
Defense Logistics Agency Contracts
Northrop Grumman Defense Contracts
Naval Aviation Support

Risk Flags

Lack of Competition
Sole-Source Award
Potential for Overpricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. LAST TIME BUY

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 $27.4 million.

What is the period of performance?

Start: 2021-05-26. End: 2028-03-20.

What is Northrop Grumman's track record with the Department of Defense for similar aircraft parts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience supplying various components and systems to the Department of Defense, including for naval aviation. Their track record typically involves large, complex contracts for aircraft, electronics, and space systems. For specific aircraft parts, their history would likely show a pattern of supplying specialized, high-value components. However, without access to detailed performance data for this specific contract or comparable ones, it's difficult to provide a precise assessment of their performance solely based on this award. Generally, their performance is considered robust, but like any large contractor, they may have had instances of delays or cost overruns on other programs.

How does the pricing of this contract compare to market rates for similar aircraft parts?

Direct comparison of pricing is challenging for this contract due to its sole-source nature. Without competitive bids, there is no benchmark to determine if the $27.4 million awarded to Northrop Grumman represents a fair market price. Typically, sole-source awards are justified when only one vendor can provide the required item or service, or in cases of urgent need. To assess value, one would need to compare the unit costs (if available) to historical pricing for similar components, prices paid by other agencies for comparable parts, or conduct a should-cost analysis. The firm fixed-price (FFP) contract type does offer cost certainty, but it doesn't inherently guarantee the lowest possible price without competition.

What are the primary risks associated with this sole-source contract award?

The primary risk associated with this sole-source contract is the potential for paying a premium due to the lack of competition. When a single vendor is awarded a contract without exploring other options, there's a reduced incentive for the contractor to offer the most competitive price. This can lead to higher costs for taxpayers. Another risk is the potential for vendor lock-in, where the government becomes dependent on a single supplier for critical parts, potentially limiting future flexibility and negotiation power. Furthermore, without competitive pressure, there might be less incentive for the contractor to innovate or improve efficiency. The duration of the contract (ending in 2028) also means these risks persist over several years.

How effective is the Department of the Navy in ensuring value for money on sole-source contracts?

The Department of the Navy employs several mechanisms to ensure value for money on sole-source contracts, although the effectiveness can vary. These include conducting 'should-cost' analyses, market research to identify potential sources even if only one is ultimately solicited, and negotiating robust contract terms. For sole-source awards, the Federal Acquisition Regulation (FAR) requires justification and approval, adding a layer of scrutiny. However, the inherent limitation of sole-sourcing is the absence of direct price competition, which is the most effective tool for driving down costs. Therefore, while the Navy has processes in place, the absence of competition inherently makes achieving optimal value more challenging compared to competed contracts.

What are the historical spending patterns for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' by the Department of the Navy?

Historical spending patterns for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' by the Department of the Navy are substantial, reflecting the continuous need to maintain and modernize its fleet of aircraft. This category encompasses a wide array of components, from engine parts and avionics to structural elements and support equipment. Spending in this area is often characterized by a mix of competitive bids for standardized parts and sole-source or limited-competition awards for highly specialized, proprietary, or legacy components. The total annual spending can fluctuate based on fleet readiness requirements, new platform introductions, and sustainment needs for existing aircraft. Data from sources like USASpending.gov would show significant aggregate figures, often in the billions of dollars annually across all defense branches.

What is the significance of the contract type (Firm Fixed Price) in this sole-source award?

The Firm Fixed Price (FFP) contract type is significant because it places the majority of the cost risk on the contractor, Northrop Grumman. Under an FFP agreement, the contractor agrees to a set price for the work or supplies, regardless of their actual costs incurred. This provides the Department of the Navy with cost certainty, meaning the total amount paid will not exceed the agreed-upon $27.4 million, barring any contract modifications. While this protects the government from cost overruns, it also means that if the contractor can perform the work for less than the fixed price, they retain the profit. In a sole-source scenario, the FFP structure is crucial for managing risk, as it prevents cost escalation that might otherwise occur without competitive pressure.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2000 W NASA BLVD, MELBOURNE, FL, 32904

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: $27,402,669

Exercised Options: $27,402,669

Current Obligation: $27,402,669

Subaward Activity

Number of Subawards: 72

Total Subaward Amount: $41,923,688

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920G0005

IDV Type: BOA

Timeline