DoD's $30.5M non-recurring engineering contract awarded to Northrop Grumman for aircraft parts faces scrutiny over competition

Contract Overview

Contract Amount: $30,512,047 ($30.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2022-03-31

End Date: 2024-06-30

Contract Duration: 822 days

Daily Burn Rate: $37.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NON-RECURRING ENGINEERING

Place of Performance

Location: NORTHRIDGE, LOS ANGELES County, CALIFORNIA, 91324

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $30.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: NON-RECURRING ENGINEERING Key points: 1. The contract's value, while significant, requires careful benchmarking against similar non-recurring engineering efforts. 2. The sole-source award raises questions about potential price inflation and missed opportunities for competitive savings. 3. Lack of competition is a key risk indicator, potentially limiting innovation and driving up costs. 4. Performance context is limited due to the 'not competed' status, making direct comparison difficult. 5. This contract falls within the Defense sector, specifically supporting aircraft parts manufacturing. 6. The absence of small business set-asides or subcontracting plans warrants further investigation into broader economic impact.

Value Assessment

Rating: questionable

Benchmarking the $30.5 million non-recurring engineering cost for aircraft parts is challenging without more detailed cost breakdowns and comparisons to similar sole-source awards. The pricing structure (Cost Plus Fixed Fee) can sometimes lead to higher costs if not tightly managed, as the contractor is reimbursed for allowable costs plus a fixed fee. Without competitive pressure, it's difficult to ascertain if this represents a fair market price or if efficiencies could have been achieved through a more open bidding process. The limited data available suggests a need for deeper analysis to ensure value for money.

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 approach bypasses the standard competitive bidding process, which typically involves soliciting proposals from multiple vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can reduce the incentive for contractors to offer their most competitive pricing. The lack of competition here means taxpayers did not benefit from potential cost savings that a competitive environment might have yielded.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium compared to what could have been achieved through a bidding process. This also limits transparency into the pricing justification.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive the non-recurring engineering services for aircraft parts. This contract supports the development and manufacturing of specialized aircraft components, contributing to national defense capabilities. The work is likely to be performed in California, based on the contractor's location and the contract's 'st' code. The contract may have implications for the specialized aerospace workforce within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost Plus Fixed Fee contract type can incentivize higher spending if not rigorously managed.
Lack of transparency in the justification for sole-source procurement.
Absence of small business participation or subcontracting plans.
Limited public information on the specific deliverables and performance metrics.

Positive Signals

Award to an established defense contractor (Northrop Grumman) suggests access to specialized expertise.
Contract supports critical defense needs within the Department of the Navy.
Fixed fee component provides some level of cost predictability for the government.
Contract duration allows for sustained development and integration efforts.

Sector Analysis

The aerospace and defense manufacturing sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. This contract for non-recurring engineering (NRE) for aircraft parts fits within this context, focusing on the initial design, development, and testing phases before mass production. The NRE costs can be substantial, often representing a significant portion of the total program cost. Comparable spending benchmarks for NRE in defense aviation vary widely based on system complexity, but multi-million dollar figures are common for major component development.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting requirements. The absence of specific provisions for small businesses means that opportunities for smaller firms to participate in this specific contract are unlikely. This could limit the broader economic impact on the small business ecosystem within the aerospace supply chain for this particular award. Further analysis would be needed to determine if Northrop Grumman engages in subcontracting with small businesses on other related efforts.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Cost Plus Fixed Fee structure necessitates close monitoring of incurred costs and the contractor's progress towards the fixed fee milestones. Transparency is limited due to the sole-source nature and the proprietary aspects of NRE. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected, but specific proactive oversight mechanisms beyond standard contract management are not detailed in the provided data.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Systems Development
Aerospace Manufacturing Contracts
Non-Recurring Engineering Services
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Cost Plus Fixed Fee contract type
Limited transparency in justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $30.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. NON-RECURRING ENGINEERING

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 $30.5 million.

What is the period of performance?

Start: 2022-03-31. End: 2024-06-30.

What is Northrop Grumman's track record with similar sole-source, non-recurring engineering contracts for the Department of Defense?

Northrop Grumman Systems Corporation, as a major defense contractor, has a long history of engaging in sole-source and competitively awarded contracts for various defense systems, including aircraft components. Their track record typically involves complex NRE projects requiring specialized engineering expertise. Analyzing past sole-source NRE contracts awarded to Northrop Grumman by the DoD can provide insights into their performance, cost control, and adherence to schedules. However, specific data on similar contracts would be needed to draw direct comparisons. Generally, large sole-source awards require robust justification and are subject to stringent oversight to ensure fair pricing and effective execution, given the contractor's established position and capabilities in the defense industrial base.

How does the $30.5 million NRE cost compare to industry benchmarks for similar aircraft parts development?

Benchmarking the $30.5 million non-recurring engineering (NRE) cost for aircraft parts is challenging without specific details on the complexity, technology involved, and the scope of work. NRE costs encompass design, prototyping, testing, and tooling, which can vary dramatically. For highly specialized or technologically advanced components, this figure might be within the expected range for a sole-source award to a prime contractor like Northrop Grumman. However, in a competitive environment, similar NRE efforts might yield lower costs due to price pressures. Without access to detailed cost breakdowns or data on comparable competitive bids for similar systems, it's difficult to definitively assess if this represents optimal value for money. The Cost Plus Fixed Fee structure also adds a layer of complexity to direct cost comparisons.

What are the primary risks associated with a sole-source award for non-recurring engineering in the defense sector?

The primary risks associated with a sole-source award for non-recurring engineering (NRE) in the defense sector include potential for inflated pricing due to the lack of competition, reduced incentive for the contractor to innovate or optimize costs, and limited transparency into the justification for the award. Taxpayers may bear a higher cost than if the contract were competed. Furthermore, sole-source awards can sometimes lead to vendor lock-in, making future procurements more expensive. There's also a risk that the government might not receive the best available technology or solution if alternative vendors are not considered. Robust justification and stringent oversight are critical to mitigate these risks, but the inherent nature of sole-sourcing presents these challenges.

What is the expected impact of this contract on the specific aircraft program it supports?

This contract for $30.5 million in non-recurring engineering (NRE) is crucial for the initial development and readiness of specific aircraft parts. NRE activities are foundational, encompassing the design, prototyping, testing, and tooling required to bring a new component or system into existence. Successful completion of this NRE phase is essential for ensuring the part meets performance specifications, reliability standards, and integration requirements with the broader aircraft platform. The 'not competed' status suggests this NRE may be for a unique or highly specialized component where Northrop Grumman possesses proprietary knowledge or capabilities. The timely and effective execution of this NRE phase directly impacts the overall program schedule, cost, and eventual operational capability of the aircraft.

How has federal spending on aircraft parts manufacturing, specifically NRE, trended over the past five years?

Federal spending on aircraft parts manufacturing, particularly Non-Recurring Engineering (NRE), has generally remained substantial, driven by ongoing modernization efforts, new platform development, and sustainment requirements within the Department of Defense (DoD) and other agencies. While specific NRE spending figures can be difficult to isolate from broader procurement data, the overall trend reflects a consistent demand for advanced aerospace technologies. Factors influencing this trend include geopolitical stability, technological advancements, and budget allocations. Contracts like this one, even if sole-source, highlight the continued investment in specialized engineering capabilities necessary for maintaining and advancing military aviation. Detailed analysis of historical spending patterns would require access to comprehensive federal procurement databases and specific contract classifications.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $31,169,608

Exercised Options: $30,512,047

Current Obligation: $30,512,047

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $1,021,074

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