DoD's $19.6M contract for aircraft parts awarded to Northrop Grumman, highlighting potential value concerns

Contract Overview

Contract Amount: $19,633,843 ($19.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-01-01

End Date: 2026-06-30

Contract Duration: 1,276 days

Daily Burn Rate: $15.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY22 CDP NRE (DLPU/DON)

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $19.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FY22 CDP NRE (DLPU/DON) Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher costs than fixed-price contracts. 2. Sole-source award limits competition, potentially impacting price discovery and value for money. 3. The contract duration of over 3 years suggests a significant, long-term need for these aircraft parts. 4. Awarded by the Department of the Navy, indicating a specific defense-related requirement. 5. The North American Industry Classification System (NAICS) code 336413 points to a specialized manufacturing sector. 6. The contract is a delivery order under a larger contract, suggesting it's part of an ongoing program.

Value Assessment

Rating: questionable

Benchmarking the value of this $19.6 million contract is challenging without more detailed cost breakdowns. However, the cost-plus-fixed-fee structure inherently carries more risk of cost overruns compared to fixed-price contracts. The lack of competition further complicates a direct value assessment, as there's no market pressure to drive down prices. Comparing this to similar sole-source awards for specialized aircraft parts would be necessary for a more robust value-for-money analysis.

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 typically occurs when a specific capability or product is only available from a single source, or for urgent requirements where full and open competition is not feasible. The lack of competition means that the government did not benefit from a range of proposals and price points that could have emerged from a competitive bidding process.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible pricing through market competition, potentially leading to higher costs for taxpayers.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Department of the Navy, ensuring the continued operation and maintenance of aircraft. The contract delivers essential aircraft parts, crucial for maintaining fleet readiness and operational capabilities. The geographic impact is primarily within the United States, supporting defense operations and potentially domestic manufacturing. Workforce implications include employment at Northrop Grumman and its supply chain, supporting skilled labor in aerospace manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can incentivize higher spending as the contractor is reimbursed for costs plus a fee.
Sole-source awards limit price negotiation leverage for the government.
Lack of transparency in cost build-up for sole-source contracts makes independent value assessment difficult.
Long contract duration may not adapt well to evolving technological needs or market price fluctuations.

Positive Signals

Award to a large, established defense contractor like Northrop Grumman suggests a high level of technical capability and reliability.
The contract is a delivery order under an existing contract, implying a structured procurement process and potentially pre-negotiated terms.
The fixed fee component in the contract type provides some level of cost predictability for the contractor's profit.
The contract supports critical defense needs, ensuring operational readiness for the Navy's aircraft.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The market for defense aerospace components is characterized by high barriers to entry, specialized technology, and long-standing relationships between prime contractors and the government. Spending in this area is driven by defense budgets and the need to maintain aging fleets as well as procure new platforms. Comparable spending benchmarks would involve analyzing other sole-source or limited-competition contracts for similar specialized aircraft components within the DoD.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by the prime contractor being Northrop Grumman Systems Corporation. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific set-aside goals or reporting requirements, the direct impact on the small business ecosystem is unclear, though large prime contractors often utilize small businesses in their supply chains.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a delivery order under a larger contract, existing oversight mechanisms for the parent contract would likely apply. Transparency is limited due to the sole-source nature and cost-plus-fixed-fee structure. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of the Navy Aircraft Procurement
Defense Logistics Agency (DLA) Aviation Support
Northrop Grumman Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts
Aircraft Parts Manufacturing Contracts
Cost-Plus-Fixed-Fee Contracts in Defense

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FY22 CDP NRE (DLPU/DON)

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 $19.6 million.

What is the period of performance?

Start: 2023-01-01. End: 2026-06-30.

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

Northrop Grumman Systems Corporation has a long-standing and extensive relationship with the Department of the Navy, serving as a major defense contractor across various platforms. Their track record includes the development, manufacturing, and sustainment of numerous aircraft, including the E-2 Hawkeye and the F/A-18 Super Hornet. For aircraft parts specifically, they are a key supplier for many systems. Analyzing their past performance on similar delivery orders or contracts for specialized components would reveal their historical reliability, on-time delivery rates, and cost performance. However, specific data on past performance for this exact type of part or contract vehicle is not publicly detailed in this summary, necessitating a deeper dive into contract databases and performance reports.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for similar aircraft parts?

Cost-plus-fixed-fee (CPFF) contracts reimburse the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs involved, such as in research and development or complex manufacturing. Compared to fixed-price contracts (like Firm-Fixed-Price or Fixed-Price Incentive), CPFF offers less cost certainty for the buyer. Fixed-price contracts place more cost risk on the contractor and incentivize efficiency. For standard, well-defined aircraft parts, fixed-price contracts are generally preferred to ensure better value for money. The use of CPFF here suggests potential complexity or uncertainty in the production or specification of these particular parts, but it also opens the door for potentially higher overall costs if not managed rigorously.

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

The primary risks for taxpayers associated with this sole-source award are related to potentially inflated costs and a lack of optimal value. Without competition, Northrop Grumman faces less pressure to offer the lowest possible price. The government may end up paying more than it would in a competitive scenario. Furthermore, the cost-plus-fixed-fee structure means that the government bears the risk of cost overruns, as the contractor is reimbursed for incurred costs. This can lead to unpredictable final expenditures. The absence of competitive benchmarking also makes it harder to ascertain if the price paid is reasonable and reflects fair market value for the aircraft parts being procured.

What is the historical spending pattern for NAICS code 336413 by the Department of the Navy?

Historical spending by the Department of the Navy (DoN) under NAICS code 336413 (Other Aircraft Parts and Auxiliary Equipment Manufacturing) is substantial, reflecting the ongoing need to support its diverse aircraft fleet. While specific aggregate figures for the DoN under this code fluctuate annually based on modernization programs, sustainment needs, and new platform procurements, it consistently represents a significant portion of the DoN's procurement budget. This sector is characterized by long-term contracts, often with sole-source or limited competition due to the specialized nature of the products and the established relationships with key manufacturers like Northrop Grumman. Analyzing trends over the past 5-10 fiscal years would reveal patterns in contract values, types of parts procured, and the prevalence of different contract vehicles, highlighting the consistent demand for these critical components.

How does the contract duration (1276 days) impact the assessment of value and potential obsolescence?

A contract duration of 1276 days (approximately 3.5 years) for aircraft parts is relatively long and has several implications for value assessment and obsolescence. On the positive side, a longer duration can provide stability for the supplier and potentially lead to better pricing through economies of scale if production is continuous. It also ensures a consistent supply chain for the Department of the Navy over the period. However, a long duration also increases the risk of technological obsolescence. Aircraft technology evolves, and parts designed for current systems might become outdated or less efficient over 3.5 years, especially if newer aircraft models or upgrades are introduced. Furthermore, market prices for raw materials or manufacturing processes could fluctuate significantly over this period, potentially impacting the cost-effectiveness of the fixed fee component of the CPFF contract. The government needs robust mechanisms to manage potential price changes and assess the ongoing relevance of the parts throughout the contract term.

Industry Classification

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

Product/Service Code: COMM/DETECT/COHERENT RADIATION

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: $19,633,843

Exercised Options: $19,633,843

Current Obligation: $19,633,843

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $31,353

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