DoD awards Northrop Grumman $392.6M for TCID Hardware Development, a sole-source contract

Contract Overview

Contract Amount: $392,581,727 ($392.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-09-12

End Date: 2028-09-30

Contract Duration: 1,845 days

Daily Burn Rate: $212.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: D6 TCID HARDWARE DEVELOPMENT

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $392.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: D6 TCID HARDWARE DEVELOPMENT Key points: 1. Contract awarded to a single, established prime contractor, raising questions about competitive pricing. 2. Significant investment in hardware development suggests a focus on advanced technological capabilities. 3. Long contract duration of over 5 years indicates a sustained need for these specialized services. 4. The contract's 'Cost Plus Incentive Fee' structure may incentivize performance but also carries cost overrun risks. 5. Geographic concentration in Florida for contract performance. 6. This award represents a substantial portion of the company's revenue within this specific NAICS code.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The 'Cost Plus Incentive Fee' (CPIF) pricing structure means the final cost is not fixed and depends on performance against certain metrics. While CPIF can encourage efficiency, it also introduces uncertainty regarding the final expenditure. Without comparable contracts or market data, it's difficult to definitively assess if the government is receiving optimal value for the funds obligated.

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 among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities or when urgency dictates a rapid award. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bids had been solicited.

Taxpayer Impact: Taxpayers may be paying a premium for this hardware development due to the absence of competitive pressure to drive down costs. The government's negotiating position is weakened without alternative sources.

Public Impact

The Department of the Navy benefits from the development of critical TCID hardware, likely enhancing its operational capabilities. This contract supports the advancement of specialized hardware for defense applications. The primary geographic impact is in Florida, where the contractor is located and likely where development activities will occur. The contract supports a highly specialized workforce within Northrop Grumman, contributing to high-skill employment in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost Plus Incentive Fee (CPIF) structure can lead to cost overruns if not carefully managed.
Lack of transparency in the sole-source justification process.
Long-term commitment without competitive re-evaluation poses a risk to future value.
Dependence on a single contractor for critical hardware development.

Positive Signals

Award to an established contractor with a track record in defense systems.
CPIF structure aims to incentivize contractor performance and efficiency.
Focus on developing advanced hardware suggests alignment with strategic defense modernization goals.
Contract duration allows for sustained development and integration of complex systems.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically related to aircraft parts and auxiliary equipment. The market for such specialized hardware is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Spending in this area is often driven by government procurement needs for advanced military platforms. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of TCID hardware, but overall defense procurement for similar systems runs into billions annually.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting plans. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Northrop Grumman voluntarily includes them in its supply chain. There is no explicit mechanism within this award to foster small business participation.

Oversight & Accountability

Oversight for this contract will be managed by the Department of the Navy, likely through program managers and contracting officers. The 'Cost Plus Incentive Fee' structure necessitates close monitoring of costs and performance against defined metrics to ensure accountability. Transparency may be limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Hardware Procurement
Aerospace Manufacturing
Northrop Grumman Contracts
Naval Systems Development
Cost Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Cost Plus Incentive Fee structure
Lack of competitive bidding
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $392.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. D6 TCID HARDWARE DEVELOPMENT

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 $392.6 million.

What is the period of performance?

Start: 2023-09-12. End: 2028-09-30.

What is the specific nature of the TCID hardware being developed, and what are its intended operational benefits for the Department of the Navy?

The specific nature of the TCID (Tactical Combat Identification) hardware is not publicly detailed due to its sensitive defense application. However, TCID systems are generally designed to enhance situational awareness and target identification capabilities for military platforms, particularly in combat environments. These systems aim to reduce fratricide (friendly fire incidents) and improve the accuracy of targeting by providing reliable identification of friendly, neutral, and hostile forces. The intended operational benefits for the Department of the Navy likely include improved combat effectiveness, enhanced soldier safety through better identification, and more efficient mission execution by reducing ambiguity on the battlefield. The $392.6 million investment suggests a significant upgrade or development of a new generation of these critical identification systems.

What justification was provided for awarding this contract on a sole-source basis instead of through full and open competition?

The specific justification for this sole-source award is not publicly detailed in the provided data. However, common reasons for sole-source procurements in the defense sector include situations where only one responsible source is available, or when there is a compelling urgency that precludes competition. This could be due to unique technological capabilities possessed by Northrop Grumman, proprietary technology, or the need to maintain continuity with existing systems where switching contractors would be prohibitively expensive or technically infeasible. The Department of the Navy would have had to formally document and approve this justification, often requiring review by higher authorities to ensure it aligns with federal procurement regulations and serves the best interests of the government.

How does the 'Cost Plus Incentive Fee' (CPIF) structure work in this contract, and what are the potential risks and benefits for the government?

The 'Cost Plus Incentive Fee' (CPIF) contract structure allows the contractor (Northrop Grumman) to be reimbursed for allowable costs plus a fee that is adjusted based on performance against pre-determined targets. In this case, the targets likely relate to technical performance, schedule adherence, or cost savings. The government benefits from CPIF by incentivizing the contractor to achieve specific objectives, potentially leading to better performance or lower costs than a fixed-price contract. However, the government also bears the risk of cost overruns if the contractor's actual costs exceed the target cost, although the incentive fee mechanism aims to mitigate this by sharing the savings or overruns. Close government oversight is crucial to ensure the targets are appropriate and that the contractor is genuinely motivated to meet them efficiently.

What is Northrop Grumman's track record with similar defense hardware development contracts, particularly with the Department of the Navy?

Northrop Grumman is a major defense contractor with a long and extensive history of developing and producing complex hardware systems for the Department of Defense, including the Department of the Navy. They have a significant track record in areas such as aerospace, naval systems, and advanced electronics. While specific details of past performance on TCID-related projects are not provided, the company is known for its capabilities in large-scale, technologically advanced programs. Their history includes numerous large-value contracts, some of which may have involved similar cost-plus incentive fee structures. Government contract databases and performance reports (like Contractor Performance Assessment Reporting System - CPARS) would contain more granular details on their past performance, including any issues related to cost, schedule, or quality on previous programs.

How does the $392.6 million contract value compare to historical spending on similar TCID hardware development or related defense systems?

Comparing the $392.6 million contract value to historical spending on similar TCID hardware development is challenging without specific historical data on TCID programs. However, as a sole-source award to a single prime contractor for a duration of over five years, this figure represents a substantial investment. Defense hardware development, especially for advanced systems like identification and situational awareness technologies, often involves significant costs due to R&D, complex manufacturing, and stringent testing requirements. For context, major defense programs can range from hundreds of millions to tens of billions of dollars. This contract appears to be a significant, but not exceptionally large, investment within the broader spectrum of major defense acquisition programs. Its value should be assessed relative to the specific technological advancements and capabilities it aims to deliver.

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 INCENTIVE FEE (V)

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: $853,733,235

Exercised Options: $853,733,235

Current Obligation: $392,581,727

Subaward Activity

Number of Subawards: 48

Total Subaward Amount: $149,482,707

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