DoD awards $97.5M for APG-85 production to Northrop Grumman, a sole-source contract

Contract Overview

Contract Amount: $97,500,000 ($97.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2025-09-24

End Date: 2029-03-30

Contract Duration: 1,283 days

Daily Burn Rate: $76.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: APG-85 PRODUCTION

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $97.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: APG-85 PRODUCTION Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Long-term contract duration (over 4 years) suggests a critical, ongoing need. 3. Fixed Price Incentive contract type aims to balance cost control with performance. 4. High value indicates significant investment in advanced defense systems. 5. Contractor's established role in defense systems suggests technical capability. 6. Focus on search, detection, and navigation systems highlights a key military capability area.

Value Assessment

Rating: questionable

The contract's value of $97.5 million for APG-85 production is substantial. Without competitive bidding, it's difficult to benchmark the pricing against market rates or similar contracts. The fixed-price incentive structure suggests an attempt to manage costs, but the lack of competition inherently limits the government's ability to secure the best possible value. Further analysis of historical pricing for similar systems or components would be needed to provide a more definitive value assessment.

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. This typically occurs when only one responsible source can provide the required supplies or services. The lack of competition means there was no opportunity for multiple bidders to offer proposals, which can limit price discovery and potentially lead to higher costs for the government. The specific justification for the sole-source award would need to be reviewed to understand why competition was not feasible.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings typically achieved through a competitive bidding process. This can result in a higher overall expenditure for the defense system.

Public Impact

The Department of the Navy benefits from the production of critical APG-85 systems. Services delivered include the manufacturing of advanced search, detection, navigation, guidance, aeronautical, and nautical systems. The geographic impact is centered in Maryland, where the contractor is located. Workforce implications include sustained employment for skilled engineers and manufacturing personnel at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Lack of transparency in the justification for sole-source award.
Long contract duration could mask potential cost overruns if not closely monitored.
Reliance on a single contractor for critical defense systems poses a supply chain risk.

Positive Signals

Contractor has established expertise in producing complex defense systems.
Fixed Price Incentive contract type provides some incentive for cost control.
Contract supports a critical military capability (search, detection, navigation).
Long-term award ensures continuity of supply for essential defense equipment.

Sector Analysis

The APG-85 production falls within the aerospace and defense electronics sector, specifically focusing on advanced sensor and navigation systems. This is a highly specialized and capital-intensive industry dominated by a few large prime contractors. The market size for such systems is significant, driven by ongoing military modernization and technological advancements. Comparable spending benchmarks would likely involve other large-scale defense electronics production contracts, often awarded through competitive processes or sole-source arrangements for unique capabilities.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. Northrop Grumman is a large defense contractor. While the prime contract is not set aside for small businesses, there may be subcontracting opportunities for small businesses within the supply chain. However, the extent of small business participation is not detailed in the provided data and would require further investigation into Northrop Grumman's subcontracting plans.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and potentially the Department of Defense's Inspector General. Accountability measures are embedded within the contract terms, particularly the fixed-price incentive structure which links profit to performance and cost targets. Transparency is limited due to the sole-source nature of the award; however, contract awards are generally reported in federal databases. The Inspector General's office would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Advanced Avionics Systems
Defense Electronics Manufacturing
Navigation and Guidance Systems
Search and Detection Equipment
Military Aircraft Components

Risk Flags

Sole-source award
Lack of competition
Potential for higher costs

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $97.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. APG-85 PRODUCTION

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 $97.5 million.

What is the period of performance?

Start: 2025-09-24. End: 2029-03-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was awarded as 'NOT COMPETED' and is 'sole-source'. Typically, sole-source awards are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or in cases of urgent and compelling need where competition is not feasible. For the APG-85 production, the justification likely relates to the proprietary nature of the technology, the specialized manufacturing capabilities required, or the existing integration with specific military platforms that only Northrop Grumman can support. A detailed review of the Justification and Approval (J&A) document associated with this sole-source award would provide the precise reasons.

How does the Fixed Price Incentive (FPI) contract type aim to control costs for this $97.5M award?

A Fixed Price Incentive (FPI) contract is designed to share the risks and rewards between the government and the contractor. In an FPI contract, the final price is determined after performance based on a formula that incorporates target cost, target profit, and a price ceiling. The contractor is incentivized to control costs because if the final cost is below the target cost, both the government and the contractor share in the savings (often based on a pre-negotiated sharing ratio). Conversely, if the final cost exceeds the target cost but remains below the ceiling, the contractor's profit is reduced. If the cost exceeds the ceiling, the contractor absorbs the additional cost. For the APG-85 production, this structure aims to encourage Northrop Grumman to achieve production efficiencies and cost savings while ensuring the government does not pay an unlimited amount.

What are the potential risks associated with a sole-source award for critical defense systems like the APG-85?

Sole-source awards for critical defense systems present several potential risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive bidding process, resulting in less value for taxpayer money. Secondly, it can reduce the incentive for the sole-source contractor to innovate or improve efficiency, as they face less market pressure. Thirdly, it creates a dependency on a single supplier, which can pose supply chain risks if the contractor experiences production issues, financial instability, or decides to exit the market. Finally, it can limit opportunities for other capable companies to enter the market or develop competing technologies, potentially hindering long-term defense industrial base resilience.

What is the historical spending trend for APG-85 production or similar systems by the Department of Defense?

The provided data focuses on a single contract award for APG-85 production. To assess historical spending trends, one would need to examine prior contracts for the APG-85 system, its predecessors, or comparable advanced navigation and detection systems. This would involve searching federal procurement databases (like FPDS or USASpending) for awards to Northrop Grumman or other contractors in this specific product category (NAICS 334511) over several fiscal years. Analyzing these trends would reveal whether spending has been increasing, decreasing, or remaining stable, and whether this $97.5 million award represents a significant deviation from past investment levels in this technology area.

What is Northrop Grumman's track record in producing complex defense systems, particularly those related to navigation and detection?

Northrop Grumman is a major defense contractor with a long and extensive track record in developing and producing complex defense systems, including those related to aerospace, electronics, and information technology. The company has been a key player in various military programs, often supplying critical components and integrated systems for aircraft, ships, and ground forces. Their portfolio includes advanced radar systems, electronic warfare capabilities, navigation systems, and communication technologies. Given their established presence and expertise in these areas, it is likely that Northrop Grumman possesses the necessary technical capabilities, manufacturing infrastructure, and security clearances to produce the APG-85 system effectively. Their historical performance on similar large-scale defense contracts would be a key factor in assessing their reliability for this award.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001925R0010

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1580B W NURSERY RD, LINTHICUM HEIGHTS, MD, 21090

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: $97,500,000

Exercised Options: $97,500,000

Current Obligation: $97,500,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline