DoD awards Northrop Grumman $67.1M for navigation systems, with 2 bids received

Contract Overview

Contract Amount: $67,140,704 ($67.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2003-03-27

End Date: 2011-10-14

Contract Duration: 3,123 days

Daily Burn Rate: $21.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $67.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Value for money appears fair given the long contract duration and cost-plus incentive fee structure. 2. Competition dynamics indicate limited but present market interest with two bidders. 3. Risk indicators include the cost-plus fee type, which can incentivize spending. 4. Performance context is a long-term contract spanning over 8 years. 5. Sector positioning is within the specialized defense navigation systems manufacturing industry.

Value Assessment

Rating: fair

The contract's total value of $67.1 million over approximately 8.5 years suggests an average annual value of around $7.9 million. Benchmarking this against similar contracts for advanced navigation systems is challenging without more specific technical details. However, the cost-plus incentive fee (CPIF) structure implies that costs are monitored and incentives are tied to performance and cost targets, which can be a reasonable approach for complex, long-term development.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with two bids received. While two bidders indicate some level of market interest, it is on the lower end for a significant defense contract. This suggests that the market for such specialized navigation systems may be concentrated among a few key players, potentially limiting price discovery compared to a scenario with more numerous competitive offers.

Taxpayer Impact: With only two bidders, taxpayers may not have benefited from the most aggressive pricing that could have emerged from a broader competitive field. The government secured a provider, but the potential for cost savings through wider competition might have been missed.

Public Impact

The Department of Defense is the primary beneficiary, receiving advanced navigation systems crucial for military operations. The contract supports the development and production of search, detection, navigation, guidance, and related systems. The geographic impact is primarily in Florida, where Northrop Grumman Systems Corporation is located. The contract likely supports a specialized workforce in aerospace and defense manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus incentive fee contracts can lead to cost overruns if not managed tightly.
Limited competition (2 bidders) may result in higher prices than a more competitive scenario.
The long contract duration (over 8 years) increases the risk of technological obsolescence or changing requirements.

Positive Signals

Awarded under full and open competition, ensuring a broad initial search for qualified contractors.
The incentive fee structure aims to align contractor performance with government objectives.
Northrop Grumman is a well-established defense contractor with significant experience in aerospace systems.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation and guidance systems. This is a highly specialized and technologically intensive area. The market is characterized by high barriers to entry due to R&D costs, intellectual property, and stringent quality requirements. Comparable spending in this sub-sector can vary widely based on system complexity and quantity, but significant government investment is typical for advanced defense capabilities.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large prime contract awarded to Northrop Grumman, there is potential for subcontracting opportunities for small businesses within the defense industrial base. However, the extent of these opportunities would depend on Northrop Grumman's subcontracting plan and the specific components or services required for the navigation systems.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, quality, and compliance. The contract's cost-plus incentive fee structure necessitates rigorous financial oversight to track costs and verify that incentives are earned appropriately. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance and cost are often considered sensitive.

Related Government Programs

DoD Navigation Systems Procurement
Aerospace and Defense Manufacturing Contracts
Northrop Grumman Defense Contracts
Cost-Plus Incentive Fee Contracts
Search, Detection, and Guidance Systems

Risk Flags

Cost Overrun Risk
Limited Competition
Long Contract Duration
Technological Obsolescence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $67.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. See the official description on USAspending.

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $67.1 million.

What is the period of performance?

Start: 2003-03-27. End: 2011-10-14.

What is Northrop Grumman's track record with similar navigation system contracts for the DoD?

Northrop Grumman Systems Corporation has a long and extensive history of developing and producing complex systems for the Department of Defense, including navigation, guidance, and control systems. They are a major defense contractor with significant experience in aerospace and defense technologies. While specific details on past navigation system contracts would require deeper research into their portfolio, their established presence suggests a substantial track record. This includes work on various aircraft, spacecraft, and missile platforms where precise navigation is critical. Their ability to secure large, long-term contracts like this one indicates a perceived capability and reliability by the DoD in delivering sophisticated systems.

How does the $67.1 million award compare to other navigation system contracts awarded by the DoD?

The $67.1 million award for search, detection, navigation, guidance, and related systems is a substantial but not exceptionally large sum in the context of major defense procurements. Navigation and guidance systems can range from tens of millions to billions of dollars depending on the complexity, quantity, and platform integration. For instance, integrated avionics suites for new fighter jets or strategic bombers can cost significantly more. However, for a specific set of navigation instruments or upgrades over an extended period, $67.1 million represents a significant investment. Benchmarking requires detailed comparison of system specifications, contract duration, and the number of units procured, which are not fully detailed here.

What are the primary risks associated with a Cost Plus Incentive Fee (CPIF) contract of this magnitude and duration?

The primary risks with a CPIF contract of this nature revolve around cost control and potential for overruns. While the 'incentive fee' component aims to motivate the contractor to meet cost and performance targets, the 'cost plus' aspect means the government ultimately pays the allowable costs incurred by the contractor, plus a fee. If the contractor's costs exceed targets, the government pays more. The long duration (over 8 years) amplifies this risk, as unforeseen technical challenges, material cost fluctuations, or scope creep can significantly increase expenses over time. Effective government oversight and robust target setting are crucial to mitigate these risks and ensure value for money.

How effective is competition with only two bidders in ensuring optimal pricing for taxpayers?

Competition with only two bidders generally provides less optimal pricing for taxpayers compared to a scenario with multiple, robust bids. While two bidders do establish a competitive dynamic, it limits the range of price discovery. The market for highly specialized defense systems like advanced navigation equipment is often concentrated among a few large, capable firms. In such cases, the government may have to accept offers from the limited pool of qualified contractors. This can lead to prices that are higher than what might be achieved if more companies were vying for the contract, potentially increasing costs for the taxpayer. The government's negotiation strategy and the specific nature of the requirements heavily influence the final outcome.

What is the historical spending trend for navigation system instruments by the DoD?

Historical spending by the DoD on navigation system instruments has been substantial and consistent, reflecting the critical role these technologies play in military operations across all branches. Spending trends are influenced by modernization cycles, geopolitical events, and the development of new platforms (aircraft, ships, vehicles, missiles). While specific figures for 'navigation system instruments' as a distinct category can fluctuate based on how spending is classified, the overall investment in avionics, guidance, and navigation has remained a significant portion of the defense budget. Trends often show increased spending during periods of technological advancement or heightened global security concerns, and may involve shifts towards more integrated, software-defined, or resilient navigation solutions.

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: WEAPONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 2000 W NASA BLVD, MELBOURNE, FL, 32902

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline