DoD's $23.3M contract with Northrop Grumman for navigation systems shows limited competition and potential value concerns

Contract Overview

Contract Amount: $23,349,687 ($23.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-01-27

End Date: 2010-05-10

Contract Duration: 1,929 days

Daily Burn Rate: $12.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: MELVILLE, SUFFOLK County, NEW YORK, 11747

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $23.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. The contract was awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The cost-plus-fixed-fee structure may incentivize cost overruns, requiring close oversight. 3. The duration of the contract (1929 days) suggests a long-term need for these specialized systems. 4. The North American Industry Classification System (NAICS) code 334511 indicates a focus on complex manufacturing. 5. The contract's value, while significant, needs benchmarking against similar systems to assess true value for money. 6. The absence of small business set-asides or subcontracting requirements is noted.

Value Assessment

Rating: fair

Benchmarking the value of this $23.3 million contract is challenging without detailed cost breakdowns and comparisons to similar navigation systems. The cost-plus-fixed-fee (CPFF) contract type, while allowing for flexibility in R&D or uncertain cost environments, can lead to higher overall costs compared to fixed-price contracts if not managed diligently. The fixed fee component needs to be assessed for reasonableness relative to the contractor's effort and risk. Without more granular data on the specific systems procured and their performance metrics, a definitive value-for-money assessment is difficult, but the sole-source nature raises initial concerns.

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 competitive bidding process, which typically drives down prices and encourages innovation. While sole-source awards can be justified for unique capabilities or national security reasons, they remove the market's pressure to achieve the lowest possible price for the government. The lack of competition here means taxpayers did not benefit from potential cost savings that a competitive process might have yielded.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for these navigation systems, as there was no market pressure to reduce costs.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical navigation systems for its operations. The contract supports the development and manufacturing of advanced search, detection, navigation, guidance, and related systems. The geographic impact is primarily linked to the contractor's facilities in New York, where the work is performed. The contract likely supports a specialized workforce within Northrop Grumman, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Lack of transparency in specific system costs due to sole-source nature.
No indication of small business participation or subcontracting opportunities.

Positive Signals

Procurement of critical navigation systems essential for defense operations.
Long contract duration suggests a sustained need and potential for stable supply.
Award to a large, established defense contractor with known capabilities.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, classified under NAICS code 334511. This industry is characterized by high technological complexity, significant R&D investment, and often involves specialized components and stringent quality control. The market is typically dominated by a few large defense contractors due to the high barriers to entry. Comparable spending benchmarks would involve analyzing other DoD contracts for similar navigation and guidance systems, which often represent substantial investments due to their critical nature and advanced technology.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor is there information suggesting subcontracting opportunities for small businesses. The award to a large prime contractor like Northrop Grumman often means that the bulk of the work remains in-house or is subcontracted to other large firms. This limits the direct economic benefit to the small business ecosystem and misses opportunities to foster innovation and competition among smaller, specialized firms in this sector.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring compliance with contract terms, quality standards, and cost controls. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to scrutinize incurred costs and the reasonableness of the fixed fee. Transparency regarding the specific performance metrics and cost justifications would be crucial for effective accountability. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

DoD Navigation and Guidance Systems Procurement
Northrop Grumman Defense Contracts
Sole-Source Defense Acquisitions
Cost-Plus-Fixed-Fee Contracts
NAICS 334511 Manufacturing

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.3 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 $23.3 million.

What is the period of performance?

Start: 2005-01-27. End: 2010-05-10.

What is the specific type of navigation system being procured under this contract, and what are its intended applications within the Department of Defense?

The contract data indicates the procurement of systems related to 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' under NAICS code 334511. While the specific system is not detailed, it likely pertains to advanced navigation and guidance equipment for military platforms such as aircraft, ships, or ground vehicles. These systems are critical for mission success, enabling precise positioning, target acquisition, and safe operation in complex environments. The 'Search' and 'Detection' components suggest capabilities beyond basic navigation, potentially including radar, sonar, or other sensor integration for situational awareness and threat identification. The exact application would depend on the specific military branch and operational requirements driving the procurement.

How does the cost-plus-fixed-fee (CPFF) structure typically impact the final cost compared to other contract types for similar defense procurements?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined or involves significant research and development, making it difficult to estimate costs accurately upfront. Under CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While this structure provides flexibility and encourages the contractor to proceed even with uncertainties, it carries a higher risk of cost overruns for the government compared to fixed-price contracts. The government bears the risk of cost increases, and the contractor has less incentive to control costs once the fee is fixed. For similar procurements where the scope is well-defined, fixed-price contracts generally offer better cost certainty and value for taxpayers, as the contractor assumes more of the cost risk.

What are the potential risks associated with a sole-source award for a contract of this magnitude and duration?

A sole-source award, like the one to Northrop Grumman for $23.3 million over approximately five years, presents several risks. Primarily, the absence of competition eliminates the government's ability to leverage market forces to achieve the best possible price. This can lead to paying a premium for the goods or services. Furthermore, without competitive pressure, there may be reduced incentives for the contractor to innovate, improve efficiency, or maintain high service levels beyond the contractually mandated minimums. It also raises concerns about whether the government truly explored all available options and justified the lack of competition adequately. This lack of transparency in the procurement process can erode public trust and potentially lead to suboptimal use of taxpayer funds.

Can the performance history of Northrop Grumman Systems Corporation on similar contracts provide insights into the potential success or risks of this specific award?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of delivering complex systems to the U.S. government. Their performance on similar contracts for navigation, guidance, and defense systems would generally indicate a high level of technical capability and program management experience. However, like any large contractor, their track record may include both successes and challenges, such as cost overruns, schedule delays, or performance issues on specific programs. A thorough review of their past performance, particularly on CPFF contracts and sole-source awards, would be necessary to identify any recurring patterns of concern or excellence. This analysis would help in assessing the likelihood of successful delivery within budget and schedule for this particular contract.

What are the historical spending patterns for navigation and guidance systems within the Department of Defense, and how does this contract compare?

The Department of Defense consistently allocates significant funding towards navigation and guidance systems, reflecting their critical role in military operations across all branches. Historical spending in this category often runs into billions of dollars annually, encompassing a wide range of technologies from basic GPS receivers to highly sophisticated inertial navigation systems and integrated sensor suites. This specific $23.3 million contract, while substantial for a single award, represents a relatively small portion of the overall DoD budget for such systems. Its significance lies more in its specific nature (sole-source, CPFF) and the contractor involved, rather than its absolute dollar value in the broader context of defense spending on navigation technology.

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: RESEARCH AND DEVELOPMENT › DEFENSE (OTHER) R&D

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

Parent Company: Northrop Grumman Corporation

Address: 65 MARCUS DR, MELVILLE, NY, 11747

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