Northrop Grumman's $73.6M JCREW System of Systems contract awarded by the Navy, spanning 2009-2016

Contract Overview

Contract Amount: $73,628,529 ($73.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2016-03-18

Contract Duration: 2,360 days

Daily Burn Rate: $31.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: JCREW SYSTEM OF SYSTEMS (SOS) IS MADE UP OF THREE DISTINCT SYSTEMS: MOBILE DISMOUNTED OPERATIONS (DISMOUNTED-E.G. MAN-PACK), MOBILE GROUND AND WATERBORNE TRANSPORT AND COMBAT SYSTEMS (MOUNTED) AND SEMI-PERMANENT GEOGRAPHICAL AREA (FIXED) SYSTEMS.

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92128

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $73.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: JCREW SYSTEM OF SYSTEMS (SOS) IS MADE UP OF THREE DISTINCT SYSTEMS: MOBILE DISMOUNTED OPERATIONS (DISMOUNTED-E.G. MAN-PACK), MOBILE GROUND AND WATERBORNE TRANSPORT AND COMBAT SYSTEMS (MOUNTED) AND SEMI-PERMANENT GEOGRAPHICAL AREA (FIXED) SYSTEMS. Key points: 1. The contract supported the development of three distinct JCREW systems: dismounted, mounted, and fixed. 2. Awarded under a full and open competition, indicating a broad market solicitation. 3. The contract type was Cost Plus Incentive Fee (CPIF), suggesting performance-based incentives for the contractor. 4. The duration of the contract was 2360 days, indicating a long-term development and integration effort. 5. The contract was awarded to Northrop Grumman Systems Corporation, a major defense contractor. 6. The North American Industry Classification System (NAICS) code 334511 points to the manufacturing of search, detection, and navigation instruments.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without detailed cost breakdowns and performance metrics. The CPIF contract type implies that actual costs could vary, with incentives tied to achieving specific performance targets. Comparing this to similar complex system development contracts would require access to proprietary cost data and independent cost estimates. The total award amount of $73.6 million over approximately 6.5 years suggests a significant investment in advanced technology.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under a full and open competition, meaning that all responsible sources were permitted to submit a bid. The presence of 3 bidders (as indicated by 'no': 3) suggests a moderate level of competition for this complex system development. While not a highly contested bid, full and open competition generally provides a better opportunity for price discovery and ensures that the government receives offers from a range of qualified contractors.

Taxpayer Impact: A full and open competition, even with a limited number of bidders, is generally favorable for taxpayers as it encourages competitive pricing and allows for the selection of the most capable and cost-effective solution.

Public Impact

The primary beneficiaries are the U.S. Navy personnel who will utilize the JCREW systems for dismounted, mounted, and fixed operational environments. The contract delivered advanced communication and situational awareness capabilities crucial for modern military operations. The geographic impact is primarily within military operational theaters where these systems are deployed. Workforce implications include highly skilled engineers, technicians, and manufacturing personnel involved in the development and production of these sophisticated systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Incentive Fee contracts can lead to cost overruns if not closely managed and incentivized effectively.
The long duration of the contract (over 6 years) increases the risk of technological obsolescence or changing requirements.
Complexity of a 'System of Systems' can introduce integration challenges and potential performance issues.

Positive Signals

Awarded through full and open competition, suggesting a structured procurement process.
The contract involved a major defense contractor with established capabilities in complex system development.
The CPIF structure aims to align contractor incentives with government objectives, potentially leading to better performance.

Sector Analysis

The JCREW System of Systems falls within the defense electronics and communication systems sector. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. The market is dominated by large defense contractors like Northrop Grumman. Comparable spending benchmarks would involve other large-scale military communication and sensor system development programs, which often run into hundreds of millions or billions of dollars over their lifecycle.

Small Business Impact

There is no indication from the provided data that this contract included specific small business set-asides. Given the nature of developing a complex 'System of Systems,' prime contracting is typically awarded to large, established defense corporations. However, it is common for large prime contractors to utilize small businesses for subcontracting opportunities to fulfill specific component needs or specialized services, contributing to the broader small business ecosystem within the defense industrial base.

Oversight & Accountability

Oversight for this contract would have been managed by the Department of the Navy's contracting and program management offices. The Cost Plus Incentive Fee structure necessitates rigorous oversight of contractor costs and performance against defined incentives. Transparency would be managed through contract reporting requirements. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Joint Communications
Tactical Communication Systems
Electronic Warfare Systems
Command and Control Systems
Military Sensor Systems

Risk Flags

Long contract duration increases risk of obsolescence.
CPIF contracts require diligent oversight to control costs.
System of Systems integration complexity poses technical challenges.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $73.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. JCREW SYSTEM OF SYSTEMS (SOS) IS MADE UP OF THREE DISTINCT SYSTEMS: MOBILE DISMOUNTED OPERATIONS (DISMOUNTED-E.G. MAN-PACK), MOBILE GROUND AND WATERBORNE TRANSPORT AND COMBAT SYSTEMS (MOUNTED) AND SEMI-PERMANENT GEOGRAPHICAL AREA (FIXED) SYSTEMS.

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 $73.6 million.

What is the period of performance?

Start: 2009-10-01. End: 2016-03-18.

What was the specific performance criteria tied to the incentive fee in this CPIF contract?

The provided data does not specify the exact performance criteria linked to the incentive fee for the JCREW System of Systems contract. CPIF contracts typically tie incentives to achieving specific technical milestones, delivery schedules, cost savings, or performance thresholds. For this contract, potential incentives could have been related to the successful integration of the three JCREW subsystems (dismounted, mounted, fixed), achieving certain communication range or reliability metrics, or meeting specific operational effectiveness targets. Detailed information on these incentives would be found in the contract's Statement of Work (SOW) and the contract's special provisions.

How did the competition level (3 bidders) impact the final negotiated price compared to a scenario with more bidders?

With three bidders in a full and open competition, the government likely achieved a reasonably competitive price. However, the impact on the final negotiated price is difficult to quantify precisely without knowing the specific bids and the government's cost estimates. A higher number of bidders (e.g., 5+) generally exerts stronger downward pressure on prices due to increased market competition. Conversely, fewer bidders might allow the incumbent or leading bidders to negotiate more favorable terms. The Cost Plus Incentive Fee structure also means the final price is variable, influenced by performance and cost outcomes, making a direct comparison to a hypothetical higher-competition scenario complex.

What are the key risks associated with developing a 'System of Systems' like JCREW?

Developing a 'System of Systems' (SOS) like JCREW presents several inherent risks. Firstly, integration risk is paramount; ensuring that disparate subsystems (dismounted, mounted, fixed) function seamlessly together is a significant technical challenge. Interoperability issues, differing technical standards, and communication protocols can lead to delays and cost overruns. Secondly, requirements management risk is high, as the needs of each subsystem and their combined operation can evolve over a long development cycle. Thirdly, performance risk exists, as the overall system's effectiveness depends on the successful performance of each component and their synergistic interaction. Finally, sustainment and lifecycle management risk arise from the complexity of maintaining and upgrading multiple interconnected systems over time.

Can we assess the value for money based on the provided data?

Assessing the value for money for the JCREW System of Systems contract based solely on the provided data is challenging. The total award of $73.6 million over approximately 6.5 years indicates a substantial investment. The contract type (CPIF) suggests an attempt to link cost to performance, which is a positive indicator for value. However, without details on the system's actual performance, its operational effectiveness, the number of units procured, or comparisons to alternative solutions, a definitive value-for-money assessment cannot be made. The fact that it was a full and open competition with three bidders suggests a degree of market discipline was applied during procurement.

What is the typical lifecycle cost for a system like JCREW, and how does this initial award fit into that?

The initial award of $73.6 million represents the development and potentially initial production phase of the JCREW System of Systems. The total lifecycle cost for such a complex defense system typically includes not only the initial acquisition (research, development, testing, and evaluation - RDT&E, and procurement) but also sustainment costs (operations, maintenance, upgrades, training, and disposal) over its operational life, which can span decades. Lifecycle costs often far exceed the initial acquisition cost, potentially running into hundreds of millions or even billions of dollars. This $73.6 million award is likely a significant portion of the RDT&E and initial procurement budget, setting the foundation for future sustainment and upgrade contracts.

What does the NAICS code 334511 specifically entail in the context of this contract?

The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' is highly relevant to the JCREW System of Systems contract. This code covers establishments primarily engaged in manufacturing instruments and related equipment for detecting, measuring, and controlling or displaying physical phenomena. For JCREW, this would encompass the manufacturing of components related to radar, sonar, electronic warfare, communication systems, and navigation aids that form the core of the dismounted, mounted, and fixed systems. It signifies that the contract's output involves the production of sophisticated electronic hardware and integrated systems.

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 › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002409R6303

Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: ONE RANCHO CARMEL DRIVE, SAN DIEGO, CA, 92128

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: $120,808,897

Exercised Options: $73,628,529

Current Obligation: $73,628,529

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline