Northrop Grumman received $29.3M for AN/AQS-24C upgrade kits, a sole-source award

Contract Overview

Contract Amount: $29,340,164 ($29.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2015-07-17

End Date: 2022-06-29

Contract Duration: 2,539 days

Daily Burn Rate: $11.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AN/AQS-24C UPGRADE KIT DESIGN AND PRODUCTION

Place of Performance

Location: ANNAPOLIS, ANNE ARUNDEL County, MARYLAND, 21409

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $29.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: AN/AQS-24C UPGRADE KIT DESIGN AND PRODUCTION Key points: 1. The contract value of $29.3M for upgrade kits suggests a significant investment in enhancing existing systems. 2. As a sole-source award, the absence of competition may have impacted price negotiation and value for money. 3. The contract duration of 2539 days indicates a long-term need for these specialized components. 4. The cost-plus-fixed-fee contract type implies that costs were reimbursed plus a fixed fee, which can incentivize cost control but also carries risk. 5. The award to Northrop Grumman, a major defense contractor, positions this within the established defense industrial base. 6. The lack of small business involvement (sb: false) suggests this contract did not prioritize small business participation.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source procurements for similar upgrade kits. The cost-plus-fixed-fee structure, while common in complex defense systems, can lead to cost overruns if not managed diligently. The absence of competition means there's no direct market price comparison to assess if the final cost represents optimal value for the taxpayer. Further analysis of the fixed fee and the contractor's cost performance would be needed to fully evaluate value.

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 typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the sole provider of a necessary component. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the most cost-effective solution is selected.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to achieve the lowest possible price. This necessitates robust government oversight to ensure fair pricing and prevent potential overspending.

Public Impact

The primary beneficiaries are the Department of Defense, specifically units utilizing the AN/AQS-24C system, which will receive upgraded equipment. The services delivered include the design and production of upgrade kits, enhancing the functionality and lifespan of existing systems. The geographic impact is likely concentrated within the operational areas of the U.S. Navy, where the AN/AQS-24C system is deployed. Workforce implications may include specialized engineering and manufacturing roles at Northrop Grumman and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed effectively.
Lack of small business participation may limit opportunities for smaller innovative firms in the defense supply chain.

Positive Signals

Award to a major defense contractor like Northrop Grumman suggests access to specialized expertise and established production capabilities.
The long contract duration indicates a sustained commitment to improving critical defense systems.
The upgrade kit design and production addresses a specific, likely critical, operational need for the AN/AQS-24C system.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a specialized area within the broader aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality requirements, and often long product lifecycles. Comparable spending benchmarks are difficult to establish due to the niche nature of the AN/AQS-24C system, but it represents investment in maintaining and enhancing advanced military sensor technology.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no small business participation (sb: false). This suggests that the specialized nature of the AN/AQS-24C upgrade kits, or the prime contractor's established capabilities, led to a decision to bypass small business set-asides. Consequently, this contract may not contribute to the small business ecosystem's growth in this specific technological area, nor does it offer subcontracting opportunities for small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance with contract terms. Accountability measures are inherent in the cost-plus-fixed-fee structure, requiring detailed cost reporting and justification. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of defense technology.

Related Government Programs

AN/AQS-24A Minehunting System
Naval Aviation Systems
Defense Sensor Technology Programs
Northrop Grumman Defense Contracts

Risk Flags

Sole Source Award
Cost-Plus-Fixed-Fee Contract
Potential for Cost Overruns
Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. AN/AQS-24C UPGRADE KIT DESIGN AND 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $29.3 million.

What is the period of performance?

Start: 2015-07-17. End: 2022-06-29.

What is the historical spending trend for the AN/AQS-24C upgrade kits and related systems?

Historical spending data for the AN/AQS-24C upgrade kits specifically is limited due to the sole-source nature of this award. However, the AN/AQS-24 family of systems has been a part of naval operations for some time, implying prior investments in its development, sustainment, and potential upgrades. Analyzing broader spending on naval mine countermeasures and airborne sensor systems could provide context. Without specific prior contract awards for these exact upgrade kits, it's difficult to establish a precise spending trend. The $29.3 million awarded here represents a significant, singular investment for this particular upgrade phase.

How does the cost-plus-fixed-fee (CPFF) structure impact the overall cost-effectiveness of this contract?

The Cost-Plus-Fixed-Fee (CPFF) contract structure reimburses the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. While CPFF is often used for research and development or complex systems where costs are uncertain, it carries inherent risks for cost-effectiveness. The government bears the risk of cost overruns, as all allowable costs are reimbursed. The fixed fee provides an incentive for the contractor to control costs to maximize their profit margin relative to the fee. However, without robust government oversight and detailed cost tracking, there's a potential for costs to escalate beyond initial estimates, impacting the overall value for money achieved by the taxpayer.

What are the specific risks associated with a sole-source award for critical defense components like the AN/AQS-24C upgrade kits?

Sole-source awards for critical defense components like the AN/AQS-24C upgrade kits present several risks. Primarily, the absence of competition eliminates the government's ability to leverage market forces to negotiate the best possible price, potentially leading to higher costs. It can also reduce the incentive for the sole provider to innovate or improve efficiency, as there is no competitive pressure. Furthermore, reliance on a single source can create supply chain vulnerabilities; if the contractor experiences production issues or goes out of business, the government may face significant delays or be forced into costly sole-source negotiations for alternatives. This contract's sole-source nature necessitates stringent government oversight to mitigate these risks.

What is Northrop Grumman's track record with similar defense system upgrade contracts?

Northrop Grumman is a major defense contractor with extensive experience in developing, producing, and upgrading complex defense systems, including sensor and navigation technologies. They have a long history of delivering systems for various branches of the U.S. military. While specific details on their performance for the AN/AQS-24C upgrade kits are tied to this sole-source award, their broader track record suggests they possess the technical expertise and manufacturing capacity required for such projects. However, like any large contractor, past performance reviews and contract close-outs would provide a more granular understanding of their efficiency, cost control, and adherence to schedule on similar, albeit potentially competed, programs.

What are the potential performance implications of upgrading the AN/AQS-24C system?

Upgrading the AN/AQS-24C system is intended to enhance its performance, reliability, and potentially its capabilities. The AN/AQS-24C is a forward-looking sonar system used for mine detection and hunting. Upgrades could involve improvements in detection range, accuracy, target discrimination, data processing speed, or integration with newer platforms and communication systems. These enhancements are crucial for maintaining the effectiveness of naval mine countermeasures operations in evolving threat environments. The specific benefits would depend on the nature of the 'upgrade kit design and production,' but the overall goal is to ensure the system remains a relevant and effective tool for the warfighter.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002415R6320

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 895 OCEANIC DR, ANNAPOLIS, MD, 21409

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: $32,365,753

Exercised Options: $30,551,462

Current Obligation: $29,340,164

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline