DoD's $746M contract for mounted/fixed systems awarded to Northrop Grumman, with 2 bids

Contract Overview

Contract Amount: $746,250,194 ($746.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2017-07-31

End Date: 2025-10-01

Contract Duration: 2,984 days

Daily Burn Rate: $250.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: JCREW I1B1 MOUNTED / FIXED SYSTEMS

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $746.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: JCREW I1B1 MOUNTED / FIXED SYSTEMS Key points: 1. Value for money assessed against similar systems and market rates. 2. Competition dynamics indicate a moderate level of market interest. 3. Risk indicators include contract type and duration. 4. Performance context is within the scope of advanced defense systems. 5. Sector positioning is in specialized defense manufacturing.

Value Assessment

Rating: good

The total contract value of $746.25 million over its period of performance appears reasonable given the specialized nature of mounted/fixed defense systems. Benchmarking against similar complex defense systems suggests that pricing is competitive, especially considering the advanced technology and integration required. The firm fixed-price structure provides cost certainty for the government, contributing to a good value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With two bids received, the competition level suggests a healthy, though not extensive, market interest for this specific type of defense system. The presence of multiple bidders generally supports price discovery and encourages competitive pricing.

Taxpayer Impact: The full and open competition with two bidders is beneficial for taxpayers as it likely led to a more competitive price than a sole-source award. This level of competition helps ensure that the government is not overpaying for the required systems.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, receiving advanced mounted and fixed systems. Services delivered include the manufacturing and integration of sophisticated search, detection, navigation, guidance, and related systems. The geographic impact is primarily within California, where the contractor is located, but the systems will be deployed globally by the Navy. Workforce implications include skilled labor in advanced manufacturing, engineering, and systems integration within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (2984 days) could lead to scope creep or evolving technological obsolescence.
Firm Fixed Price contracts can sometimes incentivize contractors to cut corners if not closely monitored.
Reliance on a single large contractor for critical defense systems can pose supply chain risks.

Positive Signals

Awarded under full and open competition, suggesting a competitive bidding process.
Firm Fixed Price contract provides cost predictability for the government.
Contractor's established presence in defense systems manufacturing implies technical capability.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on advanced electronic systems for naval applications. The market for such specialized defense equipment is characterized by high barriers to entry due to technological complexity and stringent government requirements. Comparable spending benchmarks would typically involve other large-scale defense system procurements, where costs are driven by R&D, customization, and long-term support.

Small Business Impact

The contract data indicates that small business participation was not a primary set-aside consideration (ss: false, sb: false). While Northrop Grumman is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting will depend on the prime contractor's strategy and the specific components and services required for these complex systems.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price structure and performance requirements. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Combat Systems
Defense Electronics Manufacturing
Search and Navigation Systems
Guidance Systems Manufacturing
Aeronautical and Nautical Instruments

Risk Flags

Long contract duration
Potential for technological obsolescence
Firm Fixed Price risks
Single prime contractor dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $746.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. JCREW I1B1 MOUNTED / 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 $746.3 million.

What is the period of performance?

Start: 2017-07-31. End: 2025-10-01.

What is Northrop Grumman's track record with similar large-scale defense system contracts?

Northrop Grumman Systems Corporation has a long and extensive track record of delivering complex defense systems to the U.S. military, including the Department of Defense and various branches like the Navy and Air Force. They are a major prime contractor on numerous programs involving aircraft, spacecraft, C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) systems, and advanced electronics. Their history includes significant contributions to programs like the B-2 bomber, E-2 Hawkeye, and various missile defense systems. This extensive experience suggests a high level of technical capability and program management expertise relevant to the JCREW I1B1 contract. However, like many large defense contractors, they have also faced scrutiny and performance challenges on specific programs, underscoring the importance of ongoing oversight and performance management for all their contracts.

How does the awarded amount compare to similar systems or previous contracts?

Direct comparison of the $746.25 million award for JCREW I1B1 mounted/fixed systems is challenging without specific details on the system's capabilities and scale. However, the total contract value over its duration (approximately 8 years) suggests a significant investment in advanced defense technology. For context, major naval system procurements, such as radar upgrades, electronic warfare suites, or integrated combat systems, often run into hundreds of millions or even billions of dollars. The firm fixed-price nature of this contract provides a degree of cost certainty. Benchmarking against industry reports for similar electronic warfare or navigation systems indicates that costs can range widely based on technological sophistication, quantity, and integration complexity. The two-bidder competition suggests the price was likely influenced by market conditions for this specialized niche.

What are the primary risks associated with this contract?

Several risks are associated with this contract. The long duration (2984 days, over 8 years) increases the potential for technological obsolescence, as defense technology evolves rapidly. It also raises the risk of cost overruns if not managed tightly, despite the firm fixed-price structure, especially if unforeseen technical challenges arise or if the scope implicitly expands. Reliance on a single prime contractor, Northrop Grumman, for such critical systems can create supply chain vulnerabilities and potential single-source dependency issues if key subcontractors fail or if the prime faces significant production issues. Furthermore, the complexity of integrating advanced search, detection, navigation, and guidance systems means there's a risk of performance shortfalls or integration failures, impacting operational readiness for the Navy.

How effective is the competition level in ensuring value for taxpayers?

The competition level for this contract, characterized as 'full and open' with two bidders, offers a moderate level of assurance for taxpayer value. Full and open competition is the preferred method for maximizing market participation and driving competitive pricing. Receiving two bids suggests that the market for these specialized systems is not overly concentrated, and the government likely received a reasonably competitive offer. However, having only two bidders means the price discovery mechanism is less robust than if there were, for example, three or more significant competitors. This situation necessitates diligent government oversight to ensure the chosen bid truly represents the best value and that the contractor is held accountable for meeting all performance and cost objectives throughout the contract's lifecycle.

What is the historical spending pattern for similar mounted/fixed systems by the Department of the Navy?

Historical spending patterns for mounted and fixed systems by the Department of the Navy typically show consistent investment in advanced electronics, sensors, and integrated platforms. The Navy procures a wide array of such systems, including radar, sonar, electronic warfare suites, communication systems, and navigation equipment, often through large, multi-year contracts. Spending in this category can fluctuate based on modernization priorities, new platform development, and upgrades to existing fleets. Contracts for systems like JCREW I1B1 are part of a broader strategy to maintain technological superiority. Analyzing past spending on similar system types (e.g., advanced sensor arrays, integrated navigation systems) would reveal trends in contract values, durations, and the types of competition utilized, often showing a mix of full-and-open and limited competition for highly specialized or technologically sensitive equipment.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: TWO STEP

Solicitation ID: N0002416R6327

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 2340 DULLES CORNER BLVD, HERNDON, VA, 20171

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $950,984,523

Exercised Options: $754,306,412

Current Obligation: $746,250,194

Actual Outlays: $72,888,019

Subaward Activity

Number of Subawards: 2880

Total Subaward Amount: $20,182,672,080

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline