Northrop Grumman awarded $803M contract for SEWIP BLOCK 3 DESIGN AGENT by the Department of the Navy

Contract Overview

Contract Amount: $80,304,573 ($80.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2022-08-11

End Date: 2029-12-19

Contract Duration: 2,687 days

Daily Burn Rate: $29.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SEWIP BLOCK 3 DESIGN AGENT

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $80.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: SEWIP BLOCK 3 DESIGN AGENT Key points: 1. Contract awarded to a single, large defense contractor, indicating potential for limited competition. 2. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. 3. A long performance period of over 7 years suggests a complex, long-term project. 4. The primary NAICS code (334511) points to a focus on advanced sensor and navigation systems manufacturing. 5. The contract is not competed, raising questions about potential value for money and price discovery. 6. The award is a definitive contract, suggesting a firm commitment for the specified period.

Value Assessment

Rating: questionable

Benchmarking the value of this $803 million contract is challenging without detailed cost breakdowns and comparisons to similar sole-source procurements for advanced electronic warfare systems. The Cost Plus Fixed Fee (CPFF) contract type, while common for R&D, carries inherent risks of cost escalation. The fixed fee component provides some incentive for the contractor to control costs, but the overall value proposition depends heavily on the government's ability to effectively oversee expenditures and ensure the contractor is operating efficiently. Without competitive bidding, it's difficult to ascertain if this price represents the best value achievable.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, meaning it was awarded directly to Northrop Grumman Systems Corporation without offering other potential vendors an opportunity to bid. Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. In this case, it suggests that Northrop Grumman may possess unique capabilities, intellectual property, or existing infrastructure essential for the SEWIP BLOCK 3 DESIGN AGENT program. The lack of competition limits the government's ability to leverage market forces to drive down prices and potentially explore innovative solutions from a wider range of suppliers.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive pressure. The government relies on negotiation and oversight to ensure a fair price, which can be less effective than a competitive bidding process.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive advanced electronic warfare system design capabilities. This contract supports the development and sustainment of critical defense technology for naval platforms. The geographic impact is primarily centered around Northrop Grumman's facilities, likely in Maryland (ST: MD). The contract will sustain high-skilled jobs in the aerospace and defense sector, particularly in engineering and systems design.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost Plus Fixed Fee contract type introduces risk of cost overruns.
Long contract duration could lead to scope creep or evolving requirements not fully captured in initial pricing.
Sole-source award limits opportunities for small businesses to participate directly as prime contractors.

Positive Signals

Award to a major defense contractor with established expertise in electronic warfare systems.
The contract supports a critical national defense program (SEWIP).
The fixed fee component provides some cost control incentive for the contractor.
Long-term nature of the contract ensures continuity for a vital capability.

Sector Analysis

The SEWIP BLOCK 3 DESIGN AGENT contract falls within the broader defense electronics and systems manufacturing sector. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. Companies like Northrop Grumman are key players, often holding sole-source positions for specialized, technologically advanced systems due to proprietary knowledge and extensive prior investment. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of electronic warfare systems, but multi-billion dollar programs are common in this domain.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides (SB: false). As a sole-source award to a large prime contractor, the primary avenue for small business involvement would be through subcontracting opportunities. The extent to which Northrop Grumman will utilize small businesses for specialized components or services remains to be seen and depends on their subcontracting plan. Without a competitive solicitation, there's less direct pressure to maximize small business participation.

Oversight & Accountability

Oversight for this contract will be primarily managed by the Department of the Navy's contracting and program management offices. Given the Cost Plus Fixed Fee structure, rigorous financial oversight and auditing will be crucial to monitor expenditures and ensure compliance with contract terms. The Defense Contract Audit Agency (DCAA) and potentially the Department of Defense Inspector General (IG) may conduct audits to verify costs. Transparency is generally limited for sole-source defense contracts, but contract award details are publicly available through federal procurement databases.

Related Government Programs

SEWIP Program
Electronic Warfare Systems
Naval Systems Command Contracts
Northrop Grumman Defense Contracts
Department of Defense Research and Development

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $80.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. SEWIP BLOCK 3 DESIGN AGENT

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 $80.3 million.

What is the period of performance?

Start: 2022-08-11. End: 2029-12-19.

What is Northrop Grumman's track record with similar electronic warfare system development contracts?

Northrop Grumman has a long and extensive history of developing and producing complex electronic warfare (EW) systems for various branches of the U.S. military. They are a prime contractor on numerous programs, including previous iterations of the Surface Electronic Warfare Improvement Program (SEWIP). Their experience spans a wide range of EW capabilities, such as electronic support (ES), electronic attack (EA), and countermeasures. This includes developing integrated systems that combine multiple EW functions onto a single platform. Their track record generally indicates a strong technical capability and capacity to handle large, complex defense contracts, though like many large defense firms, they have faced scrutiny over cost and schedule performance on specific projects. The SEWIP program itself has evolved over many years, with Northrop Grumman consistently involved in its advancement.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types for R&D in this sector?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development (R&D) efforts, particularly when the scope of work is not fully defined or involves significant technical uncertainty. In a CPFF contract, the contractor is reimbursed for allowable costs incurred, plus a fixed fee representing profit. This structure incentivizes the contractor to control costs, as the fee remains constant regardless of the final cost. However, it carries risks for the government, as the total cost can exceed initial estimates if actual costs are higher than anticipated. Compared to other contract types like Firm-Fixed-Price (FFP), CPFF offers more flexibility for evolving R&D but less cost certainty. Cost-Plus-Incentive-Fee (CPIF) contracts, which adjust the fee based on performance against cost targets, are another alternative that can offer better cost control incentives than CPFF. For highly defined development or production, FFP contracts provide the most cost certainty but are less suitable for exploratory R&D.

What are the primary risks associated with a sole-source award for a program of this magnitude?

The primary risks associated with a sole-source award for a program of this magnitude ($803 million) include potential lack of price competition, reduced incentive for innovation, and a higher likelihood of cost overruns. Without competing the contract, the government loses the opportunity to leverage market forces to secure the best possible price. This can lead to taxpayers paying more than necessary. Furthermore, a sole-source provider may have less incentive to innovate or improve efficiency compared to a contractor facing competitive pressure. There's also a risk that the government may become overly reliant on a single supplier, potentially creating long-term dependencies and limiting future options. Effective government oversight and negotiation become paramount to mitigate these risks, but they cannot fully replicate the benefits of a competitive process.

What does the long performance period (over 7 years) imply for program effectiveness and cost management?

A long performance period, such as the over 7 years for this SEWIP BLOCK 3 DESIGN AGENT contract (August 2022 to December 2029), implies that the program involves complex, long-term development, integration, and potentially sustainment activities. For program effectiveness, this extended timeline allows for thorough testing, refinement, and adaptation to evolving threats and technologies in the electronic warfare domain. However, it also introduces significant challenges for cost management. The longer the period, the greater the risk of scope creep, requirement changes, inflation impacting costs, and potential inefficiencies accumulating over time. Robust program management, continuous oversight, and clear milestone-based funding releases are essential to ensure the program remains on track, within budget, and continues to meet its objectives effectively throughout its lifecycle.

How does the specific NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) relate to the SEWIP program?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' is highly relevant to the SEWIP (Surface Electronic Warfare Improvement Program) program. SEWIP is fundamentally about enhancing the electronic warfare capabilities of naval platforms, which includes detecting, identifying, and responding to threats. This directly aligns with the manufacturing of systems used for search and detection (radar, electronic support measures), navigation (guidance systems), and related instruments. The code encompasses the production of complex electronic systems that are core to modern warfare, particularly in sensing and situational awareness. Therefore, a contract awarded under this NAICS code for SEWIP signifies a focus on the hardware and integrated systems development necessary for advanced electronic warfare capabilities.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002421R5520

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1580B W NURSERY RD, LINTHICUM HEIGHTS, MD, 21090

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: $91,712,158

Exercised Options: $89,912,070

Current Obligation: $80,304,573

Subaward Activity

Number of Subawards: 10

Total Subaward Amount: $889,536

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline