DoD awards $47.2M engineering services contract to Northrop Grumman, a sole-source procurement

Contract Overview

Contract Amount: $47,240,965 ($47.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-01-01

End Date: 2027-11-12

Contract Duration: 1,776 days

Daily Burn Rate: $26.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: CHARLOTTESVILLE, ALBEMARLE County, VIRGINIA, 22901

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $47.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price overruns and limited market engagement. 2. The fixed-price contract structure aims to control costs, but the lack of competition may hinder optimal value. 3. Northrop Grumman's extensive experience in defense systems suggests a capable contractor, but benchmarks are needed. 4. The contract duration of nearly five years indicates a significant, long-term commitment from the Navy. 5. Focus on search, detection, navigation, and guidance systems aligns with critical naval operational needs. 6. The absence of small business set-asides suggests limited opportunities for smaller firms in this specific procurement.

Value Assessment

Rating: fair

Benchmarking the value of this $47.2 million engineering services contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if there's an opportunity for better value. The firm fixed-price structure provides some cost certainty, but the lack of competition means the government cannot leverage market forces to drive down costs. Further analysis would require comparing the scope of services and deliverables to similar, competitively awarded contracts, which are not readily available in this context.

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. The Department of the Navy did not solicit bids from multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or security clearances required for the specific service. The lack of competition means there were no other bidders, and therefore, no direct price discovery through a bidding process. This can limit the government's ability to secure the most cost-effective solution.

Taxpayer Impact: For taxpayers, a sole-source award means the potential for higher costs compared to a competitive procurement. Without the pressure of multiple bids, the awarded price may not reflect the lowest possible market rate. This necessitates robust internal oversight to ensure the price is fair and reasonable.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive critical engineering services for its systems. Services delivered are expected to support search, detection, navigation, guidance, and related aeronautical and nautical systems. The geographic impact is likely concentrated around naval operations and facilities, primarily in Virginia where the contractor is located. Workforce implications include employment opportunities for engineers and technical staff at Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Lack of transparency in the procurement process due to no-bid award.
Potential for vendor lock-in given the specialized nature of engineering services.
Limited opportunities for small businesses to participate in this specific contract.
Contract duration of nearly five years may not allow for flexibility if requirements change.

Positive Signals

Award to a large, established defense contractor (Northrop Grumman) suggests a high likelihood of technical capability.
Firm fixed-price contract provides cost certainty for the government.
Contract duration indicates a stable, long-term need for these engineering services.
Focus on critical navigation and guidance systems aligns with essential defense functions.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on engineering services for advanced systems. The market for such specialized engineering is dominated by a few large, established contractors with the requisite expertise and security clearances. The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' indicates a highly technical and specialized segment. Spending in this area is significant, driven by national security requirements and ongoing technological advancements.

Small Business Impact

This contract does not appear to include any specific small business set-asides, as indicated by 'sb': false. The award to Northrop Grumman, a large prime contractor, suggests that subcontracting opportunities may exist for smaller firms. However, the extent and nature of these subcontracting opportunities are not detailed in the provided data. Without a competitive bidding process that includes small business participation goals, the direct impact on the small business ecosystem for this specific contract is likely minimal, with reliance on the prime contractor's subcontracting strategy.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy's contracting and program management offices. As a Department of Defense contract, it is also subject to oversight by the DoD Inspector General. Transparency is limited due to the sole-source nature of the award. Accountability measures would be embedded within the contract's performance metrics and reporting requirements, which are not detailed here. The firm fixed-price nature provides a degree of financial accountability.

Related Government Programs

Defense Engineering Services
Naval Systems Development
Aerospace and Defense Manufacturing
Navigation and Guidance Systems
Northrop Grumman Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source procurement
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENGINEERING SERVICES

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 $47.2 million.

What is the period of performance?

Start: 2023-01-01. End: 2027-11-12.

What is Northrop Grumman's track record with similar Department of Defense engineering contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing complex engineering and manufacturing services for the Department of Defense and other government agencies. They have extensive experience in areas such as aerospace, defense electronics, and information systems. While specific details on past performance for identical services are not provided, their overall profile suggests a strong capability in delivering sophisticated technical solutions. A review of their contract history would likely reveal numerous awards for research, development, and production of advanced systems, including those related to search, detection, and navigation. Their performance on these prior contracts would be a key indicator of their reliability and technical proficiency for this current award.

How does the $47.2 million value compare to similar engineering services contracts awarded by the Navy?

Direct comparison of the $47.2 million value is difficult without knowing the precise scope, duration, and complexity of the engineering services. However, for major defense systems, engineering services contracts of this magnitude are not uncommon, especially when they involve specialized development, integration, or sustainment for critical platforms. The fact that this is a sole-source award means there was no competitive bidding to establish a market-based price. To assess value, one would need to benchmark the labor hours, rates, and deliverables against similar, competitively procured contracts for comparable systems or services. Given the sole-source nature, a thorough review by the contracting officer to ensure the price is fair and reasonable is paramount, likely involving cost analysis of the contractor's proposed pricing.

What are the primary risks associated with a sole-source award for engineering services?

The primary risks associated with a sole-source award for engineering services include potential for higher costs due to lack of competition, reduced incentive for the contractor to innovate or optimize efficiency, and a lack of transparency in the procurement process. Without competitive pressure, the government may pay a premium. There's also a risk of vendor lock-in, where the government becomes dependent on a single provider for critical services, making future transitions difficult and potentially costly. Furthermore, the absence of multiple bidders can obscure potential performance issues or technical limitations that might have been revealed during a competitive evaluation. Robust oversight and negotiation are crucial to mitigate these risks.

How effective is a firm fixed-price contract for managing costs in long-term engineering projects?

A firm fixed-price (FFP) contract is generally considered effective for managing costs in long-term engineering projects, especially when the scope of work is well-defined and the risks are understood. Under an FFP contract, the contractor assumes most of the cost risk, and the price remains constant regardless of the contractor's actual costs. This provides cost certainty for the buyer. However, for complex, long-term engineering projects where requirements may evolve or unforeseen technical challenges arise, an FFP contract can sometimes lead to contractors cutting corners on quality or scope to protect their profit margin, or conversely, lead to costly change orders if scope creep occurs. Careful definition of requirements and robust change management are essential for FFP success.

What are the implications of the contract duration (1776 days) on program flexibility?

A contract duration of 1776 days, approximately 4.86 years, indicates a significant, long-term commitment to the engineering services. This duration provides stability and allows for sustained focus on complex tasks, which can be beneficial for intricate engineering projects. However, it also reduces flexibility. If the Navy's requirements change significantly due to evolving technology, strategic shifts, or budget constraints, modifying or terminating a long-term contract can be complex and potentially costly. The firm fixed-price nature further solidifies the commitment. The government must have high confidence in the defined scope and requirements to enter into such a lengthy agreement, or have well-defined mechanisms for contract modification.

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: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002420R5231

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1070 SEMINOLE TRL, CHARLOTTESVILLE, VA, 22901

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: $221,718,640

Exercised Options: $49,258,168

Current Obligation: $47,240,965

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $75,700

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline