DoD's $127.5M contract for guided missile subsystems awarded to XONTECH, Inc. raises value concerns

Contract Overview

Contract Amount: $12,751,383 ($12.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2002-01-09

End Date: 2011-10-01

Contract Duration: 3,552 days

Daily Burn Rate: $3.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200204!00A081!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0023 !A!N! !N!P00001 !20020109!20020930!039976691!039976691!039976691!N!XONTECH, INC !6862 HAYVENHURST AVENUE !VAN NUYS !CA!91406!82128!037!06!VAN NUYS !LOS ANGELES !CALIFORNIA!+000001525000!N!N!000000000000!1427!GUIDED MISSILE SUBSYSTEMS !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !541330!E! !3!A!S!C! ! !99990909!B!F!N!A! !D!N!U!1!001!N!1A!Z!Y!Z! ! !N!B!N!N! ! !A! !A!A!000!A!B!N! ! ! !Y! ! !0001!

Place of Performance

Location: WOODLAND HILLS, LOS ANGELES County, CALIFORNIA, 91367

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200204!00A081!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0023 !A!N! !N!P00001 !20020109!20020930!039976691!039976691!039976691!N!XONTECH, INC !6862 HAYVENHURST AVENUE !VAN NUYS !CA!91406!82128!037!06!VAN NUYS !LOS A… Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract duration of over 9 years suggests potential for cost overruns and scope creep. 3. The 'NOT COMPETED' award type indicates a lack of market research and potential missed savings. 4. Awarded for Engineering Services, a broad category that may obscure specific performance metrics. 5. Contractor's track record and past performance are critical for assessing future value. 6. Geographic concentration in California may indicate regional economic impact but also potential for limited competition.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and long duration. Awarding $127.5 million over nearly a decade without competition suggests a lack of proactive cost management. Without comparable contracts or detailed cost breakdowns, assessing the true value-for-money is challenging. The 'Cost Plus Fixed Fee' pricing structure, while common, can incentivize contractors to increase costs if not rigorously overseen.

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 approach is typically used when only one source is capable of meeting the requirement, but it significantly reduces the opportunity for competitive bidding and price negotiation. The lack of competition means taxpayers may not be receiving the best possible price.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive pricing, potentially leading to higher overall expenditures for the government.

Public Impact

The primary beneficiaries are likely the Department of Defense's Strategic Systems Programs, ensuring the continued development and maintenance of critical missile systems. Services delivered include engineering support for guided missile subsystems, crucial for national defense capabilities. The contract's geographic impact is concentrated in California, where the contractor is located, potentially supporting local jobs and the regional economy. Workforce implications include employment for engineers and technical specialists at XONTECH, Inc. and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about price fairness and potential for inflated costs.
Long contract duration (over 9 years) increases risk of cost overruns and performance degradation.
Cost Plus Fixed Fee contract type requires robust oversight to prevent contractor inefficiencies.
Limited transparency on specific deliverables and performance metrics makes value assessment difficult.
Sole-source award may indicate a lack of market research or a failure to identify alternative sources.

Positive Signals

Contract supports critical national defense capabilities for Strategic Systems Programs.
Engineering services are essential for maintaining and advancing complex missile systems.
Contractor XONTECH, Inc. is located in California, potentially benefiting the regional economy.
The award signifies a commitment to ensuring the readiness of strategic weapon systems.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on missile and space systems. The market for specialized engineering services in this area is often characterized by high barriers to entry due to security requirements and technical expertise. Spending benchmarks for similar engineering services within the DoD can vary widely, but large, long-term sole-source contracts warrant scrutiny for cost-effectiveness.

Small Business Impact

There is no indication that this contract included a small business set-aside. Given the specialized nature of guided missile subsystems and engineering services, it is possible that larger defense contractors or specialized firms are the primary providers. Subcontracting opportunities for small businesses may exist but are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense, likely managed by the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, requiring detailed reporting and performance reviews. Transparency is limited by the sole-source nature and the proprietary information inherent in defense contracting.

Related Government Programs

Strategic Systems Programs (SSP)
Missile Defense Agency (MDA)
Naval Sea Systems Command (NAVSEA)
Air Force Materiel Command (AFMC)

Risk Flags

Sole-source award limits competition and price discovery.
Long contract duration increases risk of cost escalation and performance issues.
Cost Plus Fixed Fee contract type requires rigorous oversight to ensure efficiency.
Lack of detailed performance metrics hinders value assessment.
Potential for contractor inefficiency due to limited competitive pressure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200204!00A081!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0023 !A!N! !N!P00001 !20020109!20020930!039976691!039976691!039976691!N!XONTECH, INC !6862 HAYVENHURST AVENUE !VAN NUYS !CA!91406!82128!037!06!VAN NUYS !LOS ANGELES !CALIFORNIA!+000001525000!N!N!000000000000!1427!GUIDED MISSILE SUBSYSTEMS !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !541330!E! !3!A!S!C! ! !99990909!B

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 $12.8 million.

What is the period of performance?

Start: 2002-01-09. End: 2011-10-01.

What is the track record of XONTECH, Inc. in performing similar defense contracts?

Information regarding XONTECH, Inc.'s specific track record on similar defense contracts is not detailed in the provided data. A thorough review would require accessing historical contract performance databases, such as the Federal Procurement Data System (FPDS) or the Contractor Performance Assessment Reporting System (CPARS). This would involve examining past awards, performance evaluations, and any instances of contract disputes or terminations. Understanding their history with Cost Plus Fixed Fee contracts and their performance in the missile and space systems sector would be crucial for assessing their reliability and capability for this $127.5 million award.

How does the $127.5 million value compare to similar guided missile subsystem engineering contracts?

Benchmarking this $127.5 million contract is challenging due to its sole-source nature and long duration (over 9 years). Typically, value comparisons are made against competitively awarded contracts for similar services. Without access to a broader dataset of comparable contracts, it's difficult to definitively state if this price is advantageous. However, sole-source awards inherently lack the price discovery mechanism of competition. A detailed cost analysis, including labor rates, overhead, and profit margins, would be necessary to assess if the pricing is reasonable compared to market rates for specialized engineering services in the defense sector.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee contract of this magnitude and duration?

The primary risks associated with this contract include potential cost overruns, lack of innovation, and reduced contractor efficiency. A sole-source award means the government did not benefit from competitive pricing, potentially leading to higher costs than necessary. The Cost Plus Fixed Fee (CPFF) structure, while providing flexibility, can incentivize contractors to increase costs to maximize their fee, especially over a long duration like 9+ years. Without strong oversight and detailed performance metrics, there's a risk that the contractor may not be motivated to find cost savings or efficiencies. Furthermore, the lack of competition could stifle innovation as there is less pressure to develop novel solutions.

What specific performance metrics or deliverables are associated with this contract?

The provided data indicates the contract is for 'Engineering Services' related to 'GUIDED MISSILE SUBSYSTEMS' under the Product Service Code (PSC) '541330'. However, specific performance metrics, key performance indicators (KPIs), or detailed deliverables are not included in this summary. For a contract of this nature and value, one would expect detailed statements of work (SOWs) outlining specific technical requirements, milestones, and quality standards. These would typically be managed and monitored by the contracting officer's representative (COR) to ensure the contractor meets its obligations.

What is the historical spending trend for guided missile subsystems engineering services by the Department of Defense?

Historical spending on guided missile subsystems and related engineering services by the Department of Defense is substantial, reflecting the critical nature of these capabilities. While specific trends for 'engineering services' alone are not detailed here, the overall defense budget consistently allocates significant resources to strategic weapons systems, including missile development, maintenance, and upgrades. Data from sources like the Federal Procurement Data System (FPDS) would show fluctuations based on modernization programs, geopolitical factors, and budget appropriations. Contracts like this one represent a portion of that ongoing investment, often characterized by long-term commitments due to the complexity and lifecycle of defense systems.

Are there any known issues or concerns regarding XONTECH, Inc.'s past performance or financial stability?

The provided data does not contain information on specific past performance issues or financial stability concerns related to XONTECH, Inc. A comprehensive risk assessment would necessitate a review of contractor performance databases (e.g., CPARS), financial health reports, and any public records of litigation or investigations. Without this information, it is difficult to assess potential risks associated with the contractor's ability to successfully execute this long-term, high-value contract.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 5500 CANOGA AVE # 31, WOODLAND HILLS, CA, 91367

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline