DoD's $140.5M contract for missile parts awarded to Northrop Grumman, a follow-on to a competed action

Contract Overview

Contract Amount: $140,500,696 ($140.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2002-12-19

End Date: 2009-09-30

Contract Duration: 2,477 days

Daily Burn Rate: $56.7K/day

Competition Type: FOLLOW ON TO COMPETED ACTION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94088

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $140.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. The contract value of $140.5 million represents a significant investment in defense manufacturing. 2. Awarded to a single, established contractor, suggesting a focus on specialized capabilities. 3. The 'follow-on' nature indicates a continuation of existing services or products. 4. The contract duration of approximately 2477 days points to a long-term requirement. 5. The 'Other Guided Missile and Space Vehicle Parts' NAICS code highlights a niche but critical defense sector. 6. The 'Cost Plus Incentive Fee' pricing structure aims to balance contractor performance with cost control.

Value Assessment

Rating: fair

Benchmarking the value of this $140.5 million contract is challenging without specific performance metrics or comparable contract data. However, the duration of nearly seven years suggests a substantial, long-term need. The Cost Plus Incentive Fee (CPIF) structure implies that the government aims to incentivize cost savings and performance, but it also carries inherent risks of cost overruns if not managed diligently. Without more granular data on the specific parts and services procured, a definitive value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract is described as a 'FOLLOW ON TO COMPETED ACTION,' which implies that the initial award was competed, but this specific follow-on action may have had limited competition. This could be due to the specialized nature of the parts or the contractor's established expertise and existing infrastructure related to the original competition. The limited competition for a follow-on could potentially lead to less favorable pricing compared to a fully and openly competed contract.

Taxpayer Impact: For taxpayers, a limited competition on a follow-on contract can mean potentially higher costs if the original competitive pressure is no longer present. It necessitates strong oversight to ensure the pricing remains fair and reflects the value delivered.

Public Impact

This contract directly supports the Department of Defense's missile defense capabilities, enhancing national security. It ensures the continued availability of critical components for guided missile and space vehicles. The contract likely supports a specialized workforce in California, contributing to the regional economy. It underpins the operational readiness of naval assets reliant on these specific missile systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Incentive Fee (CPIF) structure if not closely monitored.
Limited competition on this follow-on action could result in less competitive pricing.
Dependence on a single contractor for critical missile components may pose supply chain risks.
The long contract duration could lead to price increases over time if not adequately managed.

Positive Signals

The 'follow-on' nature suggests a proven track record and successful performance on the preceding contract.
The CPIF structure incentivizes the contractor to meet performance targets and manage costs effectively.
Awarding to Northrop Grumman, a major defense contractor, indicates access to specialized expertise and technology.
The contract supports a critical national security mission, ensuring the availability of essential defense hardware.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on guided missile and space vehicle components. This is a highly specialized and technologically intensive industry characterized by long development cycles, significant R&D investment, and stringent quality requirements. The market is dominated by a few large, established prime contractors. Spending in this area is driven by national security priorities and technological advancements in defense systems. Comparable spending benchmarks would typically be found within other large-scale defense procurement contracts for similar complex systems.

Small Business Impact

There is no indication from the provided data that this contract includes a small business set-aside. Given the nature of guided missile and space vehicle parts manufacturing, it is likely that the prime contractor, Northrop Grumman, will subcontract portions of the work. Analysis of subcontracting plans would be necessary to determine the extent of small business participation and its impact on the broader small business ecosystem within this defense sub-sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Cost Plus Incentive Fee (CPIF) structure necessitates robust financial and performance monitoring to ensure the government receives value and that costs are controlled. Inspector General (IG) audits may be conducted periodically to assess efficiency, prevent fraud, and ensure compliance. Transparency would be limited due to the classified or sensitive nature of defense contracting, but contract modifications and performance reports would be subject to internal review.

Related Government Programs

Guided Missile Manufacturing
Space Vehicle Manufacturing
Defense Procurement
Aerospace Components
Naval Systems
Cost Plus Incentive Fee Contracts

Risk Flags

Potential for cost overruns
Limited competition risk
Long-term contract management challenges
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $140.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. See the official description on USAspending.

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 $140.5 million.

What is the period of performance?

Start: 2002-12-19. End: 2009-09-30.

What is Northrop Grumman's track record with similar DoD contracts, particularly those involving missile components?

Northrop Grumman is a major defense contractor with extensive experience in aerospace and defense systems, including missile technology. They have a long history of producing complex components and integrated systems for various branches of the U.S. military. Analyzing their past performance on similar Cost Plus Incentive Fee (CPIF) contracts would reveal their ability to manage costs and meet performance targets. Historical data on contract awards, modifications, and any associated overruns or underruns for Northrop Grumman in the missile and space vehicle sector would provide crucial context for assessing their reliability and efficiency in fulfilling this current $140.5 million contract.

How does the pricing structure (Cost Plus Incentive Fee) compare to other contracts for similar missile parts?

The Cost Plus Incentive Fee (CPIF) structure is common in defense contracts where the final cost is not precisely known at the outset, and performance incentives are desired. It allows the contractor to recover allowable costs plus a pre-negotiated fee, which is adjusted based on meeting or exceeding certain performance targets (e.g., cost, schedule, technical performance). Compared to fixed-price contracts, CPIF offers more flexibility but carries a higher risk of cost growth if incentives are not structured effectively or if costs escalate beyond projections. Benchmarking this CPIF contract against others for similar missile components would require access to detailed pricing data and performance outcomes of comparable awards to determine if the negotiated fee and incentive structure represent good value for the government.

What are the specific risks associated with a 'follow-on to competed action' contract of this magnitude?

A 'follow-on to competed action' contract, especially one valued at $140.5 million, carries several risks. Firstly, the competition for the follow-on may be limited, potentially leading to less favorable pricing than if it were fully and openly competed. The incumbent contractor may have a significant advantage due to established infrastructure, knowledge, and relationships. Secondly, if the original competition did not adequately define requirements or performance metrics, the follow-on could inherit these issues, leading to scope creep or disputes. Thirdly, the long duration (2477 days) increases the risk of technological obsolescence, changing threat environments, or economic fluctuations impacting costs. Robust oversight is crucial to mitigate these risks.

What is the historical spending trend for 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' (NAICS 336419) by the Department of Defense?

Historical spending data for NAICS 336419 by the Department of Defense (DoD) indicates a consistent and significant investment in this specialized sector. While specific annual figures fluctuate based on geopolitical events, technological advancements, and strategic priorities, the overall trend shows sustained procurement of missile and space vehicle components. This $140.5 million contract awarded to Northrop Grumman is representative of the larger spending patterns within this category. Analyzing multi-year spending trends for this NAICS code would reveal periods of increased or decreased investment, potentially correlating with specific defense programs or budget cycles, and help contextualize the current award within the broader DoD acquisition landscape.

How does the contract's duration (2477 days) impact its overall value and risk profile?

A contract duration of 2477 days, approximately 6.8 years, significantly impacts both the value and risk profile. From a value perspective, such a long duration suggests a stable, long-term requirement for critical components, potentially allowing for economies of scale and more predictable production planning for the contractor. However, it also increases the risk of cost escalation due to inflation, material price volatility, and potential changes in labor costs over the contract period. Furthermore, the extended timeline heightens the risk of technological obsolescence, as advancements in missile and space vehicle technology can occur rapidly. Effective contract management, including mechanisms for price adjustments and technology refresh, is essential to mitigate these risks and ensure continued value.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FOLLOW ON TO COMPETED ACTION

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 401 E HENDY AVE, SUNNYVALE, CA, 94088

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline