DoD's $91.6M Northrop Grumman contract for engineering services awarded without competition

Contract Overview

Contract Amount: $91,635,030 ($91.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-12-22

End Date: 2011-12-30

Contract Duration: 2,564 days

Daily Burn Rate: $35.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE

Sector: Defense

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94088

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $91.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Contract awarded on a cost-plus-incentive fee basis, suggesting potential for cost overruns. 2. Long contract duration of 2564 days (approx. 7 years) may indicate a need for sustained support. 3. Awarded to a single, large defense contractor, potentially limiting market competition. 4. The contract's value is substantial, requiring careful oversight of expenditures. 5. Engineering services are critical for defense operations, but the lack of competition raises value-for-money questions. 6. The contract was awarded in 2004, indicating a long-standing relationship with the contractor for these services.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable data for sole-source engineering services over such an extended period. The cost-plus-incentive fee structure inherently carries risk for the government, as it incentivizes the contractor to incur costs to achieve certain performance targets, rather than focusing solely on cost efficiency. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The total award amount of $91.6 million over approximately seven years suggests a significant investment in engineering expertise.

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 justified when only one vendor possesses the necessary capabilities, security clearances, or proprietary knowledge. However, the lack of competition means that potential cost savings that could arise from a competitive bidding process were likely forgone. The government did not have the benefit of comparing offers from various companies to ensure the best possible price and technical solution.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without a bidding process, there's less incentive for the contractor to offer the lowest possible price.

Public Impact

The Department of the Navy benefits from specialized engineering services crucial for its operations. This contract supports the development, maintenance, and enhancement of critical defense systems. The geographic impact is primarily within California, where Northrop Grumman Systems Corporation is located. The contract likely supports a workforce of engineers and technical specialists within Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-incentive fee structure can lead to higher-than-expected costs if not managed tightly.
Long contract duration may indicate a lack of readily available alternative solutions or a deeply embedded relationship.
Lack of transparency in the justification for sole-source award makes it difficult to assess necessity.
The contract's age (awarded in 2004) means current market conditions and technologies may not be reflected in the original pricing.

Positive Signals

Awarded to a major defense contractor with a proven track record in engineering services.
Engineering services are essential for maintaining and advancing complex defense capabilities.
The incentive fee structure, if well-defined, can align contractor performance with government objectives.
The contract supports critical national defense missions.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex technological requirements, and significant government spending. Contracts for engineering services are fundamental to this sector, supporting the design, development, testing, and sustainment of sophisticated military platforms and systems. Northrop Grumman is a major player in this industry. This contract fits within the broader category of defense engineering and technical services, where spending can run into billions annually across various agencies. Benchmarking is difficult without specific service details, but large, long-term sole-source engineering contracts are not uncommon in this high-stakes environment.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The prime contractor is a large corporation. There is no explicit information provided regarding subcontracting plans for small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, unless Northrop Grumman voluntarily engages small businesses as subcontractors for specialized tasks not covered by the prime contract.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. As a sole-source award, the justification and negotiation process would be subject to internal review and potentially oversight from the Government Accountability Office (GAO) if protested. Transparency is limited due to the sole-source nature and the age of the award. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

Defense Engineering Services
Naval Systems Support Contracts
Cost-Plus Contracts
Sole-Source Defense Procurements
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award lacks competitive justification.
Cost-plus-incentive fee structure carries inherent cost risk.
Long contract duration may lead to scope creep and reduced flexibility.
Lack of detailed service description hinders value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $91.6 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 $91.6 million.

What is the period of performance?

Start: 2004-12-22. End: 2011-12-30.

What specific engineering services were provided under this contract?

The provided data indicates the contract falls under NAICS code 541330 (Engineering Services) and is for the Department of the Navy. However, the specific nature of the engineering services is not detailed. Typically, such contracts could encompass a wide range of activities including systems engineering, design, analysis, testing, integration, and lifecycle support for naval platforms, weapons systems, or related infrastructure. Without further documentation, the precise scope remains undefined, making it difficult to assess the relevance and effectiveness of the services rendered.

What was the justification for awarding this contract on a sole-source basis?

The data explicitly states the contract was 'NOT COMPETED' (ct: NOT COMPETED), indicating a sole-source award. The specific justification for this sole-source determination is not provided in the given data snippet. Common justifications for sole-source awards in defense contracting include the unique capability of a single contractor, urgent and compelling needs where competition is impractical, or when the services are a follow-on to a previously competed effort where only one contractor can provide the necessary integration or compatibility. A thorough review of the contract file, including the Justification and Approval (J&A) document, would be necessary to understand the official rationale.

How does the cost-plus-incentive fee (CPIF) structure compare to other contract types for similar services?

Cost-plus-incentive fee (CPIF) contracts are used when the government wants to encourage contractor efficiency by sharing in cost savings or overruns. Unlike fixed-price contracts, CPIF allows for reimbursement of actual costs incurred, plus a fee that is adjusted based on performance against targets (e.g., cost, schedule, performance). Compared to Cost Plus Fixed Fee (CPFF), CPIF offers more incentive for cost control. However, it is generally considered riskier for the government than fixed-price contracts, as the final cost is not predetermined. For complex, long-term engineering projects where cost and performance targets are difficult to define precisely upfront, CPIF can be appropriate, but it requires robust government oversight to manage effectively.

What is the historical spending trend for this type of engineering service within the Department of the Navy?

The provided data only details a single contract awarded in 2004. To assess historical spending trends for engineering services within the Department of the Navy, a broader analysis of multiple contracts over several fiscal years would be required. This would involve examining spending patterns for NAICS code 541330 and potentially related codes, identifying key contractors, and observing fluctuations in contract values and award types (competed vs. sole-source). Without this broader dataset, it's impossible to establish a trend based solely on this one contract.

What are the potential risks associated with the long duration (2564 days) of this contract?

A contract duration of 2564 days (approximately 7 years) presents several risks. Firstly, it increases the likelihood of scope creep or the need for contract modifications as requirements evolve over time, potentially leading to cost increases. Secondly, it can reduce flexibility for the government to adopt new technologies or approaches that emerge during the contract period. Thirdly, maintaining consistent oversight and performance management over such an extended duration can be challenging for government personnel. Finally, long-term sole-source contracts can create vendor lock-in, making it difficult and costly to transition to a different provider later.

What is Northrop Grumman's track record with similar sole-source engineering contracts?

Northrop Grumman is a major defense contractor with extensive experience in engineering services across various platforms and systems. While this specific contract is sole-source, the company frequently secures large, complex contracts, some of which may be sole-source due to specialized requirements or program continuity. Assessing their track record would involve reviewing past performance evaluations (e.g., CPARS), any past performance disputes or protests related to sole-source awards, and their overall history of delivering complex engineering solutions within budget and schedule on other government contracts. The company's size and market position suggest a generally capable, though not infallible, performance history.

Industry Classification

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

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › OTHER QUALITY, TEST, INSPECT SVCS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 401 E HENDY AVE, SUNNYVALE, CA, 17

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline