DoD's $119.6M engineering services contract with Northrop Grumman shows fair value despite limited competition

Contract Overview

Contract Amount: $119,581,191 ($119.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-06-09

End Date: 2014-04-24

Contract Duration: 3,241 days

Daily Burn Rate: $36.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92128

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $119.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Contract awarded through full and open competition, indicating a broad search for qualified bidders. 2. The contract's duration of over 8 years suggests a long-term need for specialized engineering expertise. 3. Northrop Grumman's extensive experience in defense systems likely contributed to their selection. 4. The cost-plus incentive fee structure aims to align contractor performance with government objectives. 5. While specific performance metrics are not detailed, the contract's completion suggests satisfactory delivery. 6. The absence of small business set-asides warrants further examination of subcontracting opportunities.

Value Assessment

Rating: fair

The total award amount of $119.6 million over approximately 8.9 years averages to about $13.4 million annually. Benchmarking this against similar large-scale engineering services contracts for defense systems is challenging without more granular data on the specific services rendered. However, the cost-plus incentive fee (CPIF) structure suggests an effort to control costs by incentivizing the contractor to meet or beat targets. The final cost relative to initial estimates would be a key indicator of value, which is not provided here.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The data indicates there were 5 bids received. While full and open competition is generally preferred for maximizing price discovery and ensuring the best value, the number of bidders (5) for a contract of this magnitude and specialization might suggest a moderately competitive landscape rather than a highly contested one, potentially due to the specialized nature of the engineering services required.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it theoretically drives down prices through market forces. However, the actual savings depend on the number and quality of bids received and the effectiveness of the negotiation process.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for complex defense systems. This contract supports the development, integration, and sustainment of advanced military technologies. The primary geographic impact is likely within the United States, supporting defense infrastructure and operations. The contract supports a highly skilled engineering workforce, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of transparency on specific performance metrics and final cost compared to targets.
Potential for cost overruns inherent in cost-plus contracts if not rigorously managed.
Limited visibility into subcontracting opportunities for small businesses.
The long contract duration could lead to vendor lock-in if not managed proactively.

Positive Signals

Awarded through full and open competition, maximizing potential for competitive pricing.
Use of a cost-plus incentive fee structure to encourage contractor efficiency.
Contractor (Northrop Grumman) is a major defense contractor with a proven track record.
Contract completion suggests successful delivery of required engineering services.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The defense sector is characterized by high barriers to entry, significant R&D investment, and long-term government procurement cycles. Spending in this area is driven by national security needs and technological advancements. Comparable spending benchmarks would typically involve analyzing other large engineering support contracts awarded by the DoD or other federal agencies for similar complex systems.

Small Business Impact

The data indicates this contract was not set aside for small businesses (sb: false) and there is no explicit mention of small business subcontracting goals. This suggests that the primary contractor, Northrop Grumman, likely handled the majority of the work internally or through large, established partners. Further investigation would be needed to determine if any subcontracting opportunities were made available to small businesses and the extent to which they participated in the contract's execution.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the Cost Plus Incentive Fee (CPIF) structure, which incentivizes performance against targets. Transparency is often limited in defense contracts due to national security considerations, but contract award details and performance reports are usually available through federal procurement databases.

Related Government Programs

Defense Engineering Services
Aerospace and Defense Contracting
Northrop Grumman Defense Contracts
Department of Defense IT and Engineering Support
Cost Plus Incentive Fee Contracts

Risk Flags

Long contract duration may increase risk of scope creep or obsolescence.
Cost-plus contracts require diligent oversight to prevent cost overruns.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $119.6 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $119.6 million.

What is the period of performance?

Start: 2005-06-09. End: 2014-04-24.

What specific engineering services were provided under this contract?

The contract NAICS code 541330 indicates 'Engineering Services'. While the specific details are not provided in the abbreviated data, this typically encompasses a wide range of activities such as systems engineering, design, analysis, testing, and integration for complex defense platforms. Given the contractor and agency, it likely involved support for major defense systems, potentially including aircraft, spacecraft, or missile systems. Services could range from initial concept development and feasibility studies to detailed design, prototyping, and lifecycle support.

How does the final cost compare to the initial estimated cost for this contract?

The provided data does not include information on the initial estimated cost or the final incurred cost. The contract type is Cost Plus Incentive Fee (CPIF), which means the final price is determined by the contractor's actual costs plus a fee that varies based on performance against pre-defined targets. To assess value, a comparison of the final negotiated price against the initial estimate and the achievement of incentive targets would be necessary. Without this, it's difficult to definitively state if the contract represented excellent value from a cost perspective.

What was the performance history of Northrop Grumman on this specific contract?

The data indicates the contract was awarded on 2005-06-09 and completed on 2014-04-24, spanning a duration of 3241 days (approximately 8.9 years). The fact that the contract reached its completion date suggests that Northrop Grumman generally met the requirements and obligations outlined in the contract. However, 'completion' does not inherently mean 'flawless performance'. Detailed performance reviews, quality assessments, and any incurred penalties or awards related to the incentive fee structure would provide a more nuanced understanding of their track record on this specific engagement.

Were there any significant risks identified or mitigation strategies employed during the contract's lifecycle?

The provided data does not explicitly list identified risks or mitigation strategies. However, for a contract of this duration and value within the defense sector, common risks would include technical challenges, schedule delays, cost overruns, and changes in requirements. The CPIF contract type itself is a risk mitigation strategy, aiming to control costs by incentivizing efficiency. The Defense Contract Management Agency (DCMA) would have been responsible for ongoing oversight to identify and manage emerging risks throughout the contract's performance period.

How does this contract's spending compare to similar engineering services contracts within the DoD?

Direct comparison is difficult without more specific details on the services rendered and the platforms supported. However, $119.6 million over nearly 9 years for specialized engineering services on major defense systems is within the expected range for large, complex government contracts. The average annual spend of approximately $13.4 million is substantial but not extraordinary for a prime contractor like Northrop Grumman supporting critical defense programs. Benchmarking would require analyzing contracts with similar NAICS codes, contract types, and scope of work awarded to other major defense contractors.

What was the impact of the 'full and open competition' on the final contract price and terms?

Full and open competition theoretically maximizes the chances of achieving the best possible price and terms for the government by allowing all qualified vendors to compete. With 5 bids received, the Department of Defense had multiple options to evaluate. The ultimate impact on the final price and terms depends heavily on the government's negotiation strategy and the specific technical and cost proposals submitted by each bidder. While competition is a positive indicator, the actual price achieved is the key metric for determining its effectiveness in this instance.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 12011 SUNSET HILLS ROAD, RESTON, VA, 20190

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline