DoD's $52.5M contract for logistics support services awarded to Northrop Grumman, raising questions about competition and value

Contract Overview

Contract Amount: $52,462,020 ($52.5M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2000-05-12

End Date: 2006-12-31

Contract Duration: 2,424 days

Daily Burn Rate: $21.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200008!1700!00K100!RA13A !FLEET & INDUSTRIAL SUPPLY CENTER!N0014000CM526 !A!*!* !20000512!20020630!005128988!008255408!008255408!N!26916!NORTHROP GRUMMAN CORPORATION -!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !0001!+000028935353!Y!N!000000000000!R706!LOGISTICS SUPPORT SERVICES !S1 !SERVICES !2000!NOT DISCERNABLE OR CLASSIFIED !8711!3!*!*!*!B!A!*!D !N!J!1!001!N!1A!Z!Y!A!* !* !N!C!*!A!A!A!A!A!A!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $52.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200008!1700!00K100!RA13A !FLEET & INDUSTRIAL SUPPLY CENTER!N0014000CM526 !A!*!* !20000512!20020630!005128988!008255408!008255408!N!26916!NORTHROP GRUMMAN CORPORATION -!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COO… Key points: 1. The contract's value of $52.5 million over approximately 2 years suggests a significant investment in logistics capabilities. 2. Awarded on a 'not competed' basis, the lack of a competitive bidding process warrants scrutiny regarding potential price inflation. 3. The 'definitive contract' type indicates a long-term commitment, but the absence of competition limits price discovery. 4. The primary contractor, Northrop Grumman, is a major defense industry player, suggesting a focus on established relationships. 5. The contract's classification as 'services' under PSC 8711 points to a need for specialized logistical expertise. 6. The firm-fixed-price nature of the contract shifts some risk to the contractor, but the lack of competition may obscure true cost efficiency.

Value Assessment

Rating: questionable

The contract value of $52.5 million for approximately two years of logistics support services appears substantial. Without a competitive bidding process, it is difficult to benchmark this against similar contracts or market rates. The firm-fixed-price structure offers some cost certainty, but the absence of competition raises concerns about whether the government secured the best possible value. Further analysis would be needed to compare the scope of services and performance metrics with other DoD logistics contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'not competed' basis, indicating a sole-source procurement. The specific justification for this approach is not detailed in the provided data. A lack of competition typically means only one vendor was considered, which can limit the government's ability to explore alternative solutions or negotiate the most favorable pricing. The absence of multiple bidders prevents a robust price discovery process.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure to drive down costs. Without a bidding war, the selected contractor may not have been incentivized to offer the lowest possible price for the required services.

Public Impact

The primary beneficiary of this contract is the Department of Defense, specifically entities requiring fleet and industrial supply chain support. The services delivered are categorized as 'logistics support services,' crucial for maintaining operational readiness and efficiency within military supply chains. The contract is geographically linked to Illinois, where Northrop Grumman's facility is located, suggesting a potential regional economic impact. While specific workforce implications are not detailed, such a large contract likely supports a significant number of jobs within Northrop Grumman's logistics and supply chain divisions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpayment and missed opportunities for cost savings.
The 'not competed' status requires further investigation into the justification for sole-source award.
Limited transparency into the specific services and performance metrics makes value assessment challenging.
The long-term nature of definitive contracts, coupled with sole-sourcing, can reduce future competitive pressure.

Positive Signals

Award to a major defense contractor like Northrop Grumman suggests access to established expertise and infrastructure.
Firm-fixed-price contract structure provides some level of cost predictability for the government.
The contract duration, while not explicitly stated in terms of years, implies a sustained need for these services.

Sector Analysis

This contract falls within the broader defense logistics and supply chain management sector. The North American Industry Classification System (NAICS) code 334511 relates to Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing, which may indicate a specialized component of the logistics services provided. The defense logistics market is substantial, with significant government spending allocated to ensuring operational readiness and efficient supply chains. Benchmarking this contract's value would ideally involve comparing it to other large-scale logistics support contracts within the Department of Defense or other federal agencies.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false) and there is no explicit mention of subcontracting plans for small businesses (sb: false). This suggests that the primary award went to a large corporation, and there is no immediate indication of direct benefits flowing to the small business ecosystem through this specific contract's structure. Further investigation into Northrop Grumman's subcontracting practices would be necessary to determine any indirect impact on small businesses.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of Defense's contracting and program management offices, potentially including the Defense Contract Management Agency (DCMA) given the 'sa' field. The 'not competed' nature of the award necessitates a thorough review of the justification and approval (J&A) process to ensure compliance with federal procurement regulations. Transparency regarding the specific performance metrics and deliverables would be crucial for accountability. Inspector General involvement might be triggered if specific allegations of waste, fraud, or abuse arise.

Related Government Programs

Department of Defense Logistics and Supply Chain Management
Fleet and Industrial Supply Center Operations
Northrop Grumman Defense Contracts
Federal Logistics Support Services
Sole-Source Defense Procurements

Risk Flags

Lack of Competition
Potential for Overpricing
Limited Transparency
Sole-Source Justification Required

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.5 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200008!1700!00K100!RA13A !FLEET & INDUSTRIAL SUPPLY CENTER!N0014000CM526 !A!*!* !20000512!20020630!005128988!008255408!008255408!N!26916!NORTHROP GRUMMAN CORPORATION -!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !0001!+000028935353!Y!N!000000000000!R706!LOGISTICS SUPPORT SERVICES !S1 !SERVICES !2000!NOT DISCERNABLE OR CLASSIFIED !8711!3!*!*!*!B!A!*!D !N!J!

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 $52.5 million.

What is the period of performance?

Start: 2000-05-12. End: 2006-12-31.

What specific logistics support services are being provided under this contract, and how do they align with the contractor's capabilities?

The contract is for 'LOGISTICS SUPPORT SERVICES' under PSC code 8711. While the specific details of the services are not elaborated in the provided data, this category generally encompasses a wide range of activities including supply chain management, inventory control, maintenance support, transportation, and warehousing. Northrop Grumman, as a major defense contractor, possesses extensive capabilities in these areas, often supporting complex weapon systems and global operations. The 'LOGISTICS SUPPORT SERVICES' designation suggests a comprehensive approach to managing the flow of goods and information critical to military readiness. Further details on the Statement of Work (SOW) would be required to fully understand the scope and alignment with Northrop Grumman's specific expertise.

What was the justification for awarding this contract on a sole-source basis, and were any alternatives considered?

The data explicitly states the contract was 'NOT COMPETED' (ct: NOT COMPETED), indicating a sole-source award. Federal procurement regulations require a justification for sole-source awards, typically citing reasons such as unique capabilities, urgent needs, or lack of market availability. Without access to the Justification and Approval (J&A) document associated with this contract, the specific rationale remains unknown. It is standard practice to explore alternatives, even in sole-source situations, to ensure the government is obtaining the best value. The absence of competition here suggests that either no other vendors were deemed capable, or a specific exception to full and open competition was invoked.

How does the $52.5 million contract value compare to similar logistics support contracts awarded by the DoD during the same period?

Benchmarking the $52.5 million contract value requires comparing it to similar logistics support services contracts awarded by the Department of Defense around the 2000-2002 timeframe. Factors such as contract duration, scope of services, specific military branches or agencies involved, and the level of complexity are crucial for a meaningful comparison. Given that this was a sole-source award, it is particularly important to assess if the price reflects market rates achievable through competition. Without access to a database of comparable contracts, including their specific terms and pricing, a precise value-for-money assessment is challenging. However, $52.5 million over approximately two years represents a significant expenditure, underscoring the need for robust justification and oversight.

What are the potential risks associated with a sole-source contract of this magnitude, particularly regarding cost control and contractor performance?

Sole-source contracts of this magnitude carry inherent risks, primarily centered around cost control and ensuring optimal contractor performance. Without competitive pressure, there's a reduced incentive for the contractor to minimize costs or maximize efficiency, potentially leading to higher prices than might be achieved through open competition. Contractor performance can also be a concern, as the government has fewer options if the contractor underperforms. While the firm-fixed-price (pt: FIRM FIXED PRICE) structure shifts some financial risk to the contractor, the government still bears the risk of paying a premium for services that might be delivered less efficiently or effectively than by a competitor. Robust performance monitoring and clear contract terms are essential to mitigate these risks.

What is Northrop Grumman's track record with the Department of Defense for similar logistics support services?

Northrop Grumman has a long and extensive history of contracting with the Department of Defense, providing a wide array of services and products, including those related to logistics and supply chain management. As a major defense prime contractor, they are involved in supporting numerous complex military programs, which inherently requires sophisticated logistics capabilities. Their track record typically involves managing large-scale, high-value contracts across various defense sectors. While specific performance details for this particular contract are not provided, Northrop Grumman's general standing within the defense industry suggests they possess the necessary infrastructure, expertise, and security clearances to handle significant logistics support requirements for the DoD.

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: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 600 HICKS RD, ROLLING MEADOW, IL, 60008

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline