DoD's $40M+ engineering services contract to Northrop Grumman shows limited competition and potential value concerns

Contract Overview

Contract Amount: $40,282,729 ($40.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-07-30

End Date: 2009-09-24

Contract Duration: 1,882 days

Daily Burn Rate: $21.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200412!043572!1700!BW10C !NAVAL SURFACE WARFARE CENTER, DA!N0017804C2006 !A!N! !Y! ! !20040730!20090531!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!21008!099!51!DAHLGREN !KING GEORGE !VIRGINIA !+000000557000!N!N!000000557000!D302!ADP SYSTEMS DEVELOPMENT SERVICES !S1 !SERVICES !000 !* !541330!E! !3!A!S! ! !D!20080531!B!E!N!A! !D!N!R!1!001!N!1B!Z!Y!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!A!N! ! ! ! ! !N00024!0001! !

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92128, UNITED STATES OF AMERICA

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $40.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200412!043572!1700!BW10C !NAVAL SURFACE WARFARE CENTER, DA!N0017804C2006 !A!N! !Y! ! !20040730!20090531!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!21008!099!51!DAHLGREN !KING… Key points: 1. Contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. Significant contract value suggests a need for robust oversight to ensure value for taxpayer dollars. 3. The 'Not Competed' award type indicates a lack of market exploration, potentially missing cost-saving opportunities. 4. Long contract duration (over 5 years) may not reflect evolving technological needs or market shifts. 5. Engineering services are critical for defense, but the specific nature of these services warrants closer examination for efficiency.

Value Assessment

Rating: questionable

The contract's value of over $40 million for engineering services, awarded on a Cost Plus Award Fee basis, warrants scrutiny. Without a competitive bidding process, it's difficult to benchmark the pricing against market rates or similar contracts. The lack of competition suggests that the government may not have secured the most cost-effective solution. Further analysis would be needed to determine if the award fee structure incentivized optimal performance and cost control.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source, 'Not Competed' strategy. This means that only one offeror, Northrop Grumman, was solicited and considered. While sole-source awards can be justified under specific circumstances (e.g., urgency, unique capabilities), the lack of a competitive process limits price discovery and potentially leads to higher costs for the government. The absence of multiple bidders means the government did not benefit from a range of proposals and pricing strategies.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competition. Without competing offers, there's less pressure on the contractor to offer the lowest possible price, potentially leading to inefficient use of public funds.

Public Impact

The primary beneficiary is the Department of Defense, which receives critical engineering services. Services likely support naval surface warfare capabilities, contributing to national security. The contract supports a large, established defense contractor, potentially sustaining jobs within that organization. Geographic impact is concentrated around the contractor's facilities, primarily in Virginia and California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs.
Cost Plus Award Fee contracts can be complex to manage and audit effectively.
Long contract duration might not align with rapidly changing technological requirements.
Sole-source awards reduce transparency and accountability in pricing.

Positive Signals

Awarded to a major defense contractor with established capabilities.
Engineering services are essential for maintaining and advancing defense systems.
The contract likely addresses specific, critical defense needs.

Sector Analysis

This contract falls within the Engineering Services sector, a vital component of the broader defense industrial base. The market for defense engineering services is dominated by a few large, established contractors. Spending in this area is significant, driven by the continuous need for modernization and maintenance of complex military systems. Benchmarking this contract's value against other large-scale engineering service contracts within the DoD would provide further context on its relative cost-effectiveness.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'N' for 'Small Business Set-Aside'. Given the sole-source nature and the prime contractor, it's unlikely that significant subcontracting opportunities for small businesses were mandated or actively pursued through a competitive set-aside. The impact on the small business ecosystem is likely minimal unless Northrop Grumman voluntarily engages small businesses for specialized support.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and the Naval Surface Warfare Center. The 'Cost Plus Award Fee' structure necessitates careful monitoring of costs and performance to ensure the award fee is justified. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Surface Warfare Center Contracts
Northrop Grumman Defense Contracts
Engineering Services Contracts
Department of Defense IT and Systems Development

Risk Flags

Sole-source award limits competition.
Cost-plus contract type requires diligent oversight.
Potential for cost overruns without competitive pressure.
Long contract duration may not reflect current needs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200412!043572!1700!BW10C !NAVAL SURFACE WARFARE CENTER, DA!N0017804C2006 !A!N! !Y! ! !20040730!20090531!064683464!008255408!016435559!N!NORTHROP GRUMMAN DEFENSE MISSI!12011 SUNSET HILLS ROAD !RESTON !VA!20190!21008!099!51!DAHLGREN !KING GEORGE !VIRGINIA !+000000557000!N!N!000000557000!D302!ADP SYSTEMS DEVELOPMENT SERVICES !S1 !SERVICES !000 !* !541330!E! !3!A!S! ! !D!200

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 $40.3 million.

What is the period of performance?

Start: 2004-07-30. End: 2009-09-24.

What specific engineering services were provided under this contract, and how did they contribute to naval capabilities?

The contract data indicates the primary service category was 'ADP SYSTEMS DEVELOPMENT SERVICES' (NAICS 541330 - Engineering Services). While the specific deliverables are not detailed in the provided data, these services likely encompassed the design, development, integration, testing, and sustainment of complex command, control, communications, computer, and intelligence (C4I) systems for naval platforms. This could include software development, system architecture, cybersecurity engineering, and technical support crucial for maintaining and enhancing the operational effectiveness of naval vessels and their associated systems. The contribution to naval capabilities would be in ensuring these systems are functional, secure, and meet evolving mission requirements.

Can the $40M+ contract value be benchmarked against similar engineering services contracts awarded by the DoD?

Benchmarking this $40M+ contract is challenging without more specific details on the services rendered and the contract type (Cost Plus Award Fee). However, given it was sole-sourced to Northrop Grumman for engineering services, it's likely on the higher end for specific, complex system development tasks. Typically, competitive contracts for similar broad engineering services might see a wider range of pricing. The 'Cost Plus Award Fee' structure itself implies a baseline cost plus potential incentives, making direct dollar-for-dollar comparison difficult. A more thorough analysis would involve comparing the contract's duration, scope, and the specific technical requirements against other sole-source or competitively awarded contracts for comparable defense systems development.

What are the risks associated with a sole-source award for such a significant engineering services contract?

The primary risk of a sole-source award is the lack of price competition, which can lead to the government paying a premium. Without competing proposals, there's less incentive for the contractor to offer the lowest possible price. Other risks include potential complacency from the contractor, reduced innovation if not actively managed, and a lack of transparency in the pricing structure. Furthermore, if the initial justification for a sole-source award was based on unique capabilities, there's a risk that those capabilities might become less unique over time, yet the contract continues without re-competition, potentially locking the government into a less optimal arrangement.

How does the Cost Plus Award Fee (CPAF) contract type influence contractor performance and cost control?

The Cost Plus Award Fee (CPAF) contract type aims to balance cost control with incentivizing contractor performance. The contractor is reimbursed for allowable costs incurred, plus a fixed fee that is adjusted based on performance against pre-defined criteria. This structure theoretically encourages the contractor to meet or exceed performance targets to earn a higher award fee. However, it also requires robust government oversight to ensure costs are reasonable and allocable, and that the award fee criteria are objective and well-defined. The risk is that poorly defined criteria or insufficient oversight could lead to inflated costs or unjustified award fees, diminishing the value for the government.

What was the historical spending trend for similar engineering services contracts at the Naval Surface Warfare Center?

The provided data snippet focuses on a single contract (N0017804C2006). To analyze historical spending trends for similar engineering services at the Naval Surface Warfare Center (NSWC), one would need access to a broader dataset encompassing multiple contracts over several fiscal years. This would involve querying contract databases for NSWC awards under relevant NAICS codes (like 541330) and PSC codes (like D302 - ADP Systems Development Services). Analyzing trends would reveal whether spending in this category has increased or decreased, the average contract values, the prevalence of competitive versus sole-source awards, and the dominant contractors over time. This context is crucial for understanding if the $40M+ award represents a typical expenditure or an outlier.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

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, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline