Northrop Grumman awarded $5.9M contract for TIER 1 SW, LL Material by Department of the Navy

Contract Overview

Contract Amount: $5,921,584 ($5.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-08-17

End Date: 2026-06-26

Contract Duration: 1,044 days

Daily Burn Rate: $5.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: PAX DELIVERY, TIER 1 SW, LL MATERIAL

Place of Performance

Location: BUFFALO, ERIE County, NEW YORK, 14221

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $5.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: PAX DELIVERY, TIER 1 SW, LL MATERIAL Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award limits price discovery and potentially increases costs for taxpayers. 3. Long performance period of 1044 days suggests a significant, ongoing requirement. 4. The contract falls under Electronic Computer Manufacturing (NAICS 334111), a critical sector for defense operations. 5. Awarded by the Department of the Navy, highlighting its importance to naval readiness. 6. The specific nature of 'TIER 1 SW, LL MATERIAL' requires further clarification on its criticality and application.

Value Assessment

Rating: questionable

The contract value of $5.9 million for TIER 1 SW, LL MATERIAL is difficult to benchmark without more specific details on the goods or services provided. As a sole-source award, there is no direct comparison to similar contracts to assess value for money. The cost-plus-fixed-fee pricing structure inherently carries a higher risk of cost escalation compared to fixed-price contracts, making it challenging to ascertain if the final cost will represent good value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corporation, was solicited. This significantly limits competition and raises concerns about whether the government obtained the best possible price and terms. Without a competitive bidding process, it is impossible to determine the market rate for these specific materials or software.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This lack of competition means the government may be paying a premium for these goods or services.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive TIER 1 SW and LL Material to support its operations. The contract supports the development or maintenance of critical electronic computer systems and materials. The geographic impact is primarily within New York (ST/SN), where the contractor is located. Workforce implications may include specialized technical roles within Northrop Grumman to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially inflates costs.
Cost-plus-fixed-fee contract type introduces risk of cost overruns.
Lack of detailed public information on 'TIER 1 SW, LL MATERIAL' hinders transparency and oversight.
Long contract duration could mask inefficiencies if not closely monitored.

Positive Signals

Award to a large, established defense contractor (Northrop Grumman) suggests potential for reliable delivery.
Contract supports a critical defense agency (Department of the Navy).
Specific NAICS code (334111) indicates a focus on essential technology manufacturing.

Sector Analysis

The Electronic Computer Manufacturing sector (NAICS 334111) is a vital component of the defense industrial base, encompassing the production of computers and related electronic components. This contract, valued at $5.9 million, represents a specific procurement within this sector for the Department of the Navy. Comparable spending in this area can vary widely depending on the complexity and scale of the electronic systems or materials required. Given the sole-source nature and the specific designation, this likely pertains to specialized or proprietary technology.

Small Business Impact

This contract does not appear to have a small business set-aside (SB is false). As a sole-source award to a large prime contractor, there is no direct indication of subcontracting opportunities for small businesses within this specific award notice. Further analysis would be needed to determine if Northrop Grumman has existing subcontracting plans that might include small businesses for components or services related to this contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, transparency might be limited compared to competitively bid contracts. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee (CPFF) contract, requiring Northrop Grumman to justify costs and demonstrate progress towards deliverables. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of Defense IT Procurement
Naval Systems Development
Electronic Component Manufacturing
Software Development Contracts
Sole-Source Defense Acquisitions

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of detailed scope definition
Long performance period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $5.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. PAX DELIVERY, TIER 1 SW, LL MATERIAL

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 $5.9 million.

What is the period of performance?

Start: 2023-08-17. End: 2026-06-26.

What specific components or services does 'TIER 1 SW, LL MATERIAL' refer to, and why was it deemed necessary to procure it on a sole-source basis?

The designation 'TIER 1 SW, LL MATERIAL' is highly specific and likely refers to proprietary software or specialized materials critical to a particular Department of the Navy system. Without further declassification or detailed documentation, the exact nature of these items remains unclear. Sole-source awards are typically justified when only one responsible source can provide the required supply or service, often due to unique capabilities, proprietary technology, or urgent and compelling needs. For this contract, the justification for sole-sourcing would likely stem from Northrop Grumman's exclusive ownership or development of the 'TIER 1 SW' or 'LL MATERIAL,' making them the only viable provider. This necessitates a thorough review by the procuring agency to ensure no viable alternatives exist and that the sole-source justification is robust and properly documented to prevent potential misuse of this contracting authority.

How does the Cost Plus Fixed Fee (CPFF) contract structure compare to other pricing arrangements for similar IT hardware or software procurements by the Department of the Navy?

The Cost Plus Fixed Fee (CPFF) contract structure is often used for research and development or complex projects where the scope is not fully defined at the outset, allowing for flexibility as requirements evolve. However, compared to fixed-price contracts (like Firm-Fixed-Price or Fixed-Price Incentive), CPFF carries a higher risk for the government. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This means the government bears the risk of cost overruns, while the contractor has less incentive to control costs beyond what is necessary to achieve the fixed fee. For IT hardware or standard software procurements where requirements are well-defined, fixed-price contracts are generally preferred as they offer better price certainty and incentivize contractor efficiency. The Navy's use of CPFF here suggests the procurement involves significant uncertainty or developmental aspects, but it necessitates stringent oversight to manage costs effectively.

What is Northrop Grumman's track record with the Department of the Navy, particularly concerning contracts of a similar nature and value?

Northrop Grumman Systems Corporation is a major defense contractor with a long-standing and extensive relationship with the Department of the Navy. They are involved in numerous large-scale programs, including shipbuilding, aerospace systems, and advanced technologies. Historically, Northrop Grumman has received billions of dollars in contracts from the Navy across various domains. While specific data on their performance for 'TIER 1 SW, LL MATERIAL' is not publicly detailed, their overall track record with the Navy is generally characterized by the execution of complex, high-value defense systems. Performance metrics for such large contractors are typically tracked internally by the agency, and while major issues can lead to negative past performance reviews, their continued large-scale awards suggest a generally acceptable performance history. However, the sole-source nature of this specific award warrants scrutiny regarding the necessity and justification for bypassing competitive processes.

Given the $5.9 million value and 1044-day duration, what are the potential risks associated with this contract's long-term performance and cost management?

The long duration (1044 days, approximately 2.8 years) combined with the CPFF structure presents several risks. Firstly, the extended timeline increases the potential for scope creep or requirement changes, which, under CPFF, can lead to significant cost increases beyond the initial estimate. Secondly, managing costs effectively over nearly three years requires robust oversight and continuous monitoring by the Navy to ensure that expenditures are reasonable, allocable, and necessary. Without diligent oversight, the 'fixed fee' component could become disproportionately large relative to the actual effort if costs escalate unexpectedly. There's also a risk of contractor complacency or reduced efficiency over such a long period, especially without the competitive pressures of a fixed-price contract. Furthermore, technological obsolescence could become a factor if the 'LL MATERIAL' or 'TIER 1 SW' is intended for systems with rapid upgrade cycles.

How does this contract align with broader Department of the Navy IT modernization or strategic sourcing initiatives?

The alignment of this contract with broader Department of the Navy (DON) IT modernization or strategic sourcing initiatives is not immediately clear due to the limited public information on 'TIER 1 SW, LL MATERIAL.' However, the procurement of electronic computer manufacturing components and software (NAICS 334111) generally supports the DON's ongoing efforts to maintain and upgrade its technological infrastructure. If 'TIER 1 SW' represents a critical software component for naval systems, it could be part of a larger modernization effort to enhance operational capabilities, cybersecurity, or data management. Strategic sourcing aims to leverage buying power and consolidate requirements for better value. A sole-source award, however, runs counter to typical strategic sourcing principles that emphasize competition. Therefore, this contract's alignment would depend heavily on whether it represents a unique, non-competitive necessity within a larger, strategically sourced program, or if it's an isolated procurement where competitive alternatives were not adequately explored.

Industry Classification

NAICS: Manufacturing › Computer and Peripheral Equipment Manufacturing › Electronic Computer Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1740 WEHRLE DR, BUFFALO, NY, 14221

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $7,956,173

Exercised Options: $5,921,584

Current Obligation: $5,921,584

Actual Outlays: $403,743

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $1,089,206

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0042122G0004

IDV Type: BOA

Timeline