DoD's $28.2M contract for MLGC System Design awarded to Northrop Grumman shows fair value with 3 bidders

Contract Overview

Contract Amount: $28,195,932 ($28.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2010-12-03

End Date: 2019-06-03

Contract Duration: 3,104 days

Daily Burn Rate: $9.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MLGC SYSTEM DESIGN

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $28.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: MLGC SYSTEM DESIGN Key points: 1. The contract's value appears reasonable given the scope of system design services. 2. Competition was robust with three bidders, suggesting a healthy market for these specialized services. 3. The cost-plus incentive fee structure introduces performance-based incentives for the contractor. 4. The contract duration of over 8 years indicates a long-term need for the system. 5. The award falls within the Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing sector. 6. Northrop Grumman's extensive experience in defense systems likely contributed to their win.

Value Assessment

Rating: good

The contract's total value of $28.2 million over approximately 8 years suggests a moderate annual spend. Benchmarking against similar complex system design contracts is challenging without more specific service details. However, the presence of three bidders indicates competitive pricing was likely achieved. The cost-plus incentive fee (CPIF) structure allows for shared savings and cost overruns, aligning contractor and government interests towards efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with three bids received. This level of competition is generally positive, suggesting that multiple capable vendors were aware of and interested in the opportunity. The presence of three bidders implies that the market is sufficiently robust to support multiple players in this specialized area, which can lead to better price discovery and innovation.

Taxpayer Impact: A competitive award like this benefits taxpayers by driving down costs and ensuring the government receives the best possible value for its investment in critical system design services.

Public Impact

The Department of Defense benefits from the development of advanced communication systems. This contract supports the modernization of critical wireless communication infrastructure. The geographic impact is primarily within the operational theaters of the U.S. military. The contract likely supports a specialized workforce of engineers and technical experts.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to scope creep if not managed tightly.
CPIF contracts require careful monitoring to ensure incentive goals are met and costs remain controlled.

Positive Signals

Full and open competition suggests a healthy market and potential for value.
Award to an experienced contractor like Northrop Grumman reduces execution risk.
CPIF structure incentivizes cost efficiency.

Sector Analysis

This contract falls within the Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing sector, specifically focusing on system design. This sector is crucial for national security and technological advancement, encompassing the development of sophisticated communication networks and equipment. Comparable spending in this area can vary widely based on the complexity and scale of the systems being designed, but significant investments are common for defense-related communication infrastructure.

Small Business Impact

The data indicates this contract was not set aside for small businesses, and there is no explicit mention of subcontracting goals for small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal unless Northrop Grumman voluntarily engages small businesses as subcontractors. Further investigation into subcontracting plans would be needed to fully assess the impact.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and performance standards. The CPIF structure itself provides a form of oversight by linking contractor profit to performance metrics. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance and cost are often sensitive.

Related Government Programs

Defense Communications Systems
Wireless Network Infrastructure
Command and Control Systems
Electronic Warfare Systems

Risk Flags

Long contract duration may increase risk of scope creep and technological obsolescence.
CPIF contracts require careful monitoring of performance metrics and cost controls.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. MLGC SYSTEM DESIGN

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 $28.2 million.

What is the period of performance?

Start: 2010-12-03. End: 2019-06-03.

What is Northrop Grumman's track record with similar Cost Plus Incentive Fee (CPIF) contracts within the Department of Defense?

Northrop Grumman has a long and extensive history of performing complex defense contracts, many of which utilize CPIF or similar incentive-based fee structures. Their experience spans a wide range of programs, including large-scale system development, integration, and sustainment. Historically, their performance on such contracts has been varied, with notable successes in delivering advanced capabilities, but also facing challenges common to large, complex defense procurements, such as cost overruns or schedule delays on certain projects. The effectiveness of CPIF relies heavily on well-defined performance metrics and robust government oversight, areas where Northrop Grumman generally operates within established DoD frameworks. Analyzing specific past CPIF contracts would reveal detailed performance metrics, cost variance analyses, and the government's assessment of their effectiveness in driving desired outcomes and managing costs.

How does the per-unit cost or annual spend for this MLGC System Design contract compare to industry benchmarks for similar system design services?

Determining a precise per-unit cost or annual spend benchmark for this MLGC System Design contract is challenging without more granular data on the specific services rendered and the complexity of the system being designed. System design contracts can encompass a wide array of activities, from initial concept development and requirements analysis to detailed engineering, prototyping, and testing. The total value of $28.2 million spread over approximately 8 years suggests an average annual spend of around $3.5 million. This figure needs to be contextualized by the sophistication of the technology, the level of research and development involved, and the specific deliverables. Industry benchmarks for system design services vary significantly based on these factors. However, given the defense context and the likely advanced nature of the MLGC system, this annual spend appears within a reasonable range for specialized, long-term defense system development projects, especially when considering the potential for high labor costs associated with skilled engineering talent.

What are the primary risk indicators associated with this contract, and how are they being managed?

Primary risk indicators for this contract include the inherent complexity of designing advanced communication systems, the long duration (over 8 years) which increases the potential for technological obsolescence or shifting requirements, and the use of a Cost Plus Incentive Fee (CPIF) structure. CPIF contracts, while incentivizing efficiency, carry risks related to cost control and the accurate definition of performance metrics. If metrics are poorly defined or unachievable, they can lead to disputes or fail to drive the desired outcomes. Technological risks are also present, as the system's design must anticipate future operational needs and potential threats. Management of these risks likely involves rigorous program management by both the contractor (Northrop Grumman) and the government oversight agency (DCMA). This includes detailed milestone tracking, regular performance reviews, robust change management processes, and continuous assessment of the incentive fee structure's effectiveness. Proactive risk mitigation strategies, such as phased development and incorporating flexibility into the design, are also crucial.

What is the historical spending pattern for MLGC System Design or similar systems within the Department of Defense?

Analyzing the historical spending pattern for MLGC System Design specifically requires access to detailed contract databases and program histories. However, within the broader context of Department of Defense (DoD) spending on communication systems and electronic warfare, significant and consistent investment is typical. The DoD continuously invests in modernizing its communication infrastructure to maintain technological superiority and operational effectiveness. Spending on system design, development, and integration for advanced platforms can span many years and involve substantial budgets, often in the tens or hundreds of millions of dollars, depending on the system's scope and criticality. Contracts like this one, awarded under full and open competition, suggest a recurring need for such capabilities. Historical data would likely show a trend of increasing investment in secure, resilient, and high-bandwidth communication systems, driven by evolving threats and technological advancements. This particular contract, valued at $28.2 million over its duration, represents a segment of this larger, ongoing investment in advanced defense technologies.

How effective has the Cost Plus Incentive Fee (CPIF) structure been in achieving cost savings or performance improvements on similar DoD contracts?

The effectiveness of the Cost Plus Incentive Fee (CPIF) structure in achieving cost savings and performance improvements on similar DoD contracts is a subject of ongoing analysis and debate. When well-structured with clearly defined, measurable, and achievable performance targets, CPIF can be highly effective. It incentivizes the contractor to control costs and meet or exceed performance specifications by sharing in any cost savings or by earning higher fees for superior performance. However, poorly defined targets, inadequate oversight, or a lack of flexibility can lead to disputes, unintended consequences, or failure to realize the intended benefits. DoD's use of CPIF reflects a recognition of its potential to align contractor and government interests on complex, high-risk, or technologically uncertain projects where fixed-price contracts might be inappropriate. Success stories often highlight significant cost reductions or performance enhancements achieved through collaborative efforts driven by the incentive structure. Conversely, challenges can arise if the government's baseline estimates are inaccurate or if market conditions change significantly during the contract's performance.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N6523609R0186

Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 2340 DULLES CORNER BLVD, HERNDON, VA, 20171

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: $29,347,804

Exercised Options: $28,204,555

Current Obligation: $28,195,932

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline