DoD's $49.8M R&D contract with Northrop Grumman shows cost-plus structure, raising value-for-money questions

Contract Overview

Contract Amount: $49,775,188 ($49.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-12-01

End Date: 2009-08-31

Contract Duration: 1,369 days

Daily Burn Rate: $36.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: ANNAPOLIS, ANNE ARUNDEL County, MARYLAND, 21409

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $49.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: Key points: 1. Contract awarded via full and open competition, suggesting a competitive process. 2. Cost-plus fixed fee structure may incentivize cost overruns, requiring close oversight. 3. Long contract duration of over 3 years indicates a significant R&D effort. 4. Research and Development in Physical, Engineering, and Life Sciences is a critical but often complex area for cost control. 5. No small business set-aside indicates potential for large prime contractor engagement. 6. Contractor's extensive experience in defense R&D is a positive signal for technical execution.

Value Assessment

Rating: fair

The cost-plus fixed fee (CPFF) contract type, while common for R&D where scope can evolve, presents inherent risks to value for money. Without detailed cost breakdowns and robust oversight, it can be challenging to ensure optimal pricing. Benchmarking CPFF contracts in similar R&D domains is difficult without more granular data on the specific research objectives and the contractor's proposed cost structure. The total award amount of $49.8 million over 1369 days suggests a substantial investment, but the efficiency of this spending depends heavily on the achieved research outcomes.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. This suggests a robust bidding process designed to solicit the best offers. However, the number of bidders is not specified, which is crucial for understanding the true level of competition. A high number of bidders typically leads to more competitive pricing and better value for the government.

Taxpayer Impact: A full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down costs and encourage innovation from multiple firms.

Public Impact

The primary beneficiaries are the Department of Defense, which receives advanced research and development capabilities. The contract supports advancements in physical, engineering, and life sciences relevant to national security. The geographic impact is primarily centered around the contractor's facilities in Maryland, with potential for broader defense applications. Workforce implications include highly skilled R&D professionals employed by Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus fixed fee structure can lead to higher final costs if not managed tightly.
Lack of specific performance metrics in the provided data makes it hard to assess R&D success.
Long contract duration increases the risk of scope creep or evolving requirements impacting cost.

Positive Signals

Awarded through full and open competition, suggesting a competitive selection process.
Contractor (Northrop Grumman) is a major defense contractor with significant R&D experience.
Contract supports critical research and development for the Department of Defense.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences. This sector is characterized by high innovation, long development cycles, and significant government investment due to its strategic importance. The market is dominated by large aerospace and defense contractors like Northrop Grumman, who possess the specialized expertise and facilities required for complex R&D projects. Comparable spending benchmarks are difficult to establish without knowing the specific R&D area, but government R&D spending in defense is substantial and ongoing.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large definitive contract awarded to a major defense contractor, it is unlikely to have significant direct subcontracting opportunities specifically targeted at small businesses unless mandated by the prime. The focus is likely on large-scale R&D capabilities, potentially limiting the direct ecosystem impact for smaller, specialized firms.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), as indicated by the 'sa' field. DCMA is responsible for ensuring contractor compliance with contract terms, monitoring performance, and verifying costs. The 'cost plus fixed fee' nature of the contract necessitates rigorous financial oversight to prevent cost overruns and ensure fair pricing. Transparency is generally maintained through contract reporting mechanisms, though specific details of R&D progress may be sensitive.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Aerospace and Defense R&D
Engineering Services Contracts
Life Sciences Research Contracts

Risk Flags

Cost-plus contract type requires vigilant oversight to manage costs.
Long contract duration increases risk of scope creep and requirement changes.
R&D projects inherently carry technical and outcome uncertainty.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.8 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 $49.8 million.

What is the period of performance?

Start: 2005-12-01. End: 2009-08-31.

What specific research objectives were outlined in this contract, and how were they measured?

The provided data summary does not detail the specific research objectives or the metrics used to measure success for this contract. Contracts for 'Research and Development in the Physical, Engineering, and Life Sciences' can encompass a vast array of projects, from materials science to advanced computing or biological research. Typically, such objectives would be detailed in the Statement of Work (SOW) attached to the contract. Performance measurement would likely involve milestones, technical reviews, prototype development, and final reports, but without access to the SOW and subsequent performance reports, a precise assessment is not possible. The 'cost plus fixed fee' structure implies that the contractor is reimbursed for allowable costs plus a predetermined fixed fee, incentivizing completion but requiring careful monitoring of expenditures against the research goals.

How does the $49.8 million award compare to similar R&D contracts in the physical, engineering, and life sciences sectors?

Comparing the $49.8 million award requires context regarding the specific R&D domain and the scope of work. Large-scale R&D efforts in defense, particularly those involving advanced technologies or complex scientific endeavors, can easily reach tens or even hundreds of millions of dollars. For instance, contracts for developing new aircraft systems, advanced missile technologies, or significant breakthroughs in areas like AI or quantum computing often exceed this amount. However, smaller, more focused R&D projects might be in the single-digit millions. Without knowing the precise nature of the 'Physical, Engineering, and Life Sciences' research, it's difficult to definitively benchmark this $49.8 million figure. It appears to be a substantial investment, consistent with significant R&D undertakings within the defense sector.

What are the primary risks associated with a 'Cost Plus Fixed Fee' contract for R&D?

The primary risk of a Cost Plus Fixed Fee (CPFF) contract, especially in R&D, is the potential for cost overruns. While the 'fixed fee' provides a ceiling on the contractor's profit, the 'cost plus' element means the government reimburses all allowable costs incurred. If the R&D project encounters unforeseen technical challenges, requires more resources than initially estimated, or if cost tracking is not rigorous, the total cost to the government can escalate significantly beyond initial projections. This structure can also reduce the contractor's incentive to control costs aggressively, as their profit margin is fixed regardless of the final cost. Effective oversight, detailed cost accounting, and clear performance metrics are crucial to mitigate these risks.

What is Northrop Grumman's track record with similar government R&D contracts?

Northrop Grumman is a major defense contractor with an extensive history of performing large-scale research and development contracts for the U.S. government, particularly the Department of Defense. They have a well-established presence in areas like aerospace, defense electronics, and information systems, all of which involve significant R&D components. Their track record typically includes developing and integrating complex systems for military applications. While specific performance details for every contract are not publicly available, their continued success in securing large, complex R&D awards suggests a generally positive track record in delivering technical capabilities and managing challenging projects, though like any large contractor, they may have faced specific performance issues on individual contracts over their long history.

How does the contract duration of 1369 days (approx. 3.75 years) impact the assessment of this contract?

A contract duration of 1369 days for an R&D project indicates a long-term commitment to a specific research or development effort. This extended timeframe is often necessary for complex scientific and engineering challenges where breakthroughs are not immediate and iterative development is required. For taxpayers, a longer duration can mean sustained investment, but it also increases the potential for scope creep, requirement changes, or technological obsolescence if not managed proactively. It necessitates continuous oversight to ensure the project remains aligned with evolving defense needs and technological advancements. The extended period also allows for deeper exploration and potential for significant innovation, but requires careful milestone management to track progress and justify continued funding.

What does the 'MD' (Maryland) location signify for this contract?

The 'MD' designation indicates that the contract's primary performance location or administrative oversight is associated with Maryland. Maryland is a significant hub for federal contracting, particularly in the defense, aerospace, and technology sectors, hosting numerous government agencies and major defense contractors like Northrop Grumman. This location suggests that the R&D activities likely took place at facilities within Maryland, potentially leveraging the state's skilled workforce and existing defense industrial base. It also implies that administrative functions, such as contract management and payment processing, might be handled by agencies or offices located in Maryland.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 895 OCEANIC DR, ANNAPOLIS, MD, 21401

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $51,000,577

Exercised Options: $47,280,593

Current Obligation: $49,775,188

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline