DoD's $40.3M Submarine and Surface Trainer Maintenance contract awarded to Northrop Grumman shows fair value with strong competition

Contract Overview

Contract Amount: $40,307,344 ($40.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2017-12-22

End Date: 2023-04-30

Contract Duration: 1,955 days

Daily Burn Rate: $20.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CODE 25 SUBMARINE TRAINER MAINTENANCE (SUBTM) SURFACE TRAINER MAINTENANCE (SURFTM) TRAINER MAINTENANCE SUPPORT PROGRAM

Place of Performance

Location: NEWPORT, NEWPORT County, RHODE ISLAND, 02841

State: Rhode Island Government Spending

Plain-Language Summary

Department of Defense obligated $40.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CODE 25 SUBMARINE TRAINER MAINTENANCE (SUBTM) SURFACE TRAINER MAINTENANCE (SURFTM) TRAINER MAINTENANCE SUPPORT PROGRAM Key points: 1. The contract's value appears reasonable when benchmarked against similar complex system maintenance contracts. 2. Full and open competition suggests a healthy market for these specialized services. 3. The duration and phased delivery indicate a long-term need for critical training infrastructure. 4. Performance context is crucial, as trainer availability directly impacts submarine crew readiness. 5. This contract positions Northrop Grumman as a key provider for naval training systems. 6. The use of Cost Plus Fixed Fee (CPFF) pricing requires careful monitoring of cost overruns.

Value Assessment

Rating: good

The total award amount of $40.3 million over approximately five years for submarine and surface trainer maintenance appears to be within a reasonable range for specialized defense systems. Benchmarking against similar complex simulation and training system support contracts reveals comparable pricing structures. While specific per-unit costs for maintenance tasks are not detailed, the overall value proposition seems fair given the critical nature of the systems supported and the contractor's established role. The fixed fee component of the CPFF contract provides some cost certainty, but ongoing vigilance is needed to ensure efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified vendors were able to bid. The presence of three bidders (as suggested by 'no': 3) signifies a competitive environment for this specialized service. This level of competition is generally favorable for price discovery and can lead to more cost-effective solutions for the government. The agency's decision to pursue full and open competition suggests confidence in the market's ability to provide suitable contractors.

Taxpayer Impact: The robust competition for this contract is beneficial for taxpayers, as it likely drove down prices and encouraged innovation among bidders, leading to better value for the government's investment in naval training.

Public Impact

Naval personnel, particularly submarine and surface warfare officers and enlisted crew, benefit from well-maintained and operational training systems. The contract ensures the continued availability and effectiveness of critical training simulators for submarine and surface warfare operations. The primary geographic impact is within Rhode Island, where the trainers are likely located and maintained. This contract supports a specialized technical workforce involved in the maintenance and support of advanced simulation and training systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Fixed Fee contracts if not closely managed.
Reliance on a single contractor for maintenance of critical training systems could pose long-term risks if performance degrades.
The long contract duration necessitates continuous oversight to ensure sustained quality and value.

Positive Signals

Awarded under full and open competition, indicating a healthy market and potential for competitive pricing.
Northrop Grumman's established presence in defense systems suggests technical expertise and a track record.
The contract addresses a clear and ongoing need for naval training readiness.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting complex defense systems. The market for defense simulation and training systems maintenance is specialized, often dominated by large defense contractors with specific expertise. Comparable spending benchmarks would involve other contracts for maintaining sophisticated simulators, such as flight simulators, combat systems trainers, or virtual reality training environments. The total value is moderate for a long-term defense support contract.

Small Business Impact

There is no indication that this contract included small business set-asides, nor is there information suggesting significant subcontracting opportunities for small businesses. The nature of the specialized maintenance services required likely favors large, established defense contractors. Further analysis would be needed to determine if Northrop Grumman has a subcontracting plan that benefits small businesses within its supply chain.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy, likely through contracting officers and program managers responsible for training systems. Accountability measures are typically embedded in the contract's performance work statement (PWS), with defined metrics and potential penalties for non-performance. Transparency is generally maintained through contract award databases, though detailed performance reports may be less public. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Training Systems
Submarine Warfare Training
Surface Warfare Training
Defense Simulation and Training
Engineering Services Contracts
Northrop Grumman Defense Contracts

Risk Flags

Potential for cost creep in CPFF contracts.
Long-term reliance on a single vendor.
Technological obsolescence risk for training systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CODE 25 SUBMARINE TRAINER MAINTENANCE (SUBTM) SURFACE TRAINER MAINTENANCE (SURFTM) TRAINER MAINTENANCE SUPPORT PROGRAM

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 $40.3 million.

What is the period of performance?

Start: 2017-12-22. End: 2023-04-30.

What is Northrop Grumman's track record with similar naval training system maintenance contracts?

Northrop Grumman has a significant history of developing, manufacturing, and supporting complex defense systems, including training and simulation platforms for various branches of the U.S. military. Their experience spans decades, encompassing a wide range of platforms from aircraft simulators to naval combat systems trainers. While specific details on past performance for the CODE 25 SUBMARINE TRAINER MAINTENANCE (SUBTM) and SURFACE TRAINER MAINTENANCE (SURFTM) programs are not publicly detailed in this award notice, the company's overall portfolio suggests a strong capability in maintaining sophisticated training equipment. Past performance evaluations, often included in source selection documents, would provide a more granular view of their success in meeting cost, schedule, and technical requirements on prior, similar contracts.

How does the pricing structure (Cost Plus Fixed Fee) compare to other similar trainer maintenance contracts?

Cost Plus Fixed Fee (CPFF) contracts, like the one awarded to Northrop Grumman, are common in defense acquisition, particularly for services where the scope of work might evolve or is difficult to precisely define upfront. This structure involves reimbursing the contractor for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF can offer more flexibility but carries a higher risk of cost growth if not managed diligently. Other similar trainer maintenance contracts might utilize Fixed Price Incentive Fee (FPIF) or Cost Plus Incentive Fee (CPIF) structures, which tie profit more directly to performance metrics. The 'fair value' assessment hinges on whether the fixed fee is reasonable for the effort and risk involved, and whether the total costs remain within projected budgets, which requires ongoing monitoring by the government.

What are the primary risks associated with the long duration (1955 days) of this contract?

The long duration of this contract, approximately 5.3 years, presents several potential risks. Firstly, there's the risk of technological obsolescence; training systems might require upgrades or modifications that are not fully accounted for in the original contract scope, potentially leading to change orders and increased costs. Secondly, contractor performance could degrade over time if incentives are not structured effectively or if oversight weakens. Thirdly, market conditions or the availability of skilled labor could change, impacting the contractor's ability to deliver services at the agreed-upon terms. Finally, long-term reliance on a single provider for critical maintenance could reduce flexibility and bargaining power for future procurements. Mitigating these risks requires robust contract management, regular performance reviews, and proactive planning for potential system upgrades or evolving requirements.

What is the estimated value per year for this contract?

The total award amount for this contract is $40,307,343.92, with a duration spanning from December 22, 2017, to April 30, 2023. This period covers approximately 5 years and 4 months (or about 1955 days). To estimate the annual value, we can divide the total award by the approximate duration in years. $40,307,343.92 / 5.36 years ≈ $7,519,821 per year. This provides a rough annual spending figure, though actual spending may fluctuate year-to-year based on the delivery orders issued and the specific maintenance needs of the submarine and surface trainers during that period.

How does the 'Engineering Services' NAICS code (541330) relate to the specific services provided?

The North American Industry Classification System (NAICS) code 541330, 'Engineering Services,' is broadly applied to firms that provide architectural, engineering, and related services. For this contract, it signifies that the core services procured involve the application of engineering principles to the maintenance, repair, and potentially the upgrade or modification of complex training systems. This includes tasks such as diagnostics, troubleshooting, component replacement, system integration, and ensuring the trainers meet operational and technical specifications. While the code is general, the contract details specify 'SUBMARINE TRAINER MAINTENANCE' and 'SURFACE TRAINER MAINTENANCE,' indicating a highly specialized application of engineering expertise within the defense sector, focused on ensuring the functionality and readiness of critical naval training equipment.

What does the 'RI' (Region 1) designation signify for this contract?

The 'RI' designation likely refers to the geographic region associated with the contract's performance or the location of the primary facility where the services are rendered. In this context, 'RI' typically stands for Rhode Island. Given that the Department of the Navy has significant operations and training facilities in Rhode Island (e.g., Naval Station Newport), it is highly probable that the submarine and surface trainers maintained under this contract are located in or near Rhode Island, and the maintenance services are performed there. This geographic specificity is important for understanding logistical requirements, workforce implications, and potential economic impact within that region.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N6660417R3050

Offers Received: 3

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $44,712,774

Exercised Options: $44,712,774

Current Obligation: $40,307,344

Actual Outlays: $5,510,286

Subaward Activity

Number of Subawards: 21

Total Subaward Amount: $4,030,540

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017804D4091

IDV Type: IDC

Timeline