Northrop Grumman Systems Corp. awarded $28.9M for aircraft equipment repair, a sole-source contract with potential cost risks

Contract Overview

Contract Amount: $28,947,943 ($28.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-09-16

End Date: 2011-09-30

Contract Duration: 2,570 days

Daily Burn Rate: $11.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200412!001316!1700!A8050 !NAVAL AIR WARFARE CENTER, AIRCRA!N6833504C0039 !A!N! !N! ! !20040916!20050915!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003490000!N!N!000014416214!J066!MAINT & REPAIR OF EQ/INSTRUMENTS & LAB EQUIPMENT !C9E!ALL OTHER SUPPLIES AND EQUIPMENT !000 !* !811219!E! !3! ! ! ! ! !99990909!B! ! !A! !D!U!U!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y! ! !0001! !

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $28.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200412!001316!1700!A8050 !NAVAL AIR WARFARE CENTER, AIRCRA!N6833504C0039 !A!N! !N! ! !20040916!20050915!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK… Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. The contract type is Cost Plus Fixed Fee, which can incentivize cost overruns. 3. Performance period spans over 7 years, indicating a long-term need for these services. 4. The contractor, Northrop Grumman, is a large, established defense contractor with significant experience. 5. The service category is 'Other Electronic and Precision Equipment Repair and Maintenance', a specialized niche. 6. The contract was awarded by the Naval Air Warfare Center, highlighting its defense-centric nature.

Value Assessment

Rating: questionable

The contract value of $28.9 million for aircraft equipment repair over more than seven years warrants scrutiny. Without competitive bidding, it's difficult to benchmark the pricing against market rates or similar contracts. The Cost Plus Fixed Fee (CPFF) contract type, while allowing for flexibility, can lead to higher costs if not managed closely, as the contractor is reimbursed for costs plus a fixed fee. This structure may not be the most cost-effective for the government compared to fixed-price contracts, especially for services where scope can be well-defined.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This significantly limits competition, which typically drives down prices and encourages innovation. The absence of multiple bids means there was no direct price comparison or negotiation against alternative providers, potentially leading to a less favorable price for the government.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of achieving the best possible price. The government may be paying a premium due to the lack of competitive pressure to offer lower rates.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other branches of the Department of Defense requiring maintenance for specific aircraft equipment. The services delivered include maintenance and repair of electronic and precision equipment, crucial for operational readiness of aircraft. The geographic impact is likely concentrated around naval air stations and maintenance facilities where this equipment is utilized. The contract supports the workforce employed by Northrop Grumman Systems Corporation in specialized repair and maintenance roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially leading to higher costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize cost overruns if not rigorously managed.
Long performance period (over 7 years) increases exposure to potential cost escalations and scope creep.
Lack of transparency in pricing due to no competitive bidding process.
Specialized nature of repair may limit the pool of qualified contractors, contributing to sole-source justification.

Positive Signals

Contract awarded to a large, experienced defense contractor (Northrop Grumman) with a track record in aerospace.
Services are critical for maintaining the operational readiness of naval aircraft, supporting national defense.
The contract specifies a fixed fee component, providing some level of cost predictability beyond direct costs.
The contract is managed by the Naval Air Warfare Center, an entity with expertise in aerospace procurement.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on maintenance, repair, and overhaul (MRO) services for specialized electronic and precision equipment used in aircraft. The defense MRO market is substantial, driven by the need to maintain aging fleets and complex systems. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of the equipment and the sole-source award, but large defense contractors like Northrop Grumman are significant players in this space.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to Northrop Grumman Systems Corporation, a large prime contractor. There is no explicit information regarding subcontracting plans for small businesses within the provided data. The absence of a set-aside suggests that opportunities for small businesses may be limited to potential lower-tier subcontracts, if any, awarded by the prime contractor.

Oversight & Accountability

Oversight for this contract would typically be provided by the Department of Defense's contracting officers and the Defense Contract Management Agency (DCMA). Given the Cost Plus Fixed Fee structure, rigorous financial oversight and auditing would be expected to ensure costs are reasonable and allocable, and that the fixed fee is earned. Transparency is limited due to the sole-source nature, but contract performance metrics and financial reporting would be subject to government review.

Related Government Programs

Naval Air Systems Command (NAVAIR) Contracts
Defense Logistics Agency (DLA) Maintenance Contracts
Aircraft Component Repair Services
Aerospace Electronics Maintenance
Cost Plus Fixed Fee Contracts
Sole Source Defense Procurements

Risk Flags

Sole Source Justification
Cost Plus Fixed Fee Contract Type
Potential for Cost Overruns
Limited Price Competition
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200412!001316!1700!A8050 !NAVAL AIR WARFARE CENTER, AIRCRA!N6833504C0039 !A!N! !N! ! !20040916!20050915!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003490000!N!N!000014416214!J066!MAINT & REPAIR OF EQ/INSTRUMENTS & LAB EQUIPMENT !C9E!ALL OTHER SUPPLIES AND EQUIPMENT !000 !* !811219!E! !3! ! ! ! ! !999

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 $28.9 million.

What is the period of performance?

Start: 2004-09-16. End: 2011-09-30.

What is Northrop Grumman Systems Corporation's track record with similar sole-source contracts for aircraft equipment repair?

Northrop Grumman Systems Corporation, as a major defense contractor, has a long history of receiving sole-source and competitively awarded contracts across various defense platforms. Their track record with similar sole-source contracts for aircraft equipment repair would likely involve extensive experience in maintaining complex electronic and precision systems for military aircraft. Specific details on past sole-source awards for comparable repair services would require deeper analysis of historical contract data, but their established position suggests a capacity to fulfill such requirements. However, the justification for sole-sourcing often stems from unique capabilities or proprietary technology, which can limit direct comparisons to other contractors' performance on competitive bids.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types in terms of value for money for this type of service?

The Cost Plus Fixed Fee (CPFF) structure reimburses the contractor for allowable costs plus a predetermined fixed fee. For services like specialized equipment repair, CPFF can be advantageous when the scope of work is not fully defined at the outset or is subject to change, offering flexibility. However, it generally offers less value for money compared to fixed-price contracts (like FFP or FP-EPA) because the government bears the risk of cost overruns. In a competitive environment, fixed-price contracts incentivize the contractor to control costs to maximize profit. With CPFF, especially in a sole-source scenario, the government must rely heavily on robust oversight to ensure costs are reasonable and the fixed fee represents fair compensation for the effort.

What are the primary risks associated with this sole-source, CPFF contract for the Department of Defense?

The primary risks associated with this sole-source, CPFF contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to seek cost efficiencies. The government may be paying more than it would in a competitive scenario. Secondly, the CPFF structure shifts cost risk to the government. If the contractor's costs exceed initial estimates, the government is obligated to cover them, plus the fixed fee. This can lead to budget uncertainty and potentially higher total expenditure than anticipated, especially over a long performance period. Effective contract administration and oversight are critical to mitigate these risks.

What historical spending patterns exist for 'Other Electronic and Precision Equipment Repair and Maintenance' within the Naval Air Warfare Center?

Historical spending patterns for 'Other Electronic and Precision Equipment Repair and Maintenance' within the Naval Air Warfare Center (NAWC) would likely show a consistent need for specialized repair services due to the complexity and operational demands on naval aviation assets. Spending in this category can fluctuate based on aircraft fleet age, modernization programs, and operational tempo. Contracts may range from small, specific component repairs to larger, comprehensive maintenance programs. Analyzing past awards, including their value, duration, competition levels (sole-source vs. competitive), and the specific types of equipment serviced, would reveal trends in demand and the typical contracting approaches employed by NAWC for such specialized services.

How does the geographic location of the contractor (Rolling Meadows, IL) impact service delivery and costs for the Naval Air Warfare Center?

The geographic location of Northrop Grumman Systems Corporation in Rolling Meadows, Illinois, could have several implications for this contract. If the Naval Air Warfare Center facilities requiring these repair services are located far from Illinois, travel costs for personnel or shipping costs for equipment could increase the overall contract expenses. However, large defense contractors often have dispersed facilities or mobile repair teams, potentially mitigating geographic disadvantages. The specific terms of the contract, including delivery locations, on-site service requirements, and shipping responsibilities, would dictate the actual impact. Proximity can sometimes facilitate quicker response times and easier oversight, but for specialized services, the contractor's technical capability and overall price are often prioritized over location.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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 (UEI: 967356127)

Address: 600 HICKS RD, ROLLING MEADOW, IL, 60008

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline