Northrop Grumman awarded $8.6M contract for aircraft parts, raising questions about sole-source justification

Contract Overview

Contract Amount: $8,600,285 ($8.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-03-16

End Date: 2026-03-31

Contract Duration: 1,111 days

Daily Burn Rate: $7.7K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CETS SOLE SOURCE

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92135

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $8.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CETS SOLE SOURCE Key points: 1. Contract awarded on a sole-source basis after exclusion of sources, suggesting limited competition. 2. Significant contract value for aircraft parts manufacturing, indicating a critical need for these components. 3. The cost-plus-fixed-fee pricing structure may incentivize cost overruns. 4. Contract duration of over 3 years suggests a long-term requirement. 5. Awarded by the Department of the Navy, highlighting defense sector spending. 6. Northrop Grumman's extensive experience in defense contracting likely influenced the award.

Value Assessment

Rating: questionable

Benchmarking the value of this $8.6 million contract is challenging without specific details on the aircraft parts. However, the sole-source nature raises concerns about whether the government secured the best possible price. Cost-plus-fixed-fee contracts can sometimes lead to higher overall costs compared to fixed-price agreements if not managed tightly. Further analysis of the fixed fee and estimated costs would be needed to assess value for money comprehensively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole source after the exclusion of other sources. This indicates that only one vendor, Northrop Grumman Systems Corporation, was considered capable of fulfilling the requirement. The justification for excluding other sources is critical to understanding the competitive landscape. Without open competition, there is a reduced opportunity for price discovery and potentially higher costs for the government.

Taxpayer Impact: Sole-source awards limit taxpayer value by bypassing competitive bidding, which typically drives down prices. This approach suggests a potential lack of market alternatives or a specific, urgent need that only one contractor could meet.

Public Impact

The Department of the Navy benefits from the acquisition of critical aircraft parts, ensuring operational readiness. This contract supports the manufacturing sector, specifically in the production of specialized aircraft components. The contract's impact is primarily within the defense industrial base, supporting national security objectives. Workforce implications may include skilled labor in manufacturing and engineering roles at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source justification needs thorough review to ensure no viable alternatives were overlooked.
Cost-plus-fixed-fee structure requires stringent oversight to control costs and prevent overruns.
Lack of competition may lead to suboptimal pricing for the taxpayer.
Dependency on a single supplier for critical aircraft parts could pose supply chain risks.

Positive Signals

Award to an established defense contractor like Northrop Grumman suggests a high likelihood of technical capability.
The contract addresses a specific need within the Department of the Navy's aviation programs.
The fixed fee component provides some level of cost predictability for the government.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The North American Industry Classification System (NAICS) code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' indicates a specialized segment of this industry. Spending in this area is crucial for maintaining military aviation fleets. Comparable spending benchmarks would typically involve analyzing other contracts for similar aircraft components, considering factors like complexity, volume, and technological requirements.

Small Business Impact

There is no indication that this contract includes a small business set-aside. Given the sole-source nature and the likely complexity of aircraft parts manufacturing, it is improbable that small businesses would be directly involved as prime contractors. Subcontracting opportunities for small businesses may exist, but these would depend on Northrop Grumman's procurement practices and the specific components required.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting officers and program managers. Accountability measures are embedded in the contract terms, including performance requirements and payment schedules tied to milestones. Transparency is limited due to the sole-source award; however, contract award data is publicly available. The Inspector General of the Department of Defense may have jurisdiction for audits and investigations if fraud or waste is suspected.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Support Contracts
Aerospace Component Manufacturing
Sole Source Defense Contracts

Risk Flags

Sole Source Justification
Cost-Plus-Fixed-Fee Pricing
Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $8.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CETS SOLE SOURCE

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 $8.6 million.

What is the period of performance?

Start: 2023-03-16. End: 2026-03-31.

What is the specific justification for awarding this contract on a sole-source basis after excluding other sources?

The provided data indicates the contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This specific designation suggests that while the agency initially intended to compete the contract, they later excluded all but one source. The precise justification for this exclusion is not detailed in the provided data but typically involves reasons such as the existence of only one responsible source capable of providing the supplies or services, or a compelling urgency that precludes competition. Without further documentation from the agency, it's impossible to definitively state the reason. However, such justifications are subject to review and must meet strict federal acquisition regulations to ensure fair and open competition is not unduly restricted.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for similar aircraft parts?

Cost-plus-fixed-fee (CPFF) contracts are often used when the scope of work is not precisely defined, or when there is significant uncertainty in the costs involved, such as in research and development or complex manufacturing. In this case, the government agrees to pay the contractor's actual costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less cost certainty for the government and can incentivize higher spending, as the contractor is reimbursed for all allowable costs. However, it provides flexibility when requirements are evolving. For standard, well-defined aircraft parts, fixed-price contracts (like FFP) are generally preferred as they offer better price predictability and incentivize contractor efficiency. The choice of CPFF here suggests potential complexity or evolving requirements in the parts being manufactured.

What is Northrop Grumman's track record with the Department of the Navy for similar contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long-standing and extensive relationship with the Department of the Navy. They have a significant history of delivering complex systems, including aircraft, electronics, and support services. While specific data on their past performance for contracts identical to this one (NAICS 336413, sole-source, CPFF) is not provided, their overall profile suggests a high level of capability and experience. Federal procurement databases often contain past performance ratings and award histories that would offer more granular insights. Generally, large defense contractors like Northrop Grumman are awarded substantial contracts by the Navy due to their established infrastructure, technical expertise, and proven ability to meet stringent defense requirements.

What are the potential risks associated with a sole-source award for critical aircraft parts?

Sole-source awards for critical aircraft parts carry several potential risks. Firstly, the lack of competition means the government may not achieve the lowest possible price, leading to increased costs for taxpayers. Secondly, it can reduce the incentive for the sole provider to innovate or improve efficiency, as there is no competitive pressure. Thirdly, it creates a dependency on a single supplier, which can be problematic if that supplier experiences production issues, financial instability, or decides to discontinue the product line. This dependency can also pose supply chain risks, particularly for critical defense assets that require a steady and reliable source of components. Ensuring robust contract management and performance monitoring becomes even more crucial in sole-source situations.

How does the contract duration (1111 days) impact the overall cost and risk assessment?

A contract duration of 1111 days (approximately 3 years and 2 months) for aircraft parts manufacturing indicates a long-term requirement. This extended period allows for production planning, potential scaling, and ensures a consistent supply of components over a significant timeframe. From a cost perspective, longer-term contracts can sometimes offer economies of scale, potentially leading to lower per-unit costs if production volumes are high and stable. However, they also increase the government's exposure to price fluctuations in raw materials or labor over the contract's life, especially with a cost-reimbursable element like CPFF. The extended duration also means that risks associated with technology obsolescence or changes in military requirements need to be carefully managed through contract clauses and ongoing communication.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 2000 W NASA BLVD, MELBOURNE, FL, 32904

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: $19,391,117

Exercised Options: $10,349,724

Current Obligation: $8,600,285

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001920G0005

IDV Type: BOA

Timeline