DoD's $17.2M H1 System Configuration contract awarded to Northrop Grumman, lacking competition

Contract Overview

Contract Amount: $17,238,417 ($17.2M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2019-11-08

End Date: 2022-09-30

Contract Duration: 1,057 days

Daily Burn Rate: $16.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: H1 SYSTEM CONFIGURATION SETS

Place of Performance

Location: WOODLAND HILLS, LOS ANGELES County, CALIFORNIA, 91367

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $17.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: H1 SYSTEM CONFIGURATION SETS Key points: 1. The contract value of $17.2 million for H1 System Configuration sets is significant, requiring careful scrutiny of value for money. 2. The sole-source nature of this award raises concerns about potential overpricing and limited innovation. 3. A lack of competition increases the risk of suboptimal performance and reduced accountability. 4. The contract duration of 1057 days suggests a long-term need for these system configurations. 5. Northrop Grumman's role as the incumbent contractor warrants an examination of their past performance and pricing. 6. The absence of small business set-asides or subcontracting plans needs to be assessed for broader economic impact.

Value Assessment

Rating: questionable

Benchmarking the value for money on this contract is challenging due to the lack of competitive bids. Without comparison to other offers, it's difficult to ascertain if the $17.2 million price reflects a fair market rate for H1 System Configurations. The cost-plus-fixed-fee (CPFF) contract type can sometimes lead to higher costs if not managed diligently, as the contractor is reimbursed for allowable costs plus a fixed fee. Further analysis would be needed to compare the fixed fee and overhead rates to industry standards for similar system configuration services.

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 approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can reduce the incentive for the contractor to offer the most competitive pricing.

Taxpayer Impact: Taxpayers may be at a disadvantage with sole-source awards as the absence of competition can lead to higher prices than might be achieved through a competitive process. This limits the government's ability to secure the best possible value for public funds.

Public Impact

The primary beneficiaries are likely the Department of Defense, specifically units requiring the H1 System Configuration. The services delivered involve the configuration of complex system hardware and software, crucial for operational readiness. The geographic impact is primarily within the operational sphere of the Department of Defense, potentially worldwide. Workforce implications may include specialized technical roles within Northrop Grumman and potentially government oversight personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in inflated costs for taxpayers.
Sole-source awards can stifle innovation by not encouraging new solutions from other vendors.
Limited transparency in pricing due to the absence of competing bids.
Potential for contractor lock-in, making future transitions more difficult and costly.

Positive Signals

Northrop Grumman is an established defense contractor with significant experience.
The contract addresses a specific need for H1 System Configurations within the DoD.
The fixed-fee component of the CPFF contract provides some level of cost predictability for the government.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a critical component of the defense industrial base. This industry is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Spending in this sector is heavily influenced by government defense budgets and geopolitical factors. Comparable spending benchmarks would typically involve analyzing other sole-source or competitively awarded contracts for similar complex system manufacturing and integration services within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside, nor is there explicit information regarding subcontracting plans for small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate directly. This could mean that the prime contractor, Northrop Grumman, will handle the majority of the work, potentially missing opportunities to leverage the specialized capabilities of small businesses within the defense supply chain and impacting the broader small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates close monitoring of allowable costs and the reasonableness of the fixed fee. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and financial audits would be key accountability measures. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

DoD Command and Control Systems
Aerospace Navigation Systems
Defense Electronics Manufacturing
Military Aircraft Systems Integration
Naval Combat Systems

Risk Flags

Sole-source award lacks competition
Potential for unverified value for money
Limited transparency in pricing
Risk of contractor lock-in

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.2 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. H1 SYSTEM CONFIGURATION SETS

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 $17.2 million.

What is the period of performance?

Start: 2019-11-08. End: 2022-09-30.

What is Northrop Grumman's track record with similar sole-source DoD contracts?

Northrop Grumman Systems Corporation has a long history of contracting with the Department of Defense, often securing sole-source or limited-competition awards for complex systems due to their established expertise and proprietary technologies. Analyzing their past performance on similar sole-source contracts would involve reviewing contract histories for on-time delivery, adherence to budget (within the constraints of cost-plus contracts), and quality of deliverables. Publicly available data may show patterns of contract renewals or extensions, indicating a continued reliance on their services. However, a deeper dive into specific performance metrics and any past disputes or corrective actions would require access to more detailed contract performance reports or government audit findings. The $17.2 million value of this specific contract is moderate within the context of Northrop Grumman's overall portfolio, but its sole-source nature warrants scrutiny regarding the justification for not pursuing competition.

How does the $17.2 million value compare to similar H1 System Configuration contracts awarded competitively?

Direct comparison of the $17.2 million value to competitively awarded contracts for 'H1 System Configuration' is difficult because this award was sole-source. In a competitive environment, multiple bids would provide a benchmark for pricing. Without such benchmarks, it's challenging to definitively state if this price represents optimal value. However, one could look at contracts for similar complex system manufacturing and integration services within the defense sector, even if not specifically 'H1 System Configuration.' If comparable systems, requiring similar levels of engineering, integration, and manufacturing complexity, were awarded competitively for significantly less, it would raise concerns about the value received in this sole-source case. Conversely, if similar complex systems awarded competitively were in a similar or higher price range, it might suggest the $17.2 million is within a reasonable, albeit unverified, market range for such specialized work.

What are the primary risks associated with a sole-source award for critical system configurations?

The primary risks associated with a sole-source award for critical system configurations like the H1 System Configuration include potential cost overruns and reduced value for money, as the government lacks the leverage of competition to drive down prices. There's also a risk of complacency from the contractor, potentially leading to less focus on innovation or efficiency improvements. Furthermore, sole-source awards can create vendor lock-in, making it difficult and expensive to switch providers or integrate alternative solutions in the future. This lack of competition can also limit the government's visibility into alternative technological approaches or best practices that might be offered by other firms. Finally, it raises concerns about the initial justification for the sole-source award – was competition truly not feasible, or were other factors at play?

How effective is the Cost Plus Fixed Fee (CPFF) contract type in managing costs for system configuration?

The Cost Plus Fixed Fee (CPFF) contract type aims to balance risk between the government and the contractor. The government agrees to pay the contractor's allowable costs plus a predetermined fixed fee, which represents the contractor's profit. This structure provides some cost certainty for the government regarding the profit margin, unlike pure cost-plus contracts where profit can increase with costs. However, CPFF contracts still place the risk of cost overruns on the government, as all allowable costs are reimbursed. The effectiveness hinges on robust government oversight to ensure costs are reasonable, allocable, and allowable, and that the fixed fee is appropriate for the level of risk and effort involved. For complex system configurations, where technical uncertainties can be high, CPFF can be suitable, but it requires diligent administration to prevent scope creep and control indirect costs.

What is the historical spending trend for H1 System Configurations within the DoD?

Analyzing the historical spending trend for 'H1 System Configurations' within the DoD requires access to comprehensive contract databases that track spending over multiple fiscal years. Without specific historical data for this exact category, it's difficult to provide a precise trend. However, generally, spending on complex defense systems and their configurations tends to fluctuate based on modernization programs, operational tempo, and budget allocations. If H1 System Configurations are part of a larger, ongoing platform or system, spending might be relatively stable or show gradual increases/decreases tied to the lifecycle of that platform. If it's related to a specific, time-bound project, spending might be more episodic. The current $17.2 million award over approximately three years (2019-2022) suggests a consistent, albeit not massive, level of investment in these configurations.

What are the implications of this contract being awarded under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code?

Awarding this contract under NAICS code 334511 ('Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing') signifies that the work performed is directly related to the design, development, manufacturing, and integration of sophisticated systems used for these critical functions. This classification places the contract within a highly specialized segment of the defense industrial base, often characterized by advanced technology, stringent quality requirements, and significant R&D investment. Companies operating under this NAICS code typically possess unique engineering capabilities and manufacturing expertise. For the government, it means the procurement is focused on acquiring specialized equipment and services essential for national security, often involving complex hardware and software integration, and potentially requiring long lead times for production and testing.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6893613R0055

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 21240 BURBANK BLVD, WOODLAND HILLS, CA, 91367

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: $22,665,950

Exercised Options: $22,665,950

Current Obligation: $17,238,417

Actual Outlays: $8,752,913

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $6,628,628

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6893615D0013

IDV Type: IDC

Timeline