DoD's $24.6M Northrop Grumman contract for aircraft manufacturing support lacked competition, raising value concerns

Contract Overview

Contract Amount: $24,570,793 ($24.6M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2012-01-01

End Date: 2013-12-31

Contract Duration: 730 days

Daily Burn Rate: $33.7K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CY12 INTERIM CONTRACTOR SUPPORT (ICS)

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $24.6 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: CY12 INTERIM CONTRACTOR SUPPORT (ICS) Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 2. Lack of competition suggests potential for inflated pricing and reduced value for taxpayer dollars. 3. The contract duration of two years is relatively short, but the total value is substantial. 4. This contract falls within the aircraft manufacturing sector, a critical area for defense readiness. 5. Performance context is limited due to the absence of competitive bidding and detailed performance metrics. 6. Risk indicators include the sole-source nature and the cost-plus contract type.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and cost-plus-fixed-fee structure. Without competitive bids, it's difficult to ascertain if the $24.6 million represents a fair market price for the interim contractor support services provided. The cost-plus-fixed-fee arrangement, while common for complex or evolving requirements, can lead to higher overall costs compared to fixed-price contracts if not managed rigorously. Further analysis of the fixed fee and the direct costs incurred would be necessary to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, or in situations where urgency or specific requirements preclude a full and open competition. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the best possible value. It also raises questions about whether alternative solutions or vendors were adequately explored.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price. This can lead to a less efficient use of public funds.

Public Impact

The Department of the Air Force benefits from continued interim contractor support for aircraft manufacturing. Services provided are critical for maintaining operational readiness and supporting aircraft production or sustainment. The geographic impact is primarily within California, where the contractor is located. Workforce implications include the employment of personnel by Northrop Grumman to fulfill the contract requirements.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee structure can incentivize increased spending.
Limited transparency on specific performance metrics due to sole-source award.
Potential for vendor lock-in if capabilities are highly specialized.

Positive Signals

Contract awarded to a large, established defense contractor with known capabilities.
Addresses a specific need for interim support, potentially preventing operational gaps.
Fixed fee component provides some level of cost predictability for the contractor's profit.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft manufacturing support. The industry is characterized by high barriers to entry, significant R&D investment, and long-term government contracts. Spending in this sector is crucial for national security and technological advancement. Comparable spending benchmarks would typically involve other large-scale aircraft production or sustainment contracts, often awarded to major defense primes like Northrop Grumman.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the prime contractor being Northrop Grumman, a large aerospace company, the likelihood of significant subcontracting opportunities for small businesses is uncertain without further details. Large prime contractors are often encouraged or required to subcontract portions of their work to small businesses, but the extent of this in a sole-source award can vary.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Given the sole-source award, scrutiny might be heightened to ensure the justification for non-competition is sound and that costs are reasonable. The contract's cost-plus-fixed-fee structure necessitates robust oversight of incurred costs and the contractor's performance to prevent overspending. Inspector General involvement would be possible if specific allegations of fraud, waste, or abuse arise.

Related Government Programs

Aircraft Manufacturing Support Contracts
Defense Logistics Agency Contracts
Aerospace Industry Support
Interim Contractor Support Services

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.6 million to NORTHROP GRUMMAN SYSTEMS CORP. CY12 INTERIM CONTRACTOR SUPPORT (ICS)

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $24.6 million.

What is the period of performance?

Start: 2012-01-01. End: 2013-12-31.

What specific aircraft manufacturing support services were provided under this contract?

The provided data indicates the contract is for 'CY12 INTERIM CONTRACTOR SUPPORT (ICS)' within Aircraft Manufacturing (NAICS 336411). While the specific services are not detailed in the summary data, 'Interim Contractor Support' typically encompasses a range of activities necessary to maintain operations or production lines during a transition period, such as logistics, maintenance, technical support, or program management. Given the context of aircraft manufacturing, these services could relate to the production, modification, or sustainment of aircraft systems. The cost-plus-fixed-fee structure suggests that the scope might have been somewhat flexible or difficult to define precisely at the outset, requiring ongoing cost tracking and a negotiated fixed fee for the contractor's effort.

Why was this contract awarded on a sole-source basis instead of being competed?

The data explicitly states the contract type as 'NOT COMPETED' and the award logic as 'sole-source'. While the specific justification for this sole-source award is not provided in the summary data, common reasons include: 1) Only one responsible source and no other supplies or services will satisfy the agency requirements (e.g., unique capabilities, proprietary technology). 2) Urgency of the need, where competition is not feasible. 3) Post-competition, only one offer was received. Without the official justification document (e.g., Justification and Approval - J&A), it is impossible to determine the precise rationale. However, sole-source awards are exceptions to the general policy favoring full and open competition.

How does the cost-plus-fixed-fee (CPFF) contract type impact cost control and value for money?

The Cost-Plus-Fixed-Fee (CPFF) contract type means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or is expected to change. While the fixed fee provides some predictability for the contractor's profit, the reimbursement of all costs can reduce the incentive for the contractor to control expenses rigorously, as higher costs do not directly reduce their profit margin (though they increase the overall contract value). For the government, effective oversight of allowable costs and negotiation of a fair fixed fee are critical to achieving value for money. Without stringent oversight, CPFF contracts can be more expensive than fixed-price alternatives.

What is the track record of Northrop Grumman Systems Corp in similar defense contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing complex programs for the Department of Defense and other government agencies. They have extensive experience in areas such as aerospace systems, defense electronics, and information systems. Their track record includes the development and production of aircraft, spacecraft, and advanced weapons systems. While this specific contract is for interim support, Northrop Grumman routinely manages large-scale, high-value contracts across various defense domains. Performance on such contracts is generally assessed through various metrics, including on-time delivery, quality, and adherence to technical specifications, though specific performance data for individual contracts is often not publicly detailed.

Are there any comparable contracts that could serve as a benchmark for this award?

Directly comparable contracts are difficult to identify without more specific details on the 'interim contractor support' services provided. However, one could look at other contracts awarded by the Department of the Air Force or other DoD components for aircraft manufacturing support, logistics, or sustainment services. Benchmarking would ideally involve comparing pricing structures (e.g., labor rates, overhead application) and total contract values for similar scopes of work, preferably from competitively awarded contracts. Given this contract's sole-source and CPFF nature, direct price comparisons to fixed-price, competitively bid contracts would need careful adjustment to account for differences in risk, scope definition, and profit methodology.

What are the potential risks associated with a sole-source award of this magnitude?

The primary risk associated with a sole-source award of $24.6 million is the potential for reduced value for taxpayer money due to the absence of competition. Without competing offers, the government may pay a higher price than if multiple vendors had vied for the contract. Other risks include a lack of innovation that competition might spur, potential complacency from the awarded contractor, and the possibility that the government did not identify all available sources or the best possible solution. Furthermore, the justification for sole-source procurement itself can be subject to scrutiny to ensure it was appropriate and adequately documented.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 3520 E AVE M, PALMDALE, CA, 93550

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

Financial Breakdown

Contract Ceiling: $24,570,793

Exercised Options: $24,570,793

Current Obligation: $24,570,793

Subaward Activity

Number of Subawards: 79

Total Subaward Amount: $45,681,906

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline