Northrop Grumman awarded $115M for aircraft structural component repair, highlighting potential value concerns

Contract Overview

Contract Amount: $11,500,376 ($11.5M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2002-01-01

End Date: 2009-06-01

Contract Duration: 2,708 days

Daily Burn Rate: $4.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200206!000100!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !Y!SD23 !20020101!20021231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000001000000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !3ABK!B-2 STEALTH !811219!E! !5!B!M! !C!C!20021231!B!F!N!A! !D!N!R!1!001!N!1A!C!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!N! ! ! ! ! ! !0001!

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $11.5 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: 200206!000100!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !Y!SD23 !20020101!20021231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS A… Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant contract duration of over 2700 days suggests long-term reliance on this specific contractor. 3. The 'COST PLUS AWARD FEE' contract type can incentivize cost overruns if not managed tightly. 4. Focus on repair and maintenance of structural components indicates a critical, ongoing need for fleet readiness. 5. The contractor's extensive experience with complex aircraft systems likely influenced the sole-source decision. 6. Geographic concentration in California for the contractor's facilities may have implications for regional economic impact.

Value Assessment

Rating: questionable

The contract's value of $115 million over its extended period raises questions about cost-effectiveness, especially given the sole-source nature. Without competitive bids, it's difficult to benchmark pricing against market rates or alternative providers. The 'COST PLUS AWARD FEE' structure, while allowing for flexibility, can lead to higher final costs if performance incentives are not carefully aligned with value for money. Further analysis would be needed to determine if the pricing reflects fair market value for the specialized repair services provided.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that taxpayers did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than might be achieved in an open market.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for these specialized aircraft repair services. Without competing offers, the government had limited leverage to negotiate the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Air Force and its operational readiness, ensuring critical aircraft components are maintained. Services delivered include the maintenance and repair of structural components for specific aircraft, likely impacting fleet availability. Geographic impact is concentrated around the contractor's facilities in California, potentially supporting local jobs and the aerospace ecosystem there. Workforce implications include the employment of skilled technicians and engineers specializing in aircraft structural repair and maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Cost-plus contract type can incentivize higher spending if not rigorously managed.
Long contract duration may indicate a lack of viable alternatives or a need for specialized, long-term support.
Lack of transparency in pricing due to sole-source competition.
Potential for vendor lock-in given the specialized nature of aircraft structural repair.

Positive Signals

Contractor is a major defense industry player with established expertise in complex aircraft systems.
Ensures continued operational readiness for critical Air Force assets.
Supports specialized technical workforce and advanced manufacturing capabilities.
Potential for high-quality, specialized repair services due to contractor's experience.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft maintenance, repair, and overhaul (MRO). The MRO market is substantial, driven by the need to maintain aging fleets and ensure operational readiness. Spending in this area is critical for national security. Comparable spending benchmarks would typically involve analyzing other MRO contracts for similar aircraft types or structural components, though sole-source awards make direct comparisons challenging.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded to a large prime contractor, Northrop Grumman. There is no explicit information regarding subcontracting plans for small businesses within this data. The focus on specialized aircraft structural repair might limit opportunities for broad subcontracting to smaller firms unless they possess highly niche capabilities.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. As a sole-source award, scrutiny might be higher to ensure fair pricing and performance. Inspector General (IG) investigations could be triggered by allegations of fraud, waste, or abuse. Transparency is limited due to the non-competitive nature, but contract performance reviews and audits would be standard oversight mechanisms.

Related Government Programs

Aircraft Structural Component Repair
Aerospace Maintenance and Repair
Defense Contractor Services
Air Force Fleet Readiness
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of competitive pricing data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.5 million to NORTHROP GRUMMAN SYSTEMS CORP. 200206!000100!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !Y!SD23 !20020101!20021231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000001000000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !3ABK!B-2 STEALTH !811219!E! !5!B!M! !C!C!20021231!B

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 $11.5 million.

What is the period of performance?

Start: 2002-01-01. End: 2009-06-01.

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

Northrop Grumman, as a major defense contractor, has a long history of performing complex maintenance, repair, and overhaul (MRO) services for various military aircraft platforms. Their track record often includes sole-source awards for specialized systems where they possess unique expertise or are the original equipment manufacturer. Analyzing past sole-source contracts of similar scope and value awarded to Northrop Grumman would provide insight into their performance, pricing structures, and adherence to contract terms. This historical data could help assess whether the current contract's terms are consistent with their established performance and if any past issues warrant specific attention for this award.

How does the pricing structure of this 'COST PLUS AWARD FEE' contract compare to industry standards for aircraft structural repair?

The 'COST PLUS AWARD FEE' (CPAF) contract type allows the contractor to recover allowable costs plus a base fee, with an additional award fee contingent upon meeting specific performance objectives. For aircraft structural repair, CPAF can be justified when the scope of work is not fully defined or when performance incentives are crucial. However, it carries a risk of cost escalation if performance metrics are not well-defined or if the government's oversight is insufficient. Benchmarking this contract's fee structure against other CPAF contracts for similar MRO services within the defense sector, or against fixed-price contracts if comparable work exists, would be necessary to assess its value. Without such comparisons, it's difficult to definitively state if the pricing is competitive.

What are the primary risks associated with a sole-source award for critical aircraft component repair?

The primary risks associated with a sole-source award for critical aircraft component repair include a lack of competitive pricing, potentially leading to higher costs for the government and taxpayers. Without competing bids, there is less incentive for the contractor to offer the most cost-effective solution. Additionally, sole-source awards can lead to vendor lock-in, making it difficult and costly to switch providers in the future, even if better alternatives emerge. There's also a potential reduction in transparency regarding pricing justifications and a diminished ability for the government to negotiate favorable terms. Ensuring robust oversight and detailed performance metrics becomes even more critical in sole-source situations to mitigate these risks.

What is the historical spending pattern for aircraft structural component repair by the Department of the Air Force?

Historical spending patterns for aircraft structural component repair by the Department of the Air Force (DAF) are substantial and reflect the ongoing need to maintain a large and diverse fleet of aircraft. The DAF consistently allocates significant portions of its budget to MRO activities, including structural repairs, to ensure aircraft availability and safety. Analyzing historical spending data, broken down by aircraft type, component category, and contract type (competitive vs. sole-source), would reveal trends in demand, cost drivers, and the prevalence of different contracting strategies. This contract's value of $115 million fits within the broader context of DAF's extensive MRO expenditures, but its sole-source nature warrants closer examination against historical competitive procurement data.

How does the duration of this contract (2708 days) impact its overall value and risk profile?

The contract duration of 2708 days (approximately 7.4 years) is quite extensive and significantly impacts its value and risk profile. A longer duration can provide stability and predictability for both the government and the contractor, potentially leading to better planning and resource allocation. For the contractor, it offers a sustained revenue stream. However, it also increases the risk of cost escalation over time due to inflation, changes in material costs, or evolving technological requirements. Furthermore, a long sole-source contract heightens the risk of vendor lock-in and reduces opportunities for the government to benefit from market competition or technological advancements that might arise during the contract period. Rigorous performance management and potential for contract renegotiation become crucial over such an extended term.

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

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc (UEI: 967362331)

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline