Northrop Grumman awarded $114.8M for aircraft structural component repair, with significant cost-plus-fixed-fee terms

Contract Overview

Contract Amount: $11,485,975 ($11.5M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2003-12-22

End Date: 2009-10-01

Contract Duration: 2,110 days

Daily Burn Rate: $5.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200404!000098!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD38 ! !20031222!20041231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55000!017!40!OKLAHOMA CITY !CANADIAN !OKLAHOMA !+000004000000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !811219!E! !5!B!S! ! ! !99990909!B! ! !N!Z!D!N!U!1!001!N!1A!A!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: 200404!000098!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD38 ! !20031222!20041231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55000!017!40!OKLAHOMA CITY !CANA… Key points: 1. The contract utilizes a cost-plus-fixed-fee structure, which can lead to higher costs if not carefully managed. 2. The award was not competed, raising questions about potential price efficiencies missed. 3. The contract duration is substantial, spanning over 7 years, indicating a long-term need for these services. 4. The contractor, Northrop Grumman, is a major defense industry player with extensive experience. 5. The service involves maintenance and repair of aircraft structural components, critical for operational readiness. 6. The contract's value is significant within the broader context of aircraft parts and equipment manufacturing.

Value Assessment

Rating: fair

The contract's cost-plus-fixed-fee (CPFF) pricing structure warrants scrutiny. While CPFF can be appropriate for R&D or uncertain scope work, it offers less incentive for cost control compared to fixed-price contracts. Benchmarking the fixed fee against similar repair and maintenance contracts for aircraft structural components would be necessary to assess value for money. Without detailed cost breakdowns or comparisons to industry standards for labor and overhead, it's difficult to definitively state if the $114.8 million represents excellent value. However, the lack of competition suggests potential for higher-than-market pricing.

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. Sole-source awards are typically justified when only one vendor possesses the necessary capabilities, proprietary technology, or when urgency precludes a competitive process. The lack of competition means that the government did not benefit from the price discovery and potential cost savings that typically arise from a competitive bidding environment. This can lead to higher prices than might be achieved in a more open market.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without multiple bids, there's less assurance that the negotiated price reflects the lowest possible cost for the required services.

Public Impact

The primary beneficiaries are the U.S. Air Force units relying on the operational readiness of their aircraft. The contract delivers essential maintenance and repair services for critical aircraft structural components. The geographic impact is primarily centered around Northrop Grumman's facilities in Palmdale, California, and potentially the operating locations of the supported aircraft. Workforce implications include employment for skilled technicians, engineers, and support staff at the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may incentivize higher costs without strong oversight.
Sole-source award limits price competition and potentially increases costs for taxpayers.
Long contract duration (over 7 years) increases exposure to potential cost overruns or scope creep.
Lack of detailed performance metrics in the provided data makes assessing efficiency challenging.

Positive Signals

Contract awarded to a major, experienced defense contractor (Northrop Grumman).
Addresses a critical need for aircraft structural component maintenance and repair.
The fixed fee component provides some level of cost predictability for the contractor's profit.
The contract is for essential services supporting military readiness.

Sector Analysis

The Aircraft Manufacturing sector (NAICS 336411) is a significant part of the U.S. defense industrial base. This contract falls under the maintenance, repair, and overhaul (MRO) segment within aerospace. Spending in this area is crucial for maintaining aging fleets and ensuring operational readiness. Comparable spending benchmarks would typically involve analyzing other MRO contracts for similar aircraft types or components, looking at both fixed-price and cost-reimbursable contracts to understand typical cost structures and profit margins within the industry.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor is a large corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the data provided does not specify the extent or nature of any such subcontracting efforts for this particular award. The impact on the small business ecosystem would depend on whether Northrop Grumman actively engages small businesses for specialized repair services or components related to this contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Given the cost-plus-fixed-fee structure, robust oversight is crucial to monitor costs, ensure compliance with contract terms, and verify the allowability and allocability of expenses. Transparency could be enhanced through regular reporting requirements from the contractor and potentially audits by the Defense Contract Audit Agency (DCAA). Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Parts and Auxiliary Equipment Manufacturing
Aircraft Maintenance and Repair Services
Defense Logistics and Support Services
Air Force Procurement
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus-fixed-fee structure may lead to cost overruns.
Long contract duration increases risk exposure.
Limited public data on performance metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.5 million to NORTHROP GRUMMAN SYSTEMS CORP. 200404!000098!5700!GD30 !OKLAHOMA CITY ALC/LAD !F3365799D0028 !A!N! !N!SD38 ! !20031222!20041231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55000!017!40!OKLAHOMA CITY !CANADIAN !OKLAHOMA !+000004000000!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !* !811219!E! !5!B!S! ! ! !999

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: 2003-12-22. End: 2009-10-01.

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

The Department of the Air Force historically spends billions annually on aircraft maintenance, repair, and overhaul (MRO) services. This includes everything from routine inspections and component replacements to depot-level repairs and structural modifications. Spending patterns can fluctuate based on fleet age, operational tempo, modernization programs, and budget allocations. Contracts like this one, for specific component repairs, represent a segment of the overall MRO spend. Analyzing historical data would reveal trends in contract types (fixed-price vs. cost-reimbursable), average contract values, and key contractors. For instance, periods of high operational tempo often correlate with increased demand for MRO services, potentially driving up contract values and the number of awards.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for this type of service?

Cost-plus-fixed-fee (CPFF) contracts are often used when the scope of work is not well-defined or involves significant uncertainty, such as research and development or complex repair scenarios where the extent of damage is unknown upfront. The contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less incentive for the contractor to control costs, as the fee is fixed regardless of the final cost incurred. However, it provides flexibility for the government when requirements are evolving. For routine maintenance and repair of well-understood components, fixed-price contracts or firm-fixed-price incentive contracts might offer better value by shifting more risk to the contractor and encouraging cost efficiency.

What is Northrop Grumman's track record with similar Department of Defense contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing complex services and manufacturing for the Department of Defense (DoD). They have extensive experience in aircraft manufacturing, maintenance, and systems integration across various platforms, including fighters, bombers, and transport aircraft. Their track record typically involves large, multi-year contracts, often with complex technical requirements. While specific performance metrics for individual contracts are not publicly detailed here, their sustained position as a prime contractor suggests a generally satisfactory performance history. However, like any large contractor, they may have faced scrutiny or performance issues on specific programs, which would be detailed in contract performance reports (e.g., CPARS) if publicly accessible.

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

The primary risk associated with a sole-source award for aircraft component repair is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government may not achieve the best possible price. Additionally, sole-source awards can sometimes indicate a lack of market awareness or a failure to plan adequately for competitive procurements. This can also stifle innovation and competition within the broader market, as potential new entrants or smaller specialized firms may not get opportunities to demonstrate their capabilities. Ensuring fair and reasonable pricing often requires extensive negotiation and market research by the government contracting activity.

How does the geographic location of the contractor (Palmdale, CA) impact logistics and costs?

The contractor's location in Palmdale, California, can have several implications for logistics and costs. Proximity to major Air Force bases or depots in the Western U.S. could streamline transportation of components and reduce shipping times and costs. However, Southern California is also known for its higher cost of living and doing business, which can translate into higher labor rates and overhead costs for the contractor. These factors would need to be considered during the pricing negotiation and cost monitoring phases to ensure the overall cost remains reasonable. The specific aircraft platforms being supported and their operational locations would also determine the overall logistical footprint.

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 FIXED FEE (U)

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