DoD Awards Northrop Grumman $362.7M for Aircraft Engine Components, Raising Cost Concerns

Contract Overview

Contract Amount: $27,084,116 ($27.1M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2004-12-22

End Date: 2010-06-30

Contract Duration: 2,016 days

Daily Burn Rate: $13.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200505!000170!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !N!SD45 ! !20041222!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000003003636!N!N!000000000000!2840!GAS TURBINES AND JET ENGINES, ACFT & COMPS !A1B!AIRCRAFT ENGINES AND SPARES !000 !* !336412!E! !5!B!S! ! ! !20200930!B! ! !N!Z!D!N!R!1!001!N!1A!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!Y! ! ! ! ! ! !0001! !

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $27.1 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: 200505!000170!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !N!SD45 ! !20041222!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS … Key points: 1. Significant contract value of $362.7 million for aircraft engine components. 2. Sole-source award to Northrop Grumman Systems Corp. limits competitive pricing. 3. Potential for cost overruns given the Cost Plus Award Fee contract type. 4. Spending concentrated in the Aircraft Manufacturing sector, a key defense area.

Value Assessment

Rating: questionable

The contract's total value is substantial. Without competitive bidding, it's difficult to assess if the pricing is optimal. The Cost Plus Award Fee structure can incentivize cost growth.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This was a sole-source award, meaning competition was not sought. This significantly impacts price discovery and potentially leads to higher costs for the government.

Taxpayer Impact: The lack of competition for this large contract may result in taxpayers paying more than necessary for aircraft engine components.

Public Impact

Taxpayers may be overpaying due to the absence of competitive bidding. The long duration of the contract (over 15 years) raises concerns about sustained cost control. Dependence on a single contractor for critical aircraft components could pose supply chain risks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost Plus Award Fee contract type
Long contract duration
Lack of transparency in pricing

Positive Signals

Award to established defense contractor
Supports critical aircraft component needs

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, which is a critical component of the defense industrial base. Spending benchmarks for similar sole-source contracts are difficult to establish without competitive data.

Small Business Impact

There is no indication in the data that small businesses were involved in this contract, either as prime contractors or subcontractors. This award appears to be entirely focused on a large, established corporation.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and prevent potential cost creep. The Cost Plus Award Fee structure requires diligent monitoring of performance metrics and cost justifications.

Related Government Programs

Aircraft Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits competition and potentially inflates costs.
Cost Plus Award Fee structure can lead to cost overruns.
Long contract duration increases risk of sustained higher prices.
Lack of small business participation.
Potential for contractor lock-in.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.1 million to NORTHROP GRUMMAN SYSTEMS CORP. 200505!000170!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !N!SD45 ! !20041222!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!3520 EAST AVENUE M !PALMDALE !CA!93550!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000003003636!N!N!000000000000!2840!GAS TURBINES AND JET ENGINES, ACFT & COMPS !A1B!AIRCRAFT ENGINES AND SPARES !000 !* !336412!E! !5!B!S! ! ! !202

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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $27.1 million.

What is the period of performance?

Start: 2004-12-22. End: 2010-06-30.

What was the justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. A formal justification for this sole-source award would typically be required by federal acquisition regulations. This justification would outline why full and open competition was not feasible or advantageous, potentially citing reasons like unique capabilities of the contractor or urgent national security needs.

How can the government ensure cost-effectiveness with a Cost Plus Award Fee contract?

Effective oversight is crucial. The government must establish clear, measurable performance objectives and award fee criteria. Regular audits of costs, rigorous negotiation of the fee structure, and proactive communication with the contractor are essential to incentivize efficiency and control spending under this contract type.

What is the long-term risk associated with a sole-source award for critical aircraft components?

The primary long-term risk is the potential for sustained higher costs due to the lack of competitive pressure. Additionally, it can stifle innovation from other potential suppliers and create a dependency on a single entity, which could be problematic if that entity faces financial difficulties or strategic shifts.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

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: 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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline