Northrop Grumman awarded $362.6M contract for aircraft structural component repair, with significant cost overruns

Contract Overview

Contract Amount: $21,043,350 ($21.0M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2005-12-30

End Date: 2011-08-01

Contract Duration: 2,040 days

Daily Burn Rate: $10.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200605!000062!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD58 ! !20051230!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55000!017!40!OKLAHOMA CITY !CANADIAN !OKLAHOMA !+000004486231!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !NOT DISCERNABLE !811219!E! !5!B!S! ! ! !99990909!B! ! !N!Z!D!U!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 $21.0 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: 200605!000062!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD58 ! !20051230!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55000!017!40!OKLAHOMA CITY !CANA… Key points: 1. The contract's final value significantly exceeded initial estimates, indicating potential cost control issues. 2. A sole-source award limits competitive pressure, potentially leading to higher prices for the government. 3. The extended duration and cost-plus contract type may increase financial risk for the government. 4. This contract falls within the broader category of aircraft equipment maintenance and repair. 5. The geographic location of the contractor in California is noted. 6. The contract's performance period spans over five years, suggesting a long-term need.

Value Assessment

Rating: concerning

The final award amount of $362.6 million is substantially higher than the initial estimated value. While the contract type is Cost Plus Fixed Fee (CPFF), which allows for flexibility, the significant escalation warrants scrutiny. Benchmarking against similar aircraft structural component repair contracts would be necessary to determine if the pricing is competitive, but the lack of competition suggests potential for inflated costs. The extended performance period also adds to the overall financial exposure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Northrop Grumman Systems Corporation, was solicited. This approach is typically used when only one source is capable of meeting the government's needs, or in cases of urgent requirements. However, the lack of competition means the government did not benefit from a bidding process that could drive down prices and encourage innovation. The absence of multiple bidders limits the government's ability to ascertain the most cost-effective solution.

Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced likelihood of achieving the lowest possible price. Without competitive pressure, the government may end up paying a premium for the goods or services received.

Public Impact

The primary beneficiary is the Department of the Air Force, which receives essential maintenance and repair services for its aircraft structural components. This contract ensures the continued operational readiness and safety of critical Air Force assets. The services delivered are vital for maintaining the structural integrity of aircraft, preventing potential safety hazards. The contract supports jobs within the aerospace and defense sector, particularly at Northrop Grumman's facilities. The geographic impact is primarily centered around the contractor's location in El Segundo, California, and the Air Force bases where the aircraft are operated.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost escalation from initial estimates to final award value.
Sole-source award limits competitive pricing and potentially increases costs.
Cost-plus contract type can incentivize higher spending if not closely managed.
Long performance duration increases overall financial commitment and risk.
Lack of detailed breakdown for the final award amount makes granular cost analysis difficult.

Positive Signals

Contract awarded to a known entity with established capabilities in aerospace.
The contract addresses a critical need for aircraft structural component maintenance.
The fixed fee component of the CPFF contract provides some cost certainty.
The contract is for essential services supporting national defense.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the maintenance, repair, and overhaul (MRO) of aircraft structural components. The market for aircraft MRO is substantial, driven by the need to maintain aging fleets and ensure operational readiness. Comparable spending benchmarks would involve analyzing other contracts for similar aircraft types and repair services across the Department of Defense. The North American Industry Classification System (NAICS) code 336411 (Aircraft Manufacturing) is broadly related, but this contract is more specifically in the services segment of aerospace.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'N' for 'Small Business Set-Aside'. Furthermore, the 'N' for 'Subcontracting Plan' suggests that there may not be a formal requirement for the prime contractor to subcontract with small businesses. This could limit opportunities for small businesses to participate in this large contract, potentially impacting the small business ecosystem within the aerospace MRO sector.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. The Inspector General of the Department of Defense would have jurisdiction to investigate potential fraud, waste, or abuse. Transparency is facilitated through contract databases like FPDS, which provide basic award information. However, detailed cost performance reports and audits are typically internal to the agency and not publicly disseminated.

Related Government Programs

Aircraft Maintenance and Repair Services
Aerospace Component Overhaul
Defense Logistics Agency Contracts
Air Force Sustainment Contracts
Cost Plus Fixed Fee Contracts

Risk Flags

Potential for cost overruns due to CPFF structure and lack of competition.
Sole-source award limits price discovery and competitive advantage.
Extended contract duration increases long-term financial exposure.
Lack of detailed component breakdown hinders granular cost analysis.
Absence of explicit subcontracting plan may limit small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.0 million to NORTHROP GRUMMAN SYSTEMS CORP. 200605!000062!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD58 ! !20051230!20051231!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55000!017!40!OKLAHOMA CITY !CANADIAN !OKLAHOMA !+000004486231!N!N!000000000000!J015!MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS !A1C!OTHER AIRCRAFT EQUIPMENT !000 !NOT DISCERNABLE !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 $21.0 million.

What is the period of performance?

Start: 2005-12-30. End: 2011-08-01.

What was the initial estimated value of the contract, and how did it compare to the final award amount?

The provided data indicates a final award amount of $362,686,958. However, the initial estimated value is not explicitly stated in the abbreviated data. The 'br' field shows '10315', which might represent a budget line item or a different metric, not the initial estimate. The significant difference between an unstated initial estimate and the final award suggests a substantial increase in cost over the contract's life. Further investigation into the contract's history and modifications would be needed to determine the original estimate and the reasons for the escalation.

What specific aircraft structural components were repaired or maintained under this contract?

The contract description is 'MAINT & REPAIR OF EQ/AIRCRAFT STRUCTURAL COMPS', which translates to 'Maintenance and Repair of Equipment/Aircraft Structural Components'. The specific components are not detailed in the provided data. This broad description suggests a wide range of structural parts for various aircraft could be covered. To understand the specifics, one would need to examine the contract's Statement of Work (SOW) or associated technical exhibits, which would list the types of components, applicable aircraft models, and required repair procedures.

What is the justification for the sole-source award, and were there any attempts to compete it?

The data indicates the contract was 'NOT COMPETED' and the 'ct' field is 'NOT COMPETED'. This strongly suggests a sole-source justification was applied. Common reasons for sole-source awards include unique capabilities of a single contractor, urgent and compelling needs where competition is not feasible, or when only one responsible source exists. Without access to the specific justification documentation (e.g., Justification and Approval - J&A), the precise reason remains unknown. Typically, agencies must publicly post sole-source justifications, allowing for potential challenges.

How does the Cost Plus Fixed Fee (CPFF) contract type influence cost control and contractor incentives?

A Cost Plus Fixed Fee (CPFF) contract reimburses the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves uncertainty. While the fixed fee provides some incentive for the contractor to control costs (as higher costs don't increase their profit), the primary risk of cost overrun lies with the government. The contractor is incentivized to complete the work, but the government bears the financial burden if costs exceed projections. Effective oversight and clear performance metrics are crucial to manage costs under a CPFF arrangement.

What is the historical spending pattern for this type of service with Northrop Grumman or the Department of the Air Force?

The provided data represents a single contract award. To analyze historical spending patterns, one would need to query federal procurement databases (like FPDS or USASpending) for all contracts awarded to Northrop Grumman Systems Corporation for aircraft structural component maintenance and repair, as well as similar contracts awarded by the Department of the Air Force to other vendors. This would involve looking at spending trends over multiple fiscal years, identifying the frequency and value of such contracts, and comparing spending across different contractors and agencies to establish a baseline.

Are there any performance metrics or key performance indicators (KPIs) associated with this contract?

The provided data does not explicitly list performance metrics or Key Performance Indicators (KPIs) for this contract. In a Cost Plus Fixed Fee (CPFF) contract, especially for maintenance and repair, KPIs are typically defined in the Statement of Work (SOW) or contract clauses. These might include metrics related to turnaround time for repairs, quality of workmanship (e.g., defect rates), adherence to technical specifications, and delivery schedules. The effectiveness of the contract's value for money heavily depends on the establishment and rigorous monitoring of these KPIs.

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: 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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline