Northrop Grumman awarded $362.7M contract for aircraft engine systems engineering, with significant cost-plus fixed-fee structure

Contract Overview

Contract Amount: $28,988,865 ($29.0M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2005-12-14

End Date: 2011-09-30

Contract Duration: 2,116 days

Daily Burn Rate: $13.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200604!000053!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD60 ! !20051214!20051214!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000014772280!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A1B!AIRCRAFT ENGINES AND SPARES !000 !NOT DISCERNABLE !336412!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!C!Y! ! ! ! ! ! !0001! !

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $29.0 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: 200604!000053!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD60 ! !20051214!20051214!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55156!037!06!PALMDALE !LOS … Key points: 1. Contract awarded via a non-competitive process, raising questions about price discovery and potential overpayment. 2. Significant portion of the contract value is tied to cost-plus fixed-fee, which can incentivize higher costs. 3. Long contract duration of over 5 years suggests a need for sustained support but also potential for cost escalation. 4. The contract is for systems engineering services, indicating a complex and critical support role for aircraft engines. 5. The awardee, Northrop Grumman, is a major defense contractor with extensive experience in this sector. 6. The contract's value is substantial, representing a significant investment in maintaining critical defense assets.

Value Assessment

Rating: questionable

The contract's cost-plus fixed-fee (CPFF) structure, while common for R&D and complex services, carries inherent risks of cost overruns. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or alternative providers. The total award of $362.7 million over approximately six years suggests a high per-unit cost for systems engineering services, but a precise comparison is hindered by the lack of detailed cost breakdowns and competitive data. The absence of competition means taxpayers are reliant on the contractor's cost controls and the government's oversight to ensure value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source, non-competitive procedure. This indicates that the agency determined only one source, Northrop Grumman Systems Corporation, could provide the required services. Reasons for sole-sourcing can include unique capabilities, proprietary technology, or urgent needs where competition is not feasible. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and efficiencies typically driven by a competitive bidding environment. This can lead to higher overall costs for the government.

Public Impact

The primary beneficiaries are the U.S. Air Force and potentially other branches relying on the specific aircraft engine systems supported by these services. Services delivered include critical systems engineering, ensuring the performance, reliability, and maintainability of complex aircraft engine components. The geographic impact is primarily centered around the contractor's facilities in California, but the ultimate impact is on national defense readiness. This contract supports a highly skilled workforce of engineers and technical specialists within Northrop Grumman.

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 potential taxpayer savings.
Long contract duration increases exposure to potential cost escalations over time.
Lack of detailed cost breakdowns makes independent value assessment challenging.

Positive Signals

Awardee is a highly experienced and reputable defense contractor.
Systems engineering services are critical for maintaining complex defense assets.
Contract supports essential national defense capabilities.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft engine systems engineering. This is a highly specialized and capital-intensive industry dominated by a few large prime contractors. The market for such specialized engineering services is often characterized by high barriers to entry due to technical expertise, security clearances, and existing relationships with government agencies. Comparable spending benchmarks are difficult to establish without more specific service details, but large-scale engineering support contracts for major defense platforms typically run into hundreds of millions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal, unless Northrop Grumman voluntarily engages small businesses for specific components or services not detailed here.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the relevant program office within the Department of Defense. Accountability measures would include performance reviews, milestone tracking, and financial audits, particularly given the CPFF structure. Transparency is limited due to the sole-source nature and the proprietary aspects of systems engineering, but contract awards and basic details are usually publicly available through federal procurement databases.

Related Government Programs

Aircraft Engine Maintenance and Repair
Aerospace Systems Engineering
Defense Logistics Support
Air Force Weapon Systems Support
Major Defense Acquisition Programs

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of detailed cost transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.0 million to NORTHROP GRUMMAN SYSTEMS CORP. 200604!000053!5700!FA8102!OC-ALC/LAD !F3365799D0028 !A!N! !Y!SD60 ! !20051214!20051214!362686958!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!HORNETT WAY !EL SEGUNDO !CA!90245!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000014772280!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A1B!AIRCRAFT ENGINES AND SPARES !000 !NOT DISCERNABLE !336412!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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $29.0 million.

What is the period of performance?

Start: 2005-12-14. End: 2011-09-30.

What is the specific nature of the systems engineering services provided under this contract?

The provided data indicates the contract is for 'SYSTEMS ENGINEERING SERVICES' related to 'AIRCRAFT ENGINES AND SPARES' (PSC code 336412). While the specific tasks are not detailed, systems engineering in this context typically involves the design, integration, testing, and lifecycle management of complex systems. For aircraft engines, this could encompass areas like performance optimization, reliability analysis, maintainability engineering, diagnostics, prognostics, and ensuring compliance with stringent safety and operational requirements. It involves a holistic approach to managing the technical complexities throughout the engine's operational life.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for similar services?

Cost Plus Fixed Fee (CPFF) contracts are common for research and development, complex services, or situations where the scope of work is not well-defined at the outset. In a CPFF contract, the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This structure shifts much of the cost risk to the government compared to fixed-price contracts. For systems engineering, especially on evolving or complex platforms, CPFF can be justified. However, it generally offers less incentive for cost control compared to fixed-price incentives or firm-fixed-price contracts. Benchmarking requires comparing the fixed fee percentage and the total allowable costs against similar CPFF contracts for comparable services.

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

Sole-source awards, especially for large dollar amounts like $362.7 million, carry significant risks. The primary risk is the lack of price competition, which can lead to the government paying a higher price than if multiple bidders had competed. There's also a reduced incentive for the contractor to innovate or become more efficient, as they face no direct competitive pressure. Furthermore, it can limit the government's options if performance issues arise, as switching contractors may be difficult or impossible. Ensuring robust government oversight and negotiation is crucial to mitigate these risks.

What is Northrop Grumman's track record with similar large-scale defense engineering contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing large-scale, complex engineering and manufacturing programs for the U.S. military and international allies. They have extensive experience in aerospace, including aircraft systems, electronics, and information systems. While specific performance metrics for this particular contract are not detailed in the provided data, Northrop Grumman generally has a substantial portfolio of high-value contracts. Their track record typically involves managing intricate supply chains, advanced technological development, and long-term sustainment services for major defense platforms.

How does the contract duration (2116 days) impact the overall value and risk?

A contract duration of 2116 days (approximately 5.8 years) is substantial for systems engineering services. This long duration suggests a need for sustained, ongoing support for the aircraft engine systems throughout a significant portion of their lifecycle. While it provides stability for both the government and the contractor, it also increases the risk of cost escalation due to inflation, changes in technology, or unforeseen program requirements. The CPFF structure, combined with a long duration, necessitates vigilant contract management and periodic reviews to ensure continued value and control costs over the contract's life.

What is the significance of the PSC code '336412' (Aircraft Engines and Engine Parts) in relation to the services provided?

The Product and Service Code (PSC) '336412' specifically identifies 'Aircraft Engines and Engine Parts.' While the contract is for 'Systems Engineering Services,' linking it to this PSC code indicates that the engineering support is directly related to the design, development, sustainment, or modification of aircraft engines and their components. This implies a deep technical focus on the intricacies of propulsion systems, which are critical, complex, and highly regulated elements of military aircraft.

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 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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline