DoD's $195M Northrop Grumman contract for aircraft manufacturing saw significant cost growth over its 3.7-year duration

Contract Overview

Contract Amount: $194,808,966 ($194.8M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2007-11-21

End Date: 2011-08-05

Contract Duration: 1,353 days

Daily Burn Rate: $144.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE AWARD FEE

Sector: Defense

Official Description: TIME & MATERIAL. OVER AND ABOVE.

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $194.8 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: TIME & MATERIAL. OVER AND ABOVE. Key points: 1. The contract utilized a Time & Material pricing structure, which can lead to cost overruns if not carefully managed. 2. Awarded as a sole-source contract, it bypassed competitive bidding, potentially impacting price discovery and value for money. 3. The contract experienced significant duration and potential for 'over and above' work, increasing cost uncertainty. 4. Northrop Grumman's extensive experience in defense contracting suggests a strong technical capability, but also raises questions about market concentration. 5. The fixed-price award fee structure aimed to incentivize performance but the overall cost trajectory warrants scrutiny. 6. The lack of competition is a key risk indicator for potential overpricing and reduced innovation.

Value Assessment

Rating: questionable

Benchmarking this contract's value is challenging due to its sole-source nature and the 'over and above' clause, which allows for scope expansion. The Time & Material pricing model, while flexible, often leads to higher final costs compared to fixed-price contracts, especially when project requirements evolve. Without comparable competitive bids or detailed cost breakdowns, assessing whether the $195 million spent represents a fair price for the services rendered is difficult. The significant duration and potential for scope creep suggest a risk of inefficient resource allocation.

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. This approach is typically used when only one vendor possesses the necessary capabilities or when urgency dictates a rapid award. The absence of competition limits the government's ability to leverage market forces to secure the best possible price and terms. It also means that taxpayers did not benefit from the potential cost savings and innovation that a competitive bidding process could have generated.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the best possible price. The lack of competition removes a key mechanism for ensuring cost-effectiveness and value for taxpayer dollars.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Air Force, receiving critical aircraft manufacturing services. The contract supports the maintenance, modification, or production of specific aircraft platforms, ensuring operational readiness. Geographic impact is primarily centered around Northrop Grumman's facilities in California, where the work was performed. The contract likely supports a specialized workforce within Northrop Grumman, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Time & Material pricing structure can lead to cost overruns and reduced cost certainty.
Potential for 'over and above' work introduces scope creep and budget unpredictability.
Lack of transparency in cost justification due to sole-source nature.
Long contract duration increases the risk of cost escalation over time.

Positive Signals

Northrop Grumman is a major defense contractor with extensive experience in aircraft manufacturing.
The contract likely addresses a critical need for the Air Force's operational capabilities.
The fixed-price award fee structure attempts to align contractor performance with government objectives.
The contract was awarded to an established entity with a proven track record in the sector.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant technological complexity, and substantial government spending. Major players like Northrop Grumman dominate the landscape, often securing large, long-term contracts. Spending in this sector is heavily influenced by national security priorities and defense budgets. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of aircraft manufacturing, but overall defense procurement runs into hundreds of billions annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the 'ss: false' flag suggests it was not a small business prime award. This implies that the primary contract was awarded to a large business, Northrop Grumman. While large prime contractors often have subcontracting plans that include small businesses, the absence of a direct set-aside means opportunities for small businesses are not guaranteed and depend on the prime's subcontracting strategy. This could limit direct opportunities for small businesses to participate in this specific contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force and the Department of Defense's contracting and program management offices. Accountability measures would be tied to the contract's performance clauses and award fee structure. Transparency is limited due to the sole-source nature and the Time & Material pricing model, which often involves less detailed public cost breakdowns compared to fixed-price contracts. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Production and Modification Programs
Defense Logistics and Sustainment Contracts
Aerospace Research and Development
Air Force Weapon Systems Procurement
Major Defense Acquisition Programs

Risk Flags

Sole-source award
Time and Material pricing
Potential for cost overruns
Lack of competitive bidding
Scope creep risk ('over and above' clause)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $194.8 million to NORTHROP GRUMMAN SYSTEMS CORP. TIME & MATERIAL. OVER AND ABOVE.

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 $194.8 million.

What is the period of performance?

Start: 2007-11-21. End: 2011-08-05.

What was the specific type of aircraft or system this contract supported, and what was its operational importance to the Air Force?

The provided data does not specify the exact aircraft or system. However, given the contractor (Northrop Grumman) and the sector (Aircraft Manufacturing), it likely pertains to a significant platform such as a bomber, fighter jet, reconnaissance aircraft, or a specialized support aircraft. The operational importance would be tied to the platform's role in intelligence, surveillance, reconnaissance (ISR), strategic deterrence, air superiority, or tactical support missions. Without further details, the precise impact remains speculative, but contracts of this magnitude typically support critical national security assets.

How did the 'over and above' clause impact the final cost and scope of the contract compared to initial estimates?

The 'over and above' (O&A) clause allows for work that is outside the originally defined scope of the contract. In a Time & Material (T&M) contract, O&A work is typically billed at hourly rates plus material costs. This clause significantly increases the potential for cost growth and scope creep, as new requirements or unforeseen issues can be added without a full re-competition. The final cost of $195 million likely includes substantial O&A work, making it difficult to ascertain the cost of the originally contracted effort. This flexibility, while sometimes necessary, inherently reduces cost predictability and can lead to taxpayer expense beyond initial projections.

What were the specific performance metrics tied to the 'award fee' component of the contract, and how were they measured?

The data indicates a 'FIXED PRICE AWARD FEE' (FPAF) contract type. In an FPAF structure, the contractor receives a base fixed fee plus an award fee determined by the government based on performance against specific criteria. These criteria are typically outlined in the contract's Performance Work Statement (PWS) and could include factors like on-time delivery, quality of work, technical performance, cost control (within the T&M framework), and responsiveness to government requests. The government's Contracting Officer's Representative (COR) or Technical Monitor would assess performance, and a determination would be made on the amount of award fee earned, ranging from zero to a maximum amount. The specific metrics and their weighting are not detailed in the provided summary.

Given the sole-source nature, what justification did the Air Force provide for not competing this requirement?

Sole-source justifications are typically required when a competitive process is deemed impractical or not in the government's best interest. Common reasons include the existence of only one responsible source capable of providing the required service or item (e.g., unique technology, proprietary data), urgent and compelling needs where competition cannot be accomplished in time, or specific follow-on requirements where a previous competitive award limits options. The specific justification for this Northrop Grumman contract would be documented in a Justification and Approval (J&A) document, which is often publicly available through sources like the Federal Business Opportunities (now SAM.gov) archive, though its accessibility depends on the contract's age and classification.

How does the $195 million total award compare to historical spending on similar aircraft manufacturing contracts by the Department of Defense?

Comparing this $195 million award requires context regarding the specific aircraft platform, its complexity, and the contract's duration (3.7 years). Large-scale aircraft manufacturing, modification, or sustainment contracts awarded to major defense contractors often run into hundreds of millions or even billions of dollars. For instance, contracts for new fighter jet production, bomber upgrades, or extensive fleet sustainment programs can far exceed this amount. However, for specific component manufacturing, specialized modifications, or sustainment of a particular subsystem, $195 million over nearly four years could represent significant spending. Without knowing the exact scope, it's challenging to benchmark precisely, but it falls within the typical range for substantial, non-production-line aircraft-related work within the DoD.

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: FIXED PRICE AWARD FEE (M)

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

Financial Breakdown

Contract Ceiling: $194,808,966

Exercised Options: $194,808,966

Current Obligation: $194,808,966

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline