DoD's $44.9M Northrop Grumman contract for aircraft manufacturing shows limited competition and a long duration

Contract Overview

Contract Amount: $44,897,055 ($44.9M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2008-05-29

End Date: 2013-06-30

Contract Duration: 1,858 days

Daily Burn Rate: $24.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ESTABLISH O&A CLIN AND REQUEST A ROM FOR ADDITIONAL PSLU EFFORTS.

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $44.9 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: ESTABLISH O&A CLIN AND REQUEST A ROM FOR ADDITIONAL PSLU EFFORTS. Key points: 1. The contract's value of $44.9 million over 1,858 days suggests a significant investment in aircraft manufacturing capabilities. 2. Awarded as 'NOT COMPETED', this indicates a lack of broad market engagement and potential for higher costs. 3. The 'COST PLUS FIXED FEE' contract type carries inherent risk of cost overruns, requiring robust oversight. 4. The duration of nearly five years points to a long-term need for these specialized aircraft manufacturing services. 5. Northrop Grumman's role as the sole contractor highlights their specialized expertise in this niche area. 6. The absence of small business participation raises questions about broader economic impact and subcontracting opportunities.

Value Assessment

Rating: questionable

Benchmarking this contract's value is challenging due to its sole-source nature and specific application within aircraft manufacturing. The 'COST PLUS FIXED FEE' structure, while allowing for flexibility, often leads to higher final costs compared to fixed-price contracts. Without comparable sole-source awards or detailed cost breakdowns, a precise value-for-money assessment is difficult. However, the extended duration and specialized nature suggest a substantial, albeit potentially less cost-efficient, investment.

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 a specific contractor possesses unique capabilities or when urgency dictates a rapid award. The lack of competition limits the government's ability to leverage market forces to achieve the best possible pricing and terms. It suggests that Northrop Grumman was the only viable option for this particular requirement.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. The government missed an opportunity to explore potentially more cost-effective solutions from a wider range of suppliers.

Public Impact

The primary beneficiary is the Department of the Air Force, receiving specialized aircraft manufacturing services. This contract supports the production or modification of aircraft, crucial for national defense operations. The geographic impact is centered in California, where Northrop Grumman Systems Corp is located. The contract likely sustains a workforce of skilled engineers, technicians, and manufacturing personnel within Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost-plus contract type introduces risk of cost overruns without strong oversight.
Long contract duration (1858 days) may indicate a lack of agile procurement or evolving requirements.
No small business set-aside or reported subcontracting suggests limited opportunities for smaller firms.
Lack of competition could stifle innovation from other potential suppliers in the long run.

Positive Signals

Award to a major defense contractor like Northrop Grumman suggests access to specialized, high-end capabilities.
The contract addresses a specific, likely critical, need within the Department of Defense's aircraft manufacturing portfolio.
The extended duration implies a stable, long-term requirement, providing predictability for the contractor and the agency.

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 R&D investment, and long production cycles. Major players like Northrop Grumman dominate, often securing large, long-term government contracts due to their specialized expertise and established infrastructure. Spending in this area is directly tied to defense budgets and national security priorities.

Small Business Impact

This contract does not appear to have included a small business set-aside, nor is there information suggesting significant subcontracting to small businesses. This is common for large, complex sole-source awards where the prime contractor possesses highly specialized capabilities. Consequently, the direct economic impact on the small business ecosystem for this specific award is likely minimal, missing opportunities for broader participation and economic development.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the 'COST PLUS FIXED FEE' structure, rigorous financial oversight and auditing would be essential to manage costs and prevent overruns. Transparency may be limited due to the sole-source nature, but contract performance reviews and milestone tracking are standard accountability measures. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Manufacturing Services
Defense Production Contracts
Air Force Procurement
Northrop Grumman Contracts
Sole-Source Defense Awards

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $44.9 million to NORTHROP GRUMMAN SYSTEMS CORP. ESTABLISH O&A CLIN AND REQUEST A ROM FOR ADDITIONAL PSLU EFFORTS.

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 $44.9 million.

What is the period of performance?

Start: 2008-05-29. End: 2013-06-30.

What is Northrop Grumman's track record with similar sole-source aircraft manufacturing contracts?

Northrop Grumman Systems Corp has a long history of securing large, sole-source contracts with the Department of Defense, particularly in areas requiring advanced aerospace technology and manufacturing capabilities. Their track record often involves complex, high-value programs where they possess unique expertise or are the incumbent provider. While specific details on past sole-source aircraft manufacturing contracts require deeper analysis of historical procurement data, their position as a major defense prime contractor suggests a pattern of being selected for critical, non-competed requirements due to specialized knowledge, proprietary technology, or established program integration.

How does the cost-plus-fixed-fee structure compare to other contract types for aircraft manufacturing?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined or involves significant uncertainty, common in R&D or complex manufacturing. It reimburses the contractor for allowable costs plus a fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility but shifts cost risk to the government, potentially leading to higher overall expenditures if not managed tightly. For aircraft manufacturing, FFP is generally preferred for well-defined production runs to ensure price certainty, while CPFF might be employed for initial development, prototyping, or unique modifications where requirements are still evolving.

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

The primary risks associated with a sole-source award of this magnitude ($44.9M) include a lack of competitive pressure, which can lead to inflated pricing and reduced value for money. The government may not benefit from the innovation or cost efficiencies that multiple bidders could offer. There's also a risk of contractor complacency due to the guaranteed business. Furthermore, without a competitive process to validate capabilities, there's a heightened reliance on the government's due diligence in selecting the 'best' sole source, and potential for lock-in if switching contractors later would be prohibitively expensive or disruptive.

How does the 1858-day duration impact the overall value and risk of this contract?

The 1858-day duration (approximately 5 years) for this contract indicates a long-term commitment to specific aircraft manufacturing efforts. This extended timeline can provide stability for both the contractor and the agency, ensuring continuity of critical capabilities. However, it also increases the risk of requirements becoming outdated, technological advancements being missed, or market conditions changing significantly during the contract period. For a cost-plus contract, a longer duration amplifies the potential for cost growth if not meticulously managed. It suggests a strategic, long-term need rather than a short-term or rapidly evolving requirement.

What are the implications of 'NOT COMPETED' for government procurement efficiency?

Awarding a contract as 'NOT COMPETED' bypasses the standard competitive procurement process, which is designed to ensure fair and open market access, promote price competition, and achieve the best value for the government. While justified in specific circumstances (e.g., sole-source provider, urgent need), frequent use of non-competitive awards can reduce overall procurement efficiency by limiting opportunities for new vendors, potentially leading to higher prices, and requiring more intensive justification and approval processes. It can also signal a lack of proactive market research or planning by the agency.

What is the typical market size and structure for specialized aircraft manufacturing services?

The specialized aircraft manufacturing services market is typically dominated by a few large, established defense contractors like Northrop Grumman, Lockheed Martin, and Boeing. These firms possess the extensive infrastructure, specialized workforce, security clearances, and technological expertise required for complex military aircraft programs. The market size is substantial, directly correlating with global defense spending, but it is highly concentrated. Barriers to entry are extremely high due to capital investment, R&D costs, and stringent regulatory and security requirements, making it difficult for smaller or new companies to compete for major contracts.

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

Financial Breakdown

Contract Ceiling: $44,897,055

Exercised Options: $44,897,055

Current Obligation: $44,897,055

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline