Northrop Grumman awarded $32M for aircraft manufacturing, a sole-source contract with cost-plus terms

Contract Overview

Contract Amount: $31,981,701 ($32.0M)

Contractor: Northrop Grumman Systems Corp

Awarding Agency: Department of Defense

Start Date: 2009-01-01

End Date: 2013-12-31

Contract Duration: 1,825 days

Daily Burn Rate: $17.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: B-2 CY09 INTERIM ICS-PBL

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93550

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to NORTHROP GRUMMAN SYSTEMS CORP for work described as: B-2 CY09 INTERIM ICS-PBL Key points: 1. The contract's cost-plus award fee structure allows for flexibility but requires robust oversight to ensure value. 2. Sole-source procurement limits competitive pressure, potentially impacting price efficiency. 3. The contract duration of five years suggests a long-term need for these aircraft manufacturing services. 4. Performance context is critical given the cost-plus nature, emphasizing the need for clear milestones and deliverables. 5. The contract falls within the aircraft manufacturing sector, a key area for defense spending. 6. No small business set-aside was applied, indicating a focus on large prime contractors for this requirement.

Value Assessment

Rating: fair

Assessing the value for money on this cost-plus award fee contract is challenging without detailed performance data and cost breakdowns. The sole-source nature inherently limits direct price comparisons to similar competitive contracts. However, cost-plus contracts, while offering flexibility for complex or uncertain projects, can sometimes lead to higher costs if not managed tightly. Benchmarking against other sole-source aircraft manufacturing contracts would be necessary for a more precise value assessment.

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, technology, or when urgency dictates a direct award. The lack of competition means that price discovery through market forces was not a factor in this procurement, potentially leading to a higher price than if it had been competed.

Taxpayer Impact: For taxpayers, sole-source contracts can mean a lack of assurance that the best possible price was obtained, as competitive bidding processes are designed to drive down costs.

Public Impact

The primary beneficiary is the Department of Defense, which receives critical aircraft manufacturing services. The services delivered are essential for maintaining and potentially developing military aviation capabilities. The contract's geographic impact is primarily linked to Northrop Grumman's facilities in California, where the work is performed. Workforce implications include employment opportunities for skilled labor in the aerospace and manufacturing sectors within California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure necessitates vigilant oversight to prevent cost overruns and ensure performance aligns with incentives.
Sole-source award limits transparency and competitive pressure, potentially impacting overall cost-effectiveness for taxpayers.
Lack of competition raises questions about whether alternative solutions or more cost-effective providers were overlooked.
The extended duration of the contract requires ongoing monitoring to ensure continued relevance and value.

Positive Signals

Award to a major defense contractor like Northrop Grumman suggests access to specialized expertise and established production capabilities.
The contract addresses a specific, likely critical, defense need within aircraft manufacturing.
The cost-plus award fee structure, if managed effectively, can incentivize performance and innovation.
The contract duration indicates a stable, long-term requirement, potentially leading to efficiencies through sustained production.

Sector Analysis

The aircraft manufacturing sector is a significant component of the broader aerospace and defense industry. This contract, valued at approximately $32 million over five years, represents a portion of the government's investment in maintaining and advancing its aerial fleet capabilities. Spending in this sector is often characterized by high barriers to entry, complex technological requirements, and long procurement cycles. Comparable spending benchmarks would typically involve other large-scale aircraft production or sustainment contracts within the Department of Defense.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This suggests that the primary focus was on the prime contractor's capabilities. Consequently, the direct impact on the small business ecosystem for this specific award is likely minimal, although Northrop Grumman may engage small businesses as subcontractors through its own procurement processes.

Oversight & Accountability

Given the cost-plus award fee structure and sole-source nature, robust oversight is crucial. This would typically involve detailed audits of costs, performance reviews against defined award criteria, and regular progress reporting. The Defense Contract Management Agency (DCMA) is listed as the servicing agency, indicating their role in contract administration and oversight. Transparency would be enhanced through public reporting of performance metrics and cost justifications, though this is often limited for sole-source defense contracts.

Related Government Programs

Aircraft Production
Defense Manufacturing
Military Aircraft Sustainment
Aerospace Industry Contracts

Risk Flags

Sole-source procurement
Cost-plus contract type
Potential for cost overruns
Limited competitive transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to NORTHROP GRUMMAN SYSTEMS CORP. B-2 CY09 INTERIM ICS-PBL

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 $32.0 million.

What is the period of performance?

Start: 2009-01-01. End: 2013-12-31.

What is Northrop Grumman's track record with similar cost-plus award fee contracts within the Department of Defense?

Northrop Grumman has a long history of working with the Department of Defense across various complex programs, many of which have utilized cost-plus contract types, including cost-plus award fee (CPAF). CPAF contracts are common for programs where performance is difficult to define precisely upfront or involves significant research and development. While CPAF allows for flexibility and incentivizes contractor performance through award fees tied to specific metrics, it also necessitates rigorous government oversight to manage costs and ensure that award fees are earned based on demonstrable achievements. Northrop Grumman's experience suggests they are adept at navigating these contract structures, but the success and value derived are heavily dependent on the government's ability to set clear performance standards and diligently monitor execution.

How does the $32 million value compare to other sole-source aircraft manufacturing contracts awarded by the DoD?

The $32 million value for this five-year contract is relatively modest when compared to the multi-billion dollar programs typically associated with major aircraft development or large-scale production runs. Sole-source awards in aircraft manufacturing can range significantly based on the scope – from specialized component manufacturing or modification services to entire platform development. A $32 million contract might represent a specific upgrade, a limited production run of a particular variant, or sustainment services for an existing fleet. To provide a precise comparison, one would need to analyze contracts with similar scopes (e.g., modification, sustainment, limited production) awarded on a sole-source basis within the DoD's aircraft manufacturing portfolio over a similar timeframe.

What are the primary risks associated with a sole-source, cost-plus award fee contract for aircraft manufacturing?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to higher prices than might be achieved through open competition. The government may not be getting the best possible value. Secondly, the cost-plus award fee (CPAF) structure, while incentivizing performance, carries inherent risks of cost escalation if not managed meticulously. Contractors may have less incentive to control costs tightly compared to fixed-price contracts, and the government must invest significant resources in oversight to ensure costs are reasonable and award fees are justified. For aircraft manufacturing, risks also include potential schedule delays, technical challenges, and ensuring the final product meets stringent military specifications.

What does the 'Aircraft Manufacturing' (NAICS 336411) classification imply about the services rendered?

The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' indicates that the contract is for the production of complete aircraft, or parts and auxiliary equipment for aircraft. This could encompass the manufacturing of airframes, engines, avionics, or other critical components. Given the context of a Department of Defense contract, it likely pertains to military aircraft, potentially including new production, modification of existing platforms, or the manufacturing of specialized parts necessary for defense aviation. The specific nature of the services would be detailed in the contract's statement of work, but the NAICS code confirms the core activity falls within the manufacturing domain of the aerospace industry.

How has federal spending in the 'Aircraft Manufacturing' sector evolved, and how does this contract fit?

Federal spending in the 'Aircraft Manufacturing' sector, particularly within the Department of Defense, has historically been substantial, driven by the need for advanced military aviation capabilities. Spending fluctuates based on geopolitical conditions, technological advancements, and specific platform modernization or replacement programs. This $32 million contract, awarded in 2009 for a five-year period, represents a specific, likely niche, requirement within the broader landscape of defense aircraft manufacturing. It is not indicative of a major new platform procurement but rather suggests ongoing production, modification, or sustainment activities. Analyzing historical spending trends for NAICS 336411 within DoD would reveal patterns of investment in different types of aircraft and related manufacturing activities.

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 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

Financial Breakdown

Contract Ceiling: $32,871,384

Exercised Options: $32,871,384

Current Obligation: $31,981,701

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F3365799D0028

IDV Type: IDC

Timeline