DoD awards $29.3M sole-source contract for electronic components, raising value-for-money questions

Contract Overview

Contract Amount: $29,264,057 ($29.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2024-01-01

End Date: 2028-12-31

Contract Duration: 1,826 days

Daily Burn Rate: $16.0K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: B-1 LOA PBL

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $29.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: B-1 LOA PBL Key points: 1. Contract awarded without competition, limiting price discovery and potentially increasing costs. 2. Long-term contract duration (5 years) may not align with rapidly evolving technology needs. 3. Sole-source award suggests potential reliance on a single supplier, posing supply chain risks. 4. Lack of performance data makes it difficult to assess contractor efficiency and effectiveness. 5. Contract type (Firm Fixed Price) offers some cost certainty but may not incentivize efficiency gains. 6. Focus on electronic components highlights critical infrastructure needs within the Defense sector.

Value Assessment

Rating: questionable

The $29.3 million contract value for electronic components is difficult to benchmark due to the sole-source nature of the award. Without competitive bids, it's challenging to determine if the pricing reflects fair market value or if there's an opportunity for cost savings. The long duration of the contract (5 years) also raises questions about whether the pricing will remain competitive throughout its term, especially in a sector with potentially volatile component costs. Further analysis would require access to historical pricing data for similar components or independent cost estimates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required goods or services, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition means that potential cost savings that could arise from a bidding process are likely foregone, and the government has limited leverage to negotiate the best possible price. The absence of multiple bidders also prevents a broader market assessment of available solutions and pricing.

Taxpayer Impact: Taxpayers may be paying a premium for these electronic components due to the lack of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price, potentially leading to higher overall expenditure for the Department of Defense.

Public Impact

The primary beneficiaries are the Department of Defense, which will receive critical electronic components for its operations. The contract supports the maintenance and readiness of defense systems requiring these specific components. The geographic impact is primarily within Virginia, where the contractor is located. Workforce implications include continued employment for personnel involved in the manufacturing and supply of these components at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may lead to higher costs for taxpayers.
Long contract duration could result in outdated technology or unfavorable pricing over time.
Reliance on a single supplier creates potential supply chain vulnerabilities.
Lack of transparency in the procurement process hinders independent value assessment.

Positive Signals

Firm Fixed Price contract provides cost certainty for the awarded amount.
Contract supports critical defense logistics and readiness requirements.
Awardee is a large, established defense contractor with significant experience.

Sector Analysis

The contract falls within the 'Other Electronic Component Manufacturing' sector, a critical sub-sector supporting various defense and commercial industries. The market for specialized electronic components can be characterized by high barriers to entry, proprietary technologies, and significant R&D investment. Spending in this area is essential for maintaining technological superiority in defense. Comparable spending benchmarks are difficult to establish without more specific component details, but the overall defense electronics market is substantial, with significant government procurement.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. The award to a large prime contractor like Northrop Grumman suggests that the primary focus is on established capabilities rather than fostering small business participation. This approach may limit opportunities for small businesses to contribute to this specific defense supply chain, although they may be involved in lower tiers of the supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring contractor performance and compliance with contract terms. The Inspector General of the Department of Defense may also conduct audits or investigations if concerns regarding waste, fraud, or abuse arise. Transparency is limited due to the sole-source nature, but contract award data is publicly available through federal procurement databases.

Related Government Programs

Defense Logistics Agency (DLA) Procurement
Northrop Grumman Systems Corporation Contracts
Electronic Component Manufacturing Contracts
Sole-Source Defense Procurements
Long-Term Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Long contract duration
Potential for price inflation
Supply chain risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. B-1 LOA PBL

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Logistics Agency).

What is the total obligated amount?

The obligated amount is $29.3 million.

What is the period of performance?

Start: 2024-01-01. End: 2028-12-31.

What is Northrop Grumman Systems Corporation's track record with the Department of Defense, particularly concerning sole-source contracts for electronic components?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of supplying complex systems and components to the Department of Defense. While specific data on their sole-source contracts for electronic components is not readily available in the public domain, their extensive experience suggests a capacity to fulfill such requirements. However, the nature of sole-source awards means that direct comparisons of their performance against competitors on similar contracts are not possible. Past performance reviews and contract close-out data, if accessible, would provide a more granular understanding of their reliability and adherence to cost and schedule on previous sole-source engagements.

How does the $29.3 million contract value compare to similar sole-source awards for electronic components within the DoD?

Direct comparison of this $29.3 million contract value to similar sole-source awards for electronic components is challenging without specific details on the exact nature and quantity of the components. Sole-source procurements inherently lack the price discovery mechanism of competitive bidding, making external benchmarking difficult. Generally, the value suggests a significant quantity or high-value specialized components. To assess value for money, one would ideally need access to internal DoD cost estimates, historical pricing for these specific components, or data from comparable sole-source awards that are publicly disclosed. The absence of such data makes a definitive value assessment problematic.

What are the primary risks associated with a sole-source award for critical electronic components, and how are they mitigated?

The primary risks associated with a sole-source award for critical electronic components include potential overpricing due to lack of competition, limited innovation, and supply chain vulnerability if the sole provider faces disruptions. Mitigation strategies often involve rigorous government cost analysis, negotiation of favorable terms, and potentially establishing alternative sources or stockpiling critical items. For this contract, the long duration (5 years) exacerbates the risk of price escalation or technological obsolescence. The DoD would ideally have internal mechanisms to validate the necessity of a sole-source award and ensure the contractor's pricing is justified through detailed cost breakdowns and audits.

What is the expected program effectiveness or outcome of this contract for the Department of Defense?

The expected outcome of this contract is the reliable supply of essential electronic components to support the Department of Defense's operational readiness and sustainment requirements. These components are likely integral to various defense systems, ensuring their functionality and performance. The effectiveness will be measured by the contractor's ability to deliver the specified components on time, within the agreed-upon quality standards, and at the contracted price. Given the sole-source nature, the DoD is relying on Northrop Grumman's established capabilities to meet these needs without interruption, thereby maintaining the operational effectiveness of the platforms these components support.

What have been historical spending patterns for electronic components by the Defense Logistics Agency (DLA) or similar DoD entities?

Historical spending patterns for electronic components by the Defense Logistics Agency (DLA) and other Department of Defense entities are substantial, reflecting the critical role of electronics in modern military systems. DLA, in particular, manages a vast inventory and procurement process for a wide array of parts, including electronic components, to support all branches of the military. While specific aggregate spending figures for 'electronic components' can vary based on classification, it represents a significant portion of the DoD's overall procurement budget. Trends often show a continuous demand for both standard and highly specialized components, with increasing complexity and integration driving costs. Sole-source awards are not uncommon for highly specialized or proprietary items, but the aggregate data would likely show a mix of competitive and non-competitive procurements.

Are there any specific performance metrics or key performance indicators (KPIs) associated with this contract that are publicly available?

Publicly available information regarding specific performance metrics or Key Performance Indicators (KPIs) for this contract is limited. While the contract type is Firm Fixed Price, which implies certain delivery and quality expectations, the detailed operational KPIs are typically considered internal to the government and contractor relationship. For sole-source contracts, especially those involving complex components, the government relies on its program office and contracting officers to monitor performance against the contract's statement of work. Without access to contract line item details or performance reports, it is not possible to ascertain the specific KPIs being tracked for this award.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 7575 COLSHIRE DR TOWER 1, MCLEAN, VA, 22102

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $29,264,057

Exercised Options: $29,264,057

Current Obligation: $29,264,057

Subaward Activity

Number of Subawards: 17

Total Subaward Amount: $7,880,377

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRHA124D0001

IDV Type: IDC

Timeline