DoD's $24M aircraft parts contract awarded to Northrop Grumman raises questions on competition and value

Contract Overview

Contract Amount: $24,084,930 ($24.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2019-10-11

End Date: 2026-08-06

Contract Duration: 2,491 days

Daily Burn Rate: $9.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: RUDDER,AIRCRAFT,AIR

Place of Performance

Location: EL SEGUNDO, LOS ANGELES County, CALIFORNIA, 90245

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $24.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: RUDDER,AIRCRAFT,AIR Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (over 2 years) suggests a long-term need for these critical parts. 3. The contract is for aircraft parts, a sector with established players and potential for competitive bidding. 4. Lack of competition is a key risk indicator for potential overpayment and reduced innovation. 5. The contract's value, while substantial, needs benchmarking against similar sole-source awards. 6. Performance context is limited due to the sole-source nature, making value assessment challenging.

Value Assessment

Rating: questionable

Benchmarking the value of this $24 million contract is difficult without competitive data. As a sole-source award, there's no direct comparison to market rates derived from bidding. The fixed-price nature offers some cost certainty, but the absence of competition means the government may not be achieving the best possible price. Further analysis would require understanding the specific components and their market value, as well as historical pricing for similar sole-source procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit price discovery and can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium for these aircraft parts, as there was no market pressure to drive down prices. This also reduces the incentive for the contractor to offer the most cost-effective solution.

Public Impact

The Department of Defense benefits from the continued supply of critical aircraft parts necessary for maintaining operational readiness. This contract ensures the availability of specialized parts for specific aircraft platforms, supporting military aviation capabilities. The geographic impact is primarily within the defense supply chain, with potential downstream effects on military bases and operations. Workforce implications may include continued employment for personnel involved in the manufacturing and supply of these parts at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Lack of transparency in pricing due to no competitive bidding.
Potential for contractor lock-in, making future procurements difficult to compete.
Risk of not obtaining the most innovative or cost-effective solutions available in the market.

Positive Signals

Award to an established defense contractor with a track record in aerospace manufacturing.
Firm Fixed Price contract type provides cost certainty for the government.
Long-term contract duration suggests a stable and predictable supply chain for critical components.

Sector Analysis

The aerospace and defense manufacturing sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. This contract falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sub-sector. Spending in this area is crucial for maintaining military readiness and technological superiority. Comparable spending benchmarks would typically involve analyzing other sole-source awards for similar specialized aircraft components within the DoD, as well as the overall defense budget allocated to aircraft sustainment and parts procurement.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no explicit mention of subcontracting plans for small businesses. This suggests that opportunities for small businesses to participate in this specific contract may be limited, potentially impacting the small business defense contracting ecosystem. Future analysis could explore if Northrop Grumman has a broader subcontracting program that includes small businesses for other aspects of their operations.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA), responsible for ensuring contract compliance, quality, and fair pricing. Transparency is limited due to the sole-source nature, but contract awards are publicly reported. Inspector General (IG) investigations could be initiated if any fraud, waste, or abuse is suspected. The contract's fixed-price nature provides a degree of accountability for the contractor regarding cost overruns.

Related Government Programs

DoD Aircraft Parts Procurement
Northrop Grumman Defense Contracts
Sole-Source Defense Awards
Aircraft Component Manufacturing
Defense Logistics Agency Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. RUDDER,AIRCRAFT,AIR

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 $24.1 million.

What is the period of performance?

Start: 2019-10-11. End: 2026-08-06.

What is Northrop Grumman's track record with the Department of Defense for similar aircraft parts contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of supplying complex systems and components to the Department of Defense. They have extensive experience in aerospace manufacturing, including aircraft parts and related technologies. While specific data on all their past aircraft parts contracts is not detailed here, their overall profile suggests a significant and established relationship with the DoD. Analyzing their performance on previous sole-source awards, delivery timelines, and quality metrics for similar components would provide further insight into their reliability and value proposition for this specific contract. Publicly available contract databases often show a substantial volume of awards to Northrop Grumman across various defense programs, indicating their integral role in the defense supply chain.

How does the $24 million value of this contract compare to similar sole-source awards for aircraft parts?

Directly comparing the $24 million value of this sole-source contract to 'similar' awards is challenging without more specific details on the exact nature of the 'Aircraft Parts and Auxiliary Equipment'. However, in the defense sector, contracts in the tens of millions of dollars for specialized components are not uncommon, especially when dealing with sole-source justifications. To assess value, one would ideally benchmark this against other sole-source awards for comparable systems or components, looking at the quantity, complexity, and duration. The absence of competition means this figure represents the negotiated price rather than a market-tested one. Further analysis would involve examining the unit cost of the parts if known, and comparing that to industry benchmarks or historical pricing for similar sole-source procurements by the DoD or other agencies.

What are the primary risks associated with awarding a $24 million contract on a sole-source basis?

The primary risks associated with a sole-source award of this magnitude are significant. Firstly, the lack of competition means the government likely pays a higher price than it would in a competitive environment, as there is no market pressure to drive down costs. Secondly, it reduces the incentive for the contractor to innovate or offer the most efficient solutions, as they are guaranteed the business. Thirdly, it can lead to contractor 'lock-in,' making it difficult and potentially more expensive to switch suppliers or re-compete the contract in the future. Finally, there's a reduced level of transparency in pricing and performance justification, making it harder for oversight bodies to ensure optimal value for taxpayer money. This contract's duration further exacerbates these risks.

What is the historical spending pattern for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' by the Defense Logistics Agency?

Historical spending patterns for 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' by the Defense Logistics Agency (DLA) are substantial, reflecting the continuous need to maintain and operate a vast array of military aircraft. The DLA is a key entity responsible for providing logistics support to all branches of the U.S. Armed Forces, including the procurement and supply of spare parts. While the specific dollar amount for this particular sub-sector fluctuates annually based on readiness requirements, modernization programs, and operational tempo, it consistently represents a significant portion of the DLA's overall procurement budget. Analyzing trends over the past 5-10 years would reveal whether spending in this category is increasing, decreasing, or remaining stable, and how much of it is awarded through competitive versus sole-source mechanisms. This context is crucial for understanding the significance of the $24 million award.

Does the 'firm fixed price' contract type mitigate the risks of a sole-source award?

The 'firm fixed price' (FFP) contract type does mitigate some, but not all, of the risks associated with a sole-source award. FFP establishes a ceiling price that the contractor must not exceed, providing cost certainty for the government and protecting against cost overruns that are within the contractor's control. This means the government knows the maximum it will pay. However, FFP does not address the fundamental risk of a sole-source award: the potential for an inflated initial price due to the absence of competition. While the government is protected from unexpected increases beyond the agreed price, the initial agreed price itself might be higher than what a competitive process would yield. Therefore, while FFP offers budget predictability, it does not guarantee the best possible value for money when competition is absent.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: SPRPA118RZ310

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: ONE HORNET WAY, EL SEGUNDO, CA, 90245

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

Financial Breakdown

Contract Ceiling: $24,084,930

Exercised Options: $24,084,930

Current Obligation: $24,084,930

Subaward Activity

Number of Subawards: 112

Total Subaward Amount: $560,615,855

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRPA115G001Z

IDV Type: BOA

Timeline