DoD's $40.7M exhaust pipe contract awarded to Northrop Grumman raises value and competition concerns

Contract Overview

Contract Amount: $40,725,593 ($40.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-03-12

End Date: 2023-09-30

Contract Duration: 1,297 days

Daily Burn Rate: $31.4K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PIPE, EXHAUST PIPE, EXHAUST

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $40.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: PIPE, EXHAUST PIPE, EXHAUST Key points: 1. The contract's value appears high relative to the limited scope of goods provided. 2. Lack of competition suggests potential for inflated pricing and reduced taxpayer value. 3. The long performance period may not align with the rapid obsolescence of aircraft parts. 4. The award was made without competition, limiting price discovery and market validation. 5. The contractor, Northrop Grumman, is a large, established defense contractor. 6. The contract falls under the 'Other Aircraft Parts' manufacturing NAICS code.

Value Assessment

Rating: questionable

The total contract value of $40.7 million for exhaust pipes and related parts seems disproportionately high, especially considering the contract was not competed. Without competitive bids, it is difficult to benchmark the pricing against market rates or similar contracts. The firm-fixed-price nature provides some cost certainty, but the lack of competition prevents an assessment of whether the price reflects fair market value. Further analysis of the specific quantities and types of exhaust components is needed to fully evaluate value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Northrop Grumman Systems Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The lack of competition means there was no opportunity for other qualified manufacturers to offer their products or potentially lower prices. This can occur for various reasons, such as specific technical requirements or a lack of available alternatives, but it limits the government's ability to ensure the best possible price.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government does not benefit from the price reductions typically achieved through competitive bidding. This limits the efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense (specifically the Defense Logistics Agency) and potentially military personnel who rely on these aircraft parts for operational readiness. The contract delivers essential components for aircraft maintenance and repair, ensuring the continued functionality of military aviation assets. The geographic impact is primarily within California, where the contractor is located, and wherever the delivered parts are ultimately utilized by the military. The contract supports jobs within Northrop Grumman's manufacturing facilities, contributing to the aerospace and defense industry workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher prices than could be achieved through a competitive process.
The long duration of the contract (over 3 years) could result in outdated technology or components if not managed carefully.
Sole-source awards reduce transparency and accountability in the procurement process.
The specific nature of 'exhaust pipes' for military aircraft might involve proprietary technology, but this was not detailed.
The absence of a small business set-aside raises questions about opportunities for smaller specialized manufacturers.

Positive Signals

The contract is with a large, established defense contractor with a history of performance.
The firm-fixed-price contract type provides cost certainty for the government.
The contract supports critical defense logistics and operational readiness.
The award is for essential aircraft components, indicating a clear need.
The contract was awarded to a domestic manufacturer, supporting the U.S. industrial base.

Sector Analysis

This contract falls within the broader aerospace manufacturing sector, specifically focusing on aircraft parts. The market for specialized defense components like exhaust systems is often characterized by high barriers to entry due to stringent quality, performance, and certification requirements. While the overall aerospace market is vast, niche segments like this may have limited suppliers, sometimes leading to sole-source or limited competition awards. Benchmarking spending in this specific sub-sector is challenging without more granular data on comparable exhaust system procurements.

Small Business Impact

There is no indication that this contract included a small business set-aside, nor is there information suggesting subcontracting opportunities for small businesses. Given the sole-source nature of the award to a large prime contractor, it is less likely that small businesses were actively considered or solicited for this specific procurement. This contract does not appear to directly contribute to the small business ecosystem in terms of set-asides or prime contracting opportunities.

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 compliance with contract terms and financial accountability. The Defense Logistics Agency (DLA) as the contracting activity, would also maintain oversight. Transparency is limited due to the sole-source nature, but contract awards are generally reported in federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Aircraft Parts Manufacturing
Defense Logistics Support
Sole-Source Procurements
Aerospace Component Supply
Military Aircraft Maintenance

Risk Flags

Sole-source award
Lack of competition
High contract value for components
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. PIPE, EXHAUST PIPE, EXHAUST

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 $40.7 million.

What is the period of performance?

Start: 2020-03-12. End: 2023-09-30.

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

Northrop Grumman Systems Corporation, as a major defense contractor, has a history of receiving various contract types, including sole-source awards, particularly for specialized systems and components where unique capabilities or existing platforms necessitate their involvement. Analyzing their broader contract portfolio reveals numerous awards across different defense agencies. However, specific data on their track record with sole-source contracts solely for exhaust pipes or similar low-complexity components is not readily available in public databases. Generally, large contractors like Northrop Grumman are awarded sole-source contracts when they possess unique technical expertise, proprietary technology, or are the sole provider of a critical part for an existing system, often justified by factors like industrial base preservation or national security imperatives. Without specific details on the justification for this particular award, it's difficult to assess their historical performance in this precise niche.

How does the $40.7 million contract value compare to market rates for aircraft exhaust pipes?

Directly comparing the $40.7 million contract value to 'market rates' for aircraft exhaust pipes is challenging without detailed specifications of the parts procured (e.g., material, size, complexity, quantity) and the specific aircraft platforms they are intended for. Aircraft exhaust systems can range from relatively simple components to highly complex, heat-resistant assemblies. Given the sole-source nature of this award, there was no competitive process to establish a market-driven price. Publicly available data often aggregates spending across broad categories, making it difficult to isolate the unit cost of specific components like exhaust pipes. However, the total value for what might be considered a component, rather than a full system, raises questions about potential overpricing in the absence of competition.

What are the primary risks associated with awarding a contract of this size without competition?

The primary risks associated with awarding a $40.7 million contract without competition are significant. Firstly, there is a substantial risk of paying an inflated price, as the government did not benefit from the price discovery mechanism inherent in competitive bidding. This can lead to inefficient use of taxpayer funds. Secondly, a lack of competition can stifle innovation and reduce the incentive for contractors to improve efficiency or quality over time, as they face no direct market pressure. Thirdly, it raises concerns about the government's strategic sourcing capabilities; if only one vendor can supply the item, it creates a dependency that can be exploited. Finally, it reduces transparency and accountability, making it harder to justify the expenditure and potentially masking underlying issues with the procurement process or the necessity of the item itself.

What does the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code (336413) typically encompass?

The North American Industry Classification System (NAICS) code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' encompasses establishments primarily engaged in manufacturing aircraft parts and auxiliary equipment, not elsewhere classified. This includes parts like aircraft engines, engine parts, propellers, engine and propeller parts, and other aircraft components. Exhaust pipes would logically fall under this category as auxiliary equipment. Establishments in this sector often require specialized manufacturing processes, adherence to strict quality control standards (like AS9100), and significant engineering capabilities due to the critical safety and performance requirements of aviation.

How does this contract's duration (1297 days) align with the typical lifecycle of aircraft components?

A contract duration of 1297 days (approximately 3.5 years) for aircraft components like exhaust pipes needs careful consideration regarding technological obsolescence and material degradation. While some structural components might have long service lives, exhaust systems are subject to extreme temperatures and corrosive environments, potentially leading to wear and tear. Furthermore, advancements in materials science and manufacturing techniques could render current designs suboptimal over such a long period. The Defense Logistics Agency (DLA) likely manages inventory and replacement cycles, but a multi-year award for components necessitates robust quality assurance and potential for mid-contract review to ensure continued relevance and performance, especially if newer, more efficient, or durable alternatives emerge.

What is the significance of the contract being awarded under 'Delivery Order' (aw: DELIVERY ORDER)?

The designation 'DELIVERY ORDER' typically indicates that this contract is a task order issued under a larger, pre-existing indefinite-delivery/indefinite-quantity (IDIQ) contract or a similar type of basic ordering agreement. This means the $40.7 million represents the total value awarded for this specific delivery order, not necessarily the entire potential value of the underlying IDIQ contract. IDIQ contracts provide flexibility for the government to order supplies or services as needed over a period, often with a maximum ceiling value. The fact that this is a delivery order, especially if it's a sole-source award under an IDIQ, suggests that the initial IDIQ contract itself might have been competed, or it could be a sole-source IDIQ. The specific nature of the underlying contract (competed or sole-source) is crucial for a full understanding of the competition dynamics.

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: SPRTA118R0153

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 6401 S AIR DEPOT BLVD, OKLAHOMA CITY, OK, 73135

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

Financial Breakdown

Contract Ceiling: $40,725,593

Exercised Options: $40,725,593

Current Obligation: $40,725,593

Subaward Activity

Number of Subawards: 35

Total Subaward Amount: $251,610,204

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: SPRTA119D0001

IDV Type: IDC

Timeline