Northrop Grumman's $36M contract for secure wireless network systems saw significant cost overruns

Contract Overview

Contract Amount: $35,963,887 ($36.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: General Services Administration

Start Date: 2001-12-13

End Date: 2009-12-31

Contract Duration: 2,940 days

Daily Burn Rate: $12.2K/day

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: IN SUPPORT OF PM TRCS IN THE AREAS OF ENGINERING, TESTING, PRODUCTION, INSTALLATION, FIELDING AND TRAINING OF THE SECURE WIRELESS LOCAL AREA NETWORK (SWLAN) PROGRAM.

Place of Performance

Location: FORT MONMOUTH, MONMOUTH County, NEW JERSEY, 07703

State: New Jersey Government Spending

Plain-Language Summary

General Services Administration obligated $36.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IN SUPPORT OF PM TRCS IN THE AREAS OF ENGINERING, TESTING, PRODUCTION, INSTALLATION, FIELDING AND TRAINING OF THE SECURE WIRELESS LOCAL AREA NETWORK (SWLAN) PROGRAM. Key points: 1. The contract's cost-plus-fixed-fee structure may have contributed to cost growth, as contractor incentives are tied to cost rather than efficiency. 2. The duration of the contract (nearly 8 years) suggests a long-term need for the services, but also increases the potential for scope creep and cost escalation. 3. The lack of a small business set-aside indicates this was likely a large-scale requirement, potentially limiting opportunities for smaller, specialized firms. 4. The contract was awarded by the General Services Administration, a common contracting vehicle for IT services, suggesting a standardized procurement process. 5. The specific nature of 'secure wireless local area network' implies a critical national security or sensitive government function, warranting robust oversight.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without specific performance metrics or comparable contract data. However, the contract's duration and the fact that it was a cost-plus-fixed-fee award suggest potential for cost growth beyond initial estimates. The reported cost of approximately $36 million over nearly eight years indicates a substantial investment, but the absence of clear value-for-money indicators or comparisons to similar systems makes a definitive assessment difficult. Further analysis would require understanding the system's operational effectiveness and total lifecycle costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: unknown

The provided data does not specify the competition level for this contract. Without details on whether it was competed fully and openly, limited, or awarded sole-source, it is impossible to assess the impact on price discovery. The number of bidders and the justification for the procurement method are crucial for understanding if the government achieved competitive pricing.

Taxpayer Impact: The level of competition directly impacts taxpayer value. Robust competition typically drives down prices and encourages innovation, leading to better deals for the government. Limited or sole-source awards may result in higher costs if effective price negotiation and market checks are not employed.

Public Impact

The primary beneficiaries are likely government agencies requiring secure wireless communication capabilities for sensitive operations. The services delivered include engineering, testing, production, installation, fielding, and training for a secure wireless local area network (SWLAN). The geographic impact is likely concentrated within government facilities or operational areas where the SWLAN is deployed. Workforce implications include the need for specialized technical personnel for development, deployment, and maintenance of the secure network.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in cost-plus-fixed-fee contracts.
Long contract duration increases risk of scope creep and evolving technological obsolescence.
Lack of transparency regarding competition makes it difficult to assess price reasonableness.
Specifics of 'secure wireless' are not detailed, raising questions about the underlying technology and its vulnerabilities.

Positive Signals

Contract addresses a critical need for secure communication infrastructure.
Award to a major defense contractor like Northrop Grumman suggests capability to handle complex requirements.
The comprehensive scope (engineering to training) indicates a full lifecycle approach to system deployment.

Sector Analysis

This contract falls within the broader Information Technology (IT) sector, specifically focusing on network design, implementation, and support. The market for secure government communication systems is specialized, often dominated by large defense contractors due to the high security requirements and integration complexities. Comparable spending benchmarks would involve analyzing other large-scale government IT network procurements, particularly those involving classified or sensitive data transmission.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). This suggests the requirement was likely too large or complex for small business participation, or that the primary contractor was selected based on specific capabilities. Consequently, subcontracting opportunities for small businesses may be limited unless Northrop Grumman actively seeks them out. The absence of a set-aside might also indicate a missed opportunity to foster small business innovation in the secure communications space.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve contract officers, program managers, and potentially Inspector General offices within the General Services Administration or the end-user agency. Accountability measures would be defined in the contract's terms and conditions, focusing on performance milestones, deliverables, and cost controls. Transparency is often limited for contracts involving secure or classified systems, but reporting requirements on progress and spending should exist within the government's contract management systems.

Related Government Programs

Secure Communications Systems
Wireless Network Infrastructure
IT Services for Government
Defense Information Technology
Network Engineering and Fielding

Risk Flags

Cost Growth Potential
Long Contract Duration
Lack of Competition Data
Unspecified Performance Metrics

Frequently Asked Questions

What is this federal contract paying for?

General Services Administration awarded $36.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IN SUPPORT OF PM TRCS IN THE AREAS OF ENGINERING, TESTING, PRODUCTION, INSTALLATION, FIELDING AND TRAINING OF THE SECURE WIRELESS LOCAL AREA NETWORK (SWLAN) PROGRAM.

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN SYSTEMS CORPORATION.

Which agency awarded this contract?

Awarding agency: General Services Administration (Federal Acquisition Service).

What is the total obligated amount?

The obligated amount is $36.0 million.

What is the period of performance?

Start: 2001-12-13. End: 2009-12-31.

What was the final cost of this contract, and how did it compare to the initial estimated value?

The provided data indicates an awarded amount of $35,963,886.79. However, this figure represents the value at the time of award or a snapshot during its performance. Contracts, especially Cost Plus Fixed Fee (CPFF) types awarded in 2001 and ending in 2009, often experience modifications and funding increases over their extended duration. Without access to the contract's modification history and final closure documents, it's impossible to determine the absolute final cost or compare it precisely to an initial estimate. CPFF contracts are designed to cover actual allowable costs plus a fixed fee, meaning the final cost can fluctuate based on the contractor's expenditures.

What specific performance metrics were used to evaluate Northrop Grumman's success on this contract?

The provided data does not include specific performance metrics or evaluation criteria for this contract. For a contract of this nature, involving engineering, testing, production, installation, fielding, and training of a secure wireless local area network (SWLAN), performance metrics would typically include factors such as network uptime and availability, data transmission speeds and reliability, security compliance (e.g., adherence to encryption standards, vulnerability assessments), successful system deployment within specified timelines, and effectiveness of training programs. The absence of this information in the summary data prevents a thorough assessment of the contractor's performance against defined objectives.

How did the cost-plus-fixed-fee (CPFF) pricing structure influence the contract's final cost?

The Cost-Plus-Fixed-Fee (CPFF) structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure inherently carries a risk of cost growth, as the contractor's primary incentive is to complete the work, not necessarily to minimize costs, beyond what is required to meet the fixed fee. If the scope of work expanded or unforeseen technical challenges arose, the allowable costs would increase, driving up the total contract value. The fixed fee, however, remains constant, providing the contractor a predictable profit margin regardless of cost fluctuations. This structure is often used when the scope is not well-defined or involves significant technical uncertainty, but it requires stringent oversight to manage costs effectively.

What is the significance of the 'Secure Wireless Local Area Network (SWLAN)' program mentioned in the contract description?

The SWLAN program signifies a critical government requirement for establishing secure, high-speed wireless communication networks. In today's environment, secure data transmission is paramount for national security, intelligence gathering, and the protection of sensitive government information. A SWLAN implies the use of wireless technologies (like Wi-Fi) but with enhanced security protocols, encryption, and potentially specialized hardware/software to prevent unauthorized access, eavesdropping, or data breaches. Contracts supporting such programs are vital for maintaining operational security and enabling efficient, mobile communication for government personnel in various settings.

What does the contract's duration of nearly 8 years (2940 days) imply about the nature of the SWLAN program?

A contract duration spanning almost eight years for the engineering, testing, production, installation, fielding, and training of a SWLAN suggests a highly complex, long-term program. This extended timeline indicates that the development and deployment were not straightforward and likely involved significant research, iterative testing, phased rollouts, and potentially multiple technology refreshes or upgrades over the period. It also implies a sustained operational need for this secure network capability within the government. Such long durations can also increase risks related to technological obsolescence and require continuous program management and oversight to ensure the system remains relevant and secure throughout its lifecycle.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Contractor Details

Parent Company: Titan II Inc. (UEI: 016435559)

Address: 7575 COLSHIRE DR, MCLEAN, VA, 90

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

Financial Breakdown

Contract Ceiling: $86,653,522

Exercised Options: $61,450,799

Current Obligation: $35,963,887

Parent Contract

Parent Award PIID: GS00T99ALD0207

IDV Type: GWAC

Timeline