DoD's $45M R&D contract for technical engineering services awarded to Northrop Grumman shows fair value

Contract Overview

Contract Amount: $44,991,849 ($45.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2010-08-01

End Date: 2013-01-31

Contract Duration: 914 days

Daily Burn Rate: $49.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: TECHNICAL ENGINEERING SERVICES

Place of Performance

Location: FALLS CHURCH, FAIRFAX County, VIRGINIA, 22041

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $45.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: TECHNICAL ENGINEERING SERVICES Key points: 1. Contract awarded via full and open competition, suggesting a competitive pricing environment. 2. Northrop Grumman, a large defense contractor, has a significant track record in R&D. 3. The contract's duration of 914 days (approx. 2.5 years) is typical for complex R&D projects. 4. The contract type (Cost Plus Fixed Fee) can incentivize cost control while allowing for flexibility in R&D. 5. The contract falls under R&D in Physical, Engineering, and Life Sciences, a critical sector for defense innovation. 6. The award was a single delivery order, indicating a specific project within a larger framework or potential for future orders.

Value Assessment

Rating: good

The contract's value of approximately $45 million over 914 days suggests a reasonable annual spend for specialized R&D services. While direct comparisons are difficult without knowing the specific technical scope, the Cost Plus Fixed Fee (CPFF) structure, common in R&D, allows for flexibility. The benchmarked profit rate (if available) would further refine this assessment, but the overall scale appears aligned with similar large-scale engineering R&D efforts within the Department of Defense.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. This typically leads to a more robust price discovery process as multiple bidders vie for the contract. The fact that it resulted in a single delivery order suggests that while competition was broad, one offeror was ultimately selected based on best value criteria.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down costs and encourage innovation, leading to better value for public funds.

Public Impact

The primary beneficiaries are the Department of Defense, which receives advanced technical engineering services to support its mission. The services delivered likely contribute to the development of new technologies or the enhancement of existing systems critical for national security. The geographic impact is primarily within Virginia, where the contractor is located, potentially supporting local high-tech employment. The contract supports a highly skilled workforce in engineering and research and development fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contracts can sometimes lead to cost overruns if not closely monitored, though the fixed fee component provides some ceiling.
The specific technical outcomes and their long-term impact are not detailed, making it difficult to assess the full return on investment.
Reliance on a single large contractor like Northrop Grumman could raise concerns about market concentration in specific R&D areas.

Positive Signals

Awarded through full and open competition, indicating a fair and transparent procurement process.
The contract type (CPFF) is appropriate for R&D where scope may evolve, balancing flexibility with cost control.
Northrop Grumman is a well-established defense contractor with extensive experience in R&D, suggesting a high likelihood of successful execution.
The contract duration aligns with the typical lifecycle of complex research and development projects.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on physical, engineering, and life sciences (NAICS 541712). This sector is crucial for maintaining technological superiority in defense. Spending in this area is characterized by long project timelines, high innovation potential, and significant investment. Comparable spending benchmarks would involve looking at other large-scale R&D contracts awarded by DoD agencies for similar technical services, often running into tens or hundreds of millions of dollars.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Northrop Grumman is a large prime contractor. While large prime contracts often include subcontracting plans to engage small businesses, the details of such plans are not provided here. The absence of a direct set-aside means small businesses would likely participate as subcontractors rather than prime awardees.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Information Systems Agency (DISA) contracting officers and program managers. Accountability measures are embedded in the CPFF contract structure, requiring detailed reporting and justification of costs. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Research and Development
Advanced Technology Development
Engineering Services Contracts
Information Technology R&D
Systems Engineering Support

Risk Flags

Cost Overrun Potential (CPFF)
Scope Creep Risk (R&D)
Long-Term ROI Uncertainty (R&D)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. TECHNICAL ENGINEERING SERVICES

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 Information Systems Agency).

What is the total obligated amount?

The obligated amount is $45.0 million.

What is the period of performance?

Start: 2010-08-01. End: 2013-01-31.

What is Northrop Grumman's track record with similar Cost Plus Fixed Fee R&D contracts within the Department of Defense?

Northrop Grumman has a long and extensive history of performing Cost Plus Fixed Fee (CPFF) Research and Development contracts for the Department of Defense across various agencies and technological domains. Their track record generally indicates a strong capability in managing complex R&D programs, adhering to technical specifications, and navigating the financial reporting requirements inherent in CPFF agreements. While specific performance metrics for individual contracts are often not publicly detailed, their consistent selection as a prime contractor for high-value R&D efforts suggests a satisfactory performance history. Analysis of past performance evaluations, where available, would provide a more granular understanding of their success rates, adherence to schedules, and cost control effectiveness on similar projects.

How does the $45 million contract value compare to other R&D contracts for technical engineering services awarded by DISA or similar agencies?

The $45 million contract value for technical engineering services over approximately 2.5 years falls within a common range for significant R&D projects undertaken by major defense agencies like DISA. Larger, more complex R&D initiatives can easily reach hundreds of millions or even billions of dollars. However, smaller, more focused R&D efforts or specific task orders under larger indefinite-delivery/indefinite-quantity (IDIQ) contracts might be in the millions. This $45 million award suggests a substantial project requiring specialized expertise and significant resource allocation, but it is not exceptionally large compared to the upper echelon of defense R&D spending. Benchmarking against similar NAICS codes (like 541712) and contract types (CPFF) awarded by DoD entities would reveal a distribution of contract values, placing this award in the mid-to-high range for a single delivery order of this nature.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for R&D, and how are they mitigated in this case?

The primary risk with CPFF contracts, especially in R&D, is the potential for cost overruns if the scope is not well-defined or if unforeseen technical challenges arise. The contractor is reimbursed for all allowable costs plus a fixed fee representing profit. While the fixed fee provides a ceiling on profit, it doesn't cap total costs. Mitigation strategies include robust government oversight, detailed cost tracking and reporting requirements, clearly defined milestones, and strong program management. For this contract, the government's role in monitoring expenditures, reviewing progress reports, and potentially exercising options based on performance are key mitigation factors. The selection of Northrop Grumman, a contractor with a strong R&D background, also implies a level of confidence in their ability to manage project costs effectively within the R&D context.

What does the 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' classification imply about the nature of the services provided?

The classification 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' (NAICS 541712) indicates that the contract supports activities aimed at discovering or developing new knowledge and integrating that knowledge into new or improved products or processes. This typically involves scientific investigation, experimentation, and analysis in fields like physics, chemistry, materials science, mechanical engineering, electrical engineering, aerospace, and biological sciences (excluding specific biotech focus). For the Department of Defense, this often translates to developing next-generation defense technologies, improving weapon systems, enhancing communication or surveillance capabilities, or advancing materials science for military applications. The services are likely highly technical, requiring specialized expertise and advanced laboratory or testing facilities.

Given the contract was a single delivery order, what does this suggest about the overall program or potential future spending?

A single delivery order under a contract vehicle (potentially an IDIQ or a basic ordering agreement, though not explicitly stated) suggests that this award represents a specific, defined project or requirement. It implies that the Defense Information Systems Agency (DISA) had a particular need that was met by this order. This could mean the project is self-contained and may not lead to further orders under the same contract vehicle, or it could be the first of several orders if the contract vehicle allows for multiple delivery orders. If it's part of a larger IDIQ, it indicates that DISA has the flexibility to issue subsequent orders to Northrop Grumman (or potentially other awardees if it's a multi-award IDIQ) for similar or related technical engineering services as future needs arise, subject to contract terms and funding availability.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 2340 DULLES CORNER BLVD, HERNDON, VA, 20171

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $53,622,790

Exercised Options: $53,009,152

Current Obligation: $44,991,849

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HC102808D2023

IDV Type: IDC

Timeline