DoD awards $253.8M contract to Northrop Grumman for drone components, raising value-for-money questions

Contract Overview

Contract Amount: $253,875,215 ($253.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2004-03-19

End Date: 2010-04-30

Contract Duration: 2,233 days

Daily Burn Rate: $113.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200408!002416!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0082 !A!N! !N! ! !20040319!20071030!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS DRIVE !CARSON !CA!90746!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000015078394!N!N!000000000000!1550!DRONES !A1A!AIRFRAMES AND SPARES !000 !* !336413!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001! !

Place of Performance

Location: SIERRA VISTA, COCHISE County, ARIZONA, 85635

State: Arizona Government Spending

Plain-Language Summary

Department of Defense obligated $253.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200408!002416!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0082 !A!N! !N! ! !20040319!20071030!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS DRIVE !CARSON !CA!90746!11530!037!06!CARSON !LOS … Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant contract value suggests a critical role in aviation and missile systems. 3. Long performance period of over 6 years indicates a substantial, ongoing need. 4. Contractor's extensive experience in aerospace and defense likely influenced the sole-source decision. 5. Lack of competition raises concerns about achieving optimal value for taxpayer funds. 6. The 'Other Aircraft Parts' category is broad, making specific performance benchmarking difficult.

Value Assessment

Rating: questionable

The contract's value of $253.8 million over a 6-year period is substantial. Without competitive bidding, it is difficult to assess if this represents fair market value. Benchmarking against similar sole-source awards for specialized drone components is challenging due to proprietary information and unique specifications. The cost-plus-fixed-fee structure, while common for complex projects, can incentivize cost overruns if not rigorously managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was solicited. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means there was no opportunity for price discovery through a bidding process, which could lead to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to lower prices. The government did not benefit from the potential cost savings that typically arise from multiple bids.

Public Impact

The primary beneficiary is the U.S. Department of Defense, specifically its aviation and missile command, which receives critical drone components. The contract supports the production and delivery of 'Other Aircraft Parts and Auxiliary Equipment,' likely for unmanned aerial vehicles (drones). The contract's geographic impact is centered around Northrop Grumman's facilities in Carson, California, and potentially other manufacturing sites. This contract supports a segment of the aerospace manufacturing workforce involved in drone technology and component production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs.
Lack of transparency in the sole-source justification makes value assessment difficult.
Long contract duration could mask inefficiencies if not closely monitored.
Broad service category ('Other Aircraft Parts') may obscure specific performance metrics.

Positive Signals

Award to a large, established defense contractor suggests reliability and technical capability.
Contract supports critical defense technology (drones), aligning with national security objectives.
Cost-plus-fixed-fee structure, while having risks, allows for flexibility in complex development.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on unmanned aerial systems (drones) and their components. The market for drone technology is rapidly expanding, driven by both military and commercial applications. Northrop Grumman is a major player in this sector. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of the components and the sole-source award, but overall defense spending on aviation systems is in the billions annually.

Small Business Impact

This contract does not appear to involve small business set-asides, as it was awarded directly to Northrop Grumman Systems Corporation, a large prime contractor. There is no explicit mention of subcontracting plans for small businesses within the provided data. This suggests that the primary benefits for small businesses would likely come from their role as suppliers to Northrop Grumman, rather than direct contract awards.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates close financial oversight to manage costs and prevent overruns. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the pricing and value proposition more challenging.

Related Government Programs

Unmanned Aerial Vehicle (UAV) Production
Aerospace Component Manufacturing
Defense Procurement
Northrop Grumman Defense Contracts
Sole-Source Defense Awards

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus-fixed-fee structure may incentivize cost overruns.
Broad service category hinders specific performance benchmarking.
Limited public data on justification for sole-source award.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $253.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200408!002416!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0082 !A!N! !N! ! !20040319!20071030!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS DRIVE !CARSON !CA!90746!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000015078394!N!N!000000000000!1550!DRONES !A1A!AIRFRAMES AND SPARES !000 !* !336413!E! !3! ! ! ! ! !999

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 Contract Management Agency).

What is the total obligated amount?

The obligated amount is $253.9 million.

What is the period of performance?

Start: 2004-03-19. End: 2010-04-30.

What specific drone components is Northrop Grumman supplying under this contract?

The provided data categorizes the contract under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' (NAICS code 336413) and lists 'DRONES' as a product. However, it does not specify the exact components. This could range from airframes and propulsion systems to sensors, communication equipment, or other critical sub-assemblies. The broad classification suggests a significant scope of work, potentially encompassing multiple types of parts necessary for the operation and maintenance of various drone platforms used by the U.S. military.

Why was this contract awarded on a sole-source basis instead of being competed?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. For a company like Northrop Grumman, this could be due to proprietary technology, unique manufacturing capabilities, existing integration with current defense systems, or the need for rapid procurement where competition would cause unacceptable delays. The specific justification for this particular contract is not detailed in the provided data but would likely stem from one or more of these factors, ensuring continuity or access to specialized expertise critical for national security.

How does the $253.8 million contract value compare to similar drone component contracts?

Direct comparison is challenging due to the sole-source nature and the broad 'Other Aircraft Parts' classification. However, major defense contractors often receive multi-million dollar contracts for complex systems. For instance, contracts for entire drone platforms can range from tens to hundreds of millions. This contract's value suggests it covers a substantial quantity or highly specialized components essential for advanced drone capabilities. Without competitive data, assessing if $253.8 million is a benchmark price for these specific components is speculative.

What are the potential risks associated with a sole-source, cost-plus-fixed-fee contract?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to inflated prices and reduced value for money. A cost-plus-fixed-fee (CPFF) contract structure, while providing flexibility for evolving requirements, carries the risk that the contractor may have less incentive to control costs, as the government pays the actual costs plus a predetermined fee. This necessitates robust government oversight to scrutinize costs and ensure the fee remains appropriate for the effort and risk undertaken by the contractor.

What is Northrop Grumman's track record with similar DoD contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of fulfilling complex contracts for the Department of Defense. They are involved in numerous programs related to aerospace, defense electronics, and information systems, including significant work on unmanned systems. Their extensive experience and established infrastructure suggest a strong capability to deliver on large-scale, technologically advanced projects like this one. Past performance data, often detailed in contract award justifications, would typically support their selection for such critical procurements.

What is the historical spending trend for 'Other Aircraft Parts' by the DoD?

Historical spending on 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' (NAICS 336413) by the DoD is substantial, reflecting the vastness of military aviation operations. While specific figures fluctuate annually based on modernization programs, operational tempo, and new platform development, the category consistently represents billions of dollars in annual spending. This contract, at $253.8 million, represents a significant but not unprecedented portion of the DoD's annual expenditure within this broad manufacturing segment, particularly when focused on advanced technologies like drones.

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

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 1800 GLENN CURTISS DRIVE, CARSON, CA, 90746

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline