Northrop Grumman awarded $614M for missile systems engineering, with a significant portion for R&D

Contract Overview

Contract Amount: $52,108,805 ($52.1M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2005-09-30

End Date: 2011-09-30

Contract Duration: 2,191 days

Daily Burn Rate: $23.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200602!000084!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q05C0316 !A!N! !N! ! !20051117!20100228!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS STREET !CARSON !CA!90746!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000000600000!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A2 !MISSILE AND SPACE SYSTEMS !000 !NOT DISCERNABLE !541511!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1G!Z!Y!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!A!N! ! ! ! ! ! !0001! !

Place of Performance

Location: REDONDO BEACH, LOS ANGELES County, CALIFORNIA, 90278

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $52.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200602!000084!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q05C0316 !A!N! !N! ! !20051117!20100228!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS STREET !CARSON !CA!90746!11530!037!06!CARSON !LOS … Key points: 1. Contract value of $614.2M over 5 years indicates substantial investment in missile systems. 2. The contract's focus on systems engineering suggests a need for complex integration and development. 3. A significant portion of the contract value is allocated to research and development, signaling innovation. 4. The 'NOT COMPETED' status raises questions about potential cost efficiencies and market competition. 5. Northrop Grumman's extensive experience in aerospace and defense likely influenced the sole-source award. 6. The contract duration of 2191 days points to a long-term strategic need for these services.

Value Assessment

Rating: fair

The contract's total value of $614.2 million over approximately five years for systems engineering services is substantial. Benchmarking this against similar large-scale defense contracts for complex systems integration and R&D is challenging without more specific service details. However, the cost-plus-fixed-fee structure suggests that while the contractor has an incentive to control costs, the government bears a significant portion of the risk if costs exceed projections. Further analysis would require comparing the labor rates and overhead applied to industry standards for similar specialized engineering roles.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition means that the government did not benefit from a competitive bidding process, which could potentially lead to higher prices than if multiple offers had been solicited and evaluated.

Taxpayer Impact: For taxpayers, a sole-source award means there was no opportunity to leverage competitive pressures to drive down costs. This increases the importance of robust government oversight to ensure fair pricing and prevent potential overspending.

Public Impact

The primary beneficiaries are the U.S. Army Aviation and Missile Command, receiving critical systems engineering support. Services delivered include missile and space systems engineering, likely encompassing design, development, testing, and integration. The geographic impact is centered in Carson, California, where Northrop Grumman's facility is located. Workforce implications include employment for highly skilled engineers and technical personnel within Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may result in higher costs for taxpayers.
Cost-plus-fixed-fee contract type carries inherent cost overrun risks for the government.
Limited transparency due to sole-source award makes independent value assessment difficult.

Positive Signals

Award to a major defense contractor with established expertise in missile systems.
Long-term contract duration suggests a stable and critical requirement.
Focus on systems engineering implies a comprehensive approach to complex technological development.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on missile and space systems. This is a highly specialized and capital-intensive industry characterized by long development cycles and significant R&D investment. The market is dominated by a few large prime contractors, including Northrop Grumman. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would involve looking at other large-scale systems engineering and development contracts for major defense platforms.

Small Business Impact

This contract does not appear to have a small business set-aside component. As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities specifically targeted at small businesses unless mandated by the prime. The impact on the small business ecosystem is minimal in terms of direct set-asides, though large primes often engage small businesses as subcontractors for specialized components or services.

Oversight & Accountability

Oversight for this contract would primarily 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 monitoring of costs incurred by Northrop Grumman. Transparency is limited due to the sole-source nature, but contract modifications, performance reports, and financial audits would be key accountability measures. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Aerospace Engineering Services
Advanced Technology Development
Space Systems Integration
Department of Defense Research and Development

Risk Flags

Sole-source award limits price competition.
Cost-plus-fixed-fee contract increases government cost risk.
Lack of detailed public information on specific deliverables hinders independent value assessment.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.1 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200602!000084!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q05C0316 !A!N! !N! ! !20051117!20100228!614227643!004179453!016435559!N!NORTHROP GRUMMAN SPACE & MISSI!1800 GLENN CURTISS STREET !CARSON !CA!90746!11530!037!06!CARSON !LOS ANGELES !CALIFORNIA!+000000600000!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A2 !MISSILE AND SPACE SYSTEMS !000 !NOT DISCERNABLE !541511!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 $52.1 million.

What is the period of performance?

Start: 2005-09-30. End: 2011-09-30.

What is Northrop Grumman's track record with similar sole-source missile systems engineering contracts?

Northrop Grumman has a long and extensive history of performing complex systems engineering and development for U.S. military programs, particularly in the missile and space domains. They are a prime contractor on numerous classified and unclassified programs requiring specialized expertise. While specific details on prior sole-source awards for similar missile systems engineering are often proprietary or classified, their consistent selection for critical, high-value contracts suggests a strong track record of meeting demanding technical and programmatic requirements. Their experience with programs like the Ground-based Midcourse Defense (GMD) system and various satellite programs indicates a deep understanding of the complexities involved in large-scale, sole-source defense procurements. However, the lack of competition in sole-source awards inherently limits public data on comparative performance and cost-effectiveness against potential alternatives.

How does the $614.2 million contract value compare to industry benchmarks for similar systems engineering services?

Directly comparing the $614.2 million contract value to industry benchmarks for 'systems engineering services' is challenging due to the highly specialized nature of missile and space systems. This figure represents the total contract value over approximately five years, encompassing a broad range of activities from research and development to integration and testing. Standard industry benchmarks for generic IT or engineering services would not be applicable. To assess value, one would need to compare the specific labor categories, overhead rates, and profit margins applied by Northrop Grumman against government cost-allowability regulations and potentially against other large, sole-source contracts awarded for comparable defense platforms. The cost-plus-fixed-fee (CPFF) structure also means the final cost can vary, making a fixed benchmark difficult. The significant R&D component suggests a substantial portion of the value is tied to innovation and future capabilities rather than routine service delivery.

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

The primary risks associated with this sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs than if the contract had been competed. This reduces the government's leverage in price negotiation. Secondly, the CPFF structure shifts a significant portion of the cost risk to the government. While the contractor has a fixed fee, they are reimbursed for allowable costs. If costs escalate beyond initial projections due to unforeseen technical challenges, scope creep, or inefficient management, the government will bear the burden of these increased expenditures. This necessitates rigorous government oversight to scrutinize costs, manage scope, and ensure efficient performance to mitigate these inherent risks.

What is the historical spending pattern for missile systems engineering within the Department of Defense?

Historical spending patterns for missile systems engineering within the Department of Defense (DoD) show a consistent and substantial allocation of resources, driven by evolving threats and technological advancements. The DoD consistently invests billions annually in research, development, testing, and evaluation (RDT&E) for missile defense, offensive missile systems, and related technologies. This includes funding for prime contractors like Northrop Grumman, Lockheed Martin, and Raytheon, who are essential for designing, building, and maintaining these complex platforms. Spending often fluctuates based on specific program lifecycles, geopolitical tensions, and strategic priorities. Contracts for systems engineering, particularly for major platforms, are typically long-term, high-value awards, often awarded on a sole-source or limited-competition basis due to the specialized nature of the work and the critical national security implications.

How does the 'NOT COMPETED' designation impact the government's ability to ensure best value?

The 'NOT COMPETED' designation significantly impacts the government's ability to ensure best value. When a contract is not competed, the government foregoes the benefits of a competitive bidding process, which typically drives down prices and encourages innovation among multiple offerors. Without competition, there is no direct comparison of technical approaches or pricing from different vendors. The government must rely heavily on its negotiation skills and its ability to accurately estimate fair and reasonable prices, often based on historical data or cost analysis. In sole-source situations, particularly for highly specialized or technologically advanced systems, the government's leverage is reduced, increasing the risk that the awarded price may not represent the lowest possible cost for the required capability. Robust justification for the sole-source award is crucial in such cases.

Industry Classification

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

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

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 STREET, 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