DoD's $28.8M engineering services contract awarded to Northrop Grumman shows limited competition and potential value concerns

Contract Overview

Contract Amount: $28,782,153 ($28.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-05-24

End Date: 2012-01-31

Contract Duration: 1,713 days

Daily Burn Rate: $16.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TECHNICAL SERVICES

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $28.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: TECHNICAL SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long contract duration of over 4 years suggests a need for sustained services. 3. Cost-plus-fixed-fee structure may incentivize cost overruns. 4. Engineering services are critical for defense operations, but value needs careful scrutiny. 5. Contractor has a significant presence in the defense sector. 6. Geographic concentration in California for contract performance.

Value Assessment

Rating: fair

The total value of $28.8 million for engineering services over a 4-year period warrants careful examination. Without comparable sole-source contracts for similar engineering services, it is difficult to definitively benchmark the value. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or services where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts if not managed rigorously. The absence of competition further complicates a direct value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was solicited. This approach is typically used when a specific contractor possesses unique capabilities or when circumstances preclude full and open competition. The lack of multiple bidders means there was no competitive pressure to drive down prices, potentially leading to a higher cost for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through market competition, potentially resulting in taxpayer funds being used less efficiently.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for its operations. This contract supports advanced engineering and technical expertise within the defense sector. Services are likely to impact national security capabilities. Workforce implications include employment for engineers and technical specialists, primarily in California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Long contract duration may indicate a lack of readily available alternatives or a need for sustained, specialized support.
Lack of transparency in the sole-source justification could mask underlying issues.
Performance risks associated with sole-source awards are higher due to limited oversight from competitive pressures.

Positive Signals

Northrop Grumman is a major defense contractor with extensive experience in engineering services.
The contract addresses critical engineering needs for the Department of Defense.
The definitive contract award provides a clear framework for service delivery.
The contract was awarded by a reputable agency (DoD) with established oversight processes.

Sector Analysis

Engineering services are a vital component of the defense industrial base, encompassing design, development, testing, and sustainment of complex military systems. The market is characterized by a few large, established prime contractors like Northrop Grumman, alongside numerous specialized subcontractors. Spending in this sector is driven by defense modernization priorities, technological advancements, and the need for ongoing support of existing platforms. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of defense engineering requirements, but overall defense R&D and services spending runs into billions annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The prime contractor, Northrop Grumman, is a large aerospace and defense company. While large prime contractors are often required to subcontract portions of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a set-aside suggests that the primary focus was on securing specialized capabilities rather than promoting small business participation directly through this award.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA) and the relevant Department of Defense program offices. These entities are responsible for monitoring contractor performance, ensuring compliance with contract terms, and auditing costs, especially for cost-plus contracts. Transparency is generally maintained through contract reporting mechanisms, but specific details of the sole-source justification and ongoing performance reviews may not be publicly accessible.

Related Government Programs

Defense Engineering Services
Northrop Grumman Contracts
Department of Defense IT and Technical Services
Aerospace and Defense Sector Spending

Risk Flags

Sole-source award raises concerns about price competition and potential overpayment.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed effectively.
Lack of detailed service description limits full understanding of value and necessity.
Long contract duration may indicate a lack of market alternatives or strategic necessity.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. TECHNICAL 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 Contract Management Agency).

What is the total obligated amount?

The obligated amount is $28.8 million.

What is the period of performance?

Start: 2007-05-24. End: 2012-01-31.

What specific engineering services were provided under this contract, and how do they align with current DoD priorities?

The data indicates 'Engineering Services' (NAICS 541330) were procured. While the specific nature of these services isn't detailed, they likely encompass a broad range of technical support critical to the Department of Defense's mission. This could include system design, integration, testing, analysis, and lifecycle support for various defense platforms or technologies. Given the contract's award date (2007-2012), these services likely supported modernization efforts or sustainment of existing capabilities during that period. Alignment with 'current' DoD priorities would require examining the services procured during the contract's active period and comparing them to the strategic objectives of the DoD at that time, such as advancements in C4ISR, aviation, or missile defense systems.

What was the justification for awarding this contract on a sole-source basis to Northrop Grumman Systems Corporation?

The provided data explicitly states the contract type as 'NOT COMPETED' (ct: NOT COMPETED), indicating a sole-source award. The specific justification for this sole-source determination is not included in the abbreviated data. Typically, sole-source justifications are required by federal acquisition regulations and often cite reasons such as unique capabilities possessed by only one contractor, urgent and compelling needs where competition is impractical, or follow-on work to a previously competed contract where only the original contractor can meet the requirements. Without the official justification document, it's impossible to ascertain the precise rationale, but it implies that the DoD determined Northrop Grumman was the only viable source for the required engineering services at the time of award.

How does the Cost Plus Fixed Fee (CPFF) pricing structure potentially impact the final cost compared to other contract types?

The Cost Plus Fixed Fee (CPFF) pricing structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, making fixed-price contracts impractical. While the 'fixed fee' provides some predictability for the contractor's profit, the 'cost-plus' element means the government bears the risk of cost overruns. If the contractor's actual costs exceed initial estimates, the total contract price will increase. This contrasts with fixed-price contracts, where the contractor assumes more risk for cost overruns to achieve a set price. Therefore, CPFF contracts can potentially lead to higher final costs for the government if cost controls are not rigorously managed and monitored by the contracting agency.

What is Northrop Grumman Systems Corporation's track record with similar sole-source engineering services contracts with the DoD?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of securing large, complex contracts with the Department of Defense, many of which may involve specialized engineering services. While this specific data point highlights one sole-source award, it is highly probable that the company has been awarded numerous other sole-source and competitively bid contracts for similar services. Analyzing their broader contract portfolio, including past performance evaluations, any instances of contract disputes, or audit findings related to sole-source awards, would provide a more comprehensive understanding of their track record. However, based on their status as a prime defense contractor, they generally possess the established infrastructure and expertise to handle significant engineering requirements.

What were the historical spending patterns for engineering services by the DoD in the years surrounding this contract's award (2007-2012)?

During the period of 2007-2012, the Department of Defense was actively engaged in conflicts and undergoing significant modernization efforts, leading to substantial spending on engineering and technical services. Federal procurement data indicates that the DoD consistently ranks as one of the largest federal agencies for contract spending. Engineering services, encompassing areas like systems engineering, research and development support, and technical consulting, represent a significant portion of this expenditure. While specific figures for 'engineering services' alone can fluctuate based on classification and reporting, overall DoD obligations for services and RDT&E (Research, Development, Test, and Evaluation) were in the hundreds of billions of dollars annually during this timeframe. This contract, at $28.8 million, represents a relatively small fraction of the DoD's total engineering services budget during that period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering 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 ST, CARSON, CA, 90746

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $28,782,153

Exercised Options: $28,782,153

Current Obligation: $28,782,153

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline