DoD's $65.8M FAAD C2/C-RAM contract awarded to Northrop Grumman without competition

Contract Overview

Contract Amount: $65,861,428 ($65.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2009-12-10

End Date: 2010-12-09

Contract Duration: 364 days

Daily Burn Rate: $180.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FORWARD AREA AIR DEFENSE COMMAND AND CONTROL SYSTEM (FAAD C2/COUNTER-ROCKET, ARTILLERY AND MORTAR (C-RAM) SYSTEM OF SYSTEMS (SOS) INSTALLATION AND SUPPORT (I&S)- INITIAL 8 FORWARD OPERATING BASES (FOB) AFGHANISTAN, OEF

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $65.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FORWARD AREA AIR DEFENSE COMMAND AND CONTROL SYSTEM (FAAD C2/COUNTER-ROCKET, ARTILLERY AND MORTAR (C-RAM) SYSTEM OF SYSTEMS (SOS) INSTALLATION AND SUPPORT (I&S)- INITIAL 8 FORWARD OPERATING BASES (FOB) AFGHANISTAN, OEF Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. The contract's cost-plus-incentive-fee structure may incentivize cost overruns. 3. Limited competition suggests potential risks of contractor lock-in and reduced innovation. 4. Performance period of one year indicates a focus on immediate operational needs. 5. The contract supports critical air defense systems in a high-threat environment. 6. The specific value of $65.8M for a one-year support contract warrants further scrutiny against industry benchmarks.

Value Assessment

Rating: questionable

The contract's value of $65.8 million for a one-year period supporting the FAAD C2/C-RAM system is substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The cost-plus-incentive-fee (CPIF) pricing structure, while common in complex defense procurements, can lead to higher final costs if not managed diligently. The lack of competition makes it challenging to assess whether the government received the best possible value for the funds expended.

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. This typically occurs when only one responsible source can provide the required goods or services. However, the justification for sole-source awards needs careful review to ensure that competition was not feasible or that it was deliberately avoided. The absence of multiple bidders means there was no direct price comparison, potentially leading to less favorable pricing for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down costs, potentially resulting in higher expenditures for taxpayers. It also reduces the incentive for contractors to offer their most competitive pricing.

Public Impact

Provides critical air defense capabilities to U.S. forces operating in Afghanistan. Enhances the protection of Forward Operating Bases (FOBs) against rocket, artillery, and mortar attacks. Supports the operational readiness and safety of military personnel in a combat zone. Contributes to the overall effectiveness of U.S. and allied military operations in Operation Enduring Freedom (OEF).

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-incentive-fee structure could lead to cost overruns if not closely monitored.
Lack of competition may reduce opportunities for innovation and technological advancement.
Short performance period might indicate a reactive procurement rather than strategic planning.

Positive Signals

Addresses a critical and immediate need for force protection in a high-threat environment.
Supports the deployment and sustainment of essential defensive systems.
Contractor has a role in providing vital support for ongoing military operations.

Sector Analysis

This contract falls within the defense sector, specifically focusing on command and control systems and counter-rocket, artillery, and mortar (C-RAM) capabilities. The market for such specialized defense electronics and support services is often dominated by a few large prime contractors. Spending in this area is driven by evolving threat landscapes and the need for advanced force protection technologies. Comparable spending benchmarks are difficult to establish without detailed knowledge of system complexity and specific support requirements, but significant investments are typical for such critical defense systems.

Small Business Impact

The contract data indicates that small business participation was not a stated requirement or focus for this award (ss: false, sb: false). As a sole-source award to a large prime contractor, it is unlikely that significant subcontracting opportunities for small businesses were mandated or actively pursued within this specific contract vehicle. This suggests that the direct impact on the small business defense ecosystem for this particular award may be minimal, with potential benefits accruing primarily to the large prime and its direct suppliers.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Army and the Department of Defense. Given the sole-source nature and the CPIF structure, rigorous oversight would be crucial to manage costs and ensure performance. Accountability measures would typically involve regular performance reviews, audits of cost submissions, and adherence to contract milestones. Transparency might be limited due to the sole-source justification and the sensitive nature of defense procurements, but Inspector General (IG) offices within the DoD would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

Forward Area Air Defense Command and Control (FAAD C2)
Counter-Rocket, Artillery, and Mortar (C-RAM) Systems
Operation Enduring Freedom (OEF) Support Contracts
Department of the Army Command and Control Systems
DoD Force Protection Systems

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
High dollar value for short duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $65.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FORWARD AREA AIR DEFENSE COMMAND AND CONTROL SYSTEM (FAAD C2/COUNTER-ROCKET, ARTILLERY AND MORTAR (C-RAM) SYSTEM OF SYSTEMS (SOS) INSTALLATION AND SUPPORT (I&S)- INITIAL 8 FORWARD OPERATING BASES (FOB) AFGHANISTAN, OEF

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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $65.9 million.

What is the period of performance?

Start: 2009-12-10. End: 2010-12-09.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. Typically, sole-source awards are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source is available, or in cases of urgent and compelling need where competition is not feasible. Without the official justification document (e.g., a Justification and Approval - J&A), it's impossible to determine the precise reasons. However, for complex, specialized systems like FAAD C2/C-RAM, it's possible that only Northrop Grumman possessed the necessary technical expertise, proprietary data, or existing infrastructure to provide the required installation and support within the specified timeframe and operational context of Afghanistan during OEF.

How does the Cost Plus Incentive Fee (CPIF) structure typically impact contractor performance and cost?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on meeting or exceeding certain performance criteria, often related to cost targets. The 'incentive' part means the contractor is motivated to control costs and perform efficiently to earn a higher fee. However, the 'cost-plus' aspect means the government still bears the risk of cost overruns if targets are missed or if costs exceed the initial estimates. Effective implementation requires clearly defined performance metrics and target costs, along with robust government oversight to ensure the incentives align with the government's best interests and prevent undue cost escalation.

What are the potential risks associated with a sole-source award for critical defense systems?

Sole-source awards for critical defense systems carry several inherent risks. Firstly, the lack of competition can lead to higher prices than might be achieved through a competitive bidding process, as the contractor faces less pressure to offer the most cost-effective solution. Secondly, it can foster contractor complacency or 'lock-in,' where the government becomes dependent on a single provider, potentially limiting future flexibility and innovation. Thirdly, without competitive benchmarks, it becomes more challenging for the government to accurately assess the 'should-cost' of the system and ensure fair and reasonable pricing. Finally, sole-source awards can raise concerns about transparency and fairness in the procurement process, potentially leading to perceptions of favoritism or missed opportunities for other capable vendors.

What is the significance of the 'Other Communications Equipment Manufacturing' NAICS code in relation to this contract?

The North American Industry Classification System (NAICS) code 334290, 'Other Communications Equipment Manufacturing,' is assigned to establishments primarily engaged in manufacturing communication equipment, except telephone apparatus, radio and television broadcasting and wireless communications equipment. While the contract is for 'Installation and Support' of the FAAD C2/C-RAM system, the NAICS code likely reflects the primary manufacturing or integration role of the contractor (Northrop Grumman) in producing or assembling the core components of the communication and command systems involved. This code helps categorize the industry sector and understand the type of manufacturing capabilities involved, even though the contract itself focuses on services.

How does the short duration (364 days) of this contract impact its strategic value?

A contract duration of 364 days, just shy of a full year, suggests that this procurement was likely intended to address immediate operational needs or fulfill a specific, short-term requirement rather than a long-term strategic objective. For critical systems like air defense in a combat zone, such short durations can be common for sustainment or support tasks, allowing for flexibility to adapt to changing mission requirements or threat assessments. However, it also means that the government would need to re-compete or extend the contract relatively quickly, potentially leading to recurring administrative costs and a continuous need to justify the procurement strategy, especially if it remains sole-source.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Other Communications Equipment Manufacturing

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 INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $65,861,428

Exercised Options: $65,861,428

Current Obligation: $65,861,428

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline