DoD's $31.7M C-RAM Sense and Warn contract awarded to Northrop Grumman, raising questions about competition and value

Contract Overview

Contract Amount: $31,749,460 ($31.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2010-10-08

End Date: 2016-02-26

Contract Duration: 1,967 days

Daily Burn Rate: $16.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FMS AUSTRALIA CONTRACT FOR C-RAM SENSE AND WARN

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20171

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $31.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FMS AUSTRALIA CONTRACT FOR C-RAM SENSE AND WARN Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract's duration of nearly 2,000 days suggests a long-term need for these engineering services. 3. Lack of competition is a significant risk indicator for potential overspending and suboptimal performance. 4. The engineering services sector is broad; specific benchmarking is needed to assess value. 5. This contract falls within the Defense sector, specifically supporting critical C-RAM capabilities.

Value Assessment

Rating: questionable

Without a competitive bidding process, it is difficult to definitively assess the value for money. The $31.7 million awarded over its period of performance represents a substantial investment. Benchmarking against similar sole-source engineering services contracts for defense systems would be necessary to determine if the pricing is reasonable. The cost-plus-fixed-fee structure, while common in defense, can sometimes lead to higher costs if not carefully 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 considered. This approach bypasses the standard competitive procurement process, which typically involves soliciting bids from multiple vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, national security urgency), they inherently limit price discovery and can reduce the incentive for contractors to offer their best pricing.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from a competitive bidding environment. This can lead to higher overall expenditure for the government.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Army, receiving critical C-RAM (Counter Rocket, Artillery, and Mortar) sense and warn capabilities. The services delivered are engineering support essential for the development, maintenance, or enhancement of C-RAM systems. The geographic impact is likely focused on areas where U.S. forces operate and require protection from indirect fire threats. Workforce implications include specialized engineering roles within Northrop Grumman and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type may not incentivize maximum cost efficiency.
Lack of transparency in the justification for sole-source award.
Long contract duration without clear performance metrics in the provided data.
Engineering services are broad; specific value assessment is challenging without more detail.

Positive Signals

Awarded to a known defense contractor with established capabilities.
Supports critical military defense systems (C-RAM).
Contracting agency is the Department of Defense, indicating strategic importance.
Contract type (Cost Plus Fixed Fee) can provide flexibility for evolving requirements.

Sector Analysis

This contract falls within the Engineering Services (NAICS 541330) sector, which is a significant component of the broader defense industrial base. The market for defense engineering services is characterized by high barriers to entry, specialized expertise, and substantial government spending. Comparable spending benchmarks would typically involve other large-scale defense engineering contracts, particularly those related to sophisticated weapon systems and integrated defense solutions. The market size for defense engineering services is in the tens of billions annually.

Small Business Impact

The provided data indicates that small business participation was not a stated factor (ss: false, sb: false). This suggests that the contract was not set aside for small businesses, nor does it appear to have explicit subcontracting goals for small businesses mentioned. Consequently, the direct impact on the small business ecosystem for this specific contract is likely minimal, unless Northrop Grumman voluntarily engages small businesses as subcontractors for specialized components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and program management offices. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, including reporting requirements and milestone achievements. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

DoD C-RAM Systems Procurement
Defense Engineering Services Contracts
Northrop Grumman Defense Contracts
Army Weapon Systems Support
Sole-Source Defense Acquisitions

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns (Cost Plus Fixed Fee)
Limited transparency in procurement justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FMS AUSTRALIA CONTRACT FOR C-RAM SENSE AND WARN

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 $31.7 million.

What is the period of performance?

Start: 2010-10-08. End: 2016-02-26.

What specific C-RAM system or capability does this contract support, and what is Northrop Grumman's track record with similar systems?

The contract is for 'C-RAM Sense and Warn' capabilities, which are critical for detecting and providing early warning of incoming rocket, artillery, and mortar threats. Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in aerospace, defense, and information systems. While the specific C-RAM system isn't detailed, the company has a history of developing and supporting complex defense platforms, including radar, command and control, and electronic warfare systems, which are foundational to sense and warn functions. Their track record in delivering sophisticated defense solutions suggests technical capability, but the sole-source nature of this award prevents a direct comparison of their performance against competitors for this specific requirement.

How does the $31.7 million cost compare to similar sole-source engineering contracts for defense systems?

Benchmarking the $31.7 million cost for this sole-source contract against similar defense engineering services is challenging without more specific details on the scope of work and the exact systems supported. Sole-source awards inherently lack the price discovery mechanism of competition, making direct value comparisons difficult. However, for large-scale, long-duration engineering support contracts within the defense sector, this figure is within a plausible range, especially if it involves highly specialized, proprietary technology or critical national security functions where only one contractor possesses the requisite expertise. A detailed analysis would require comparing it to other sole-source contracts for comparable complexity and duration, factoring in inflation and specific technological requirements.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with a sole-source award of this magnitude ($31.7 million) are significant. Firstly, the lack of competition means the government likely paid a higher price than it would have in a competitive environment, as there was no pressure on Northrop Grumman to offer its most competitive bid. Secondly, there's a reduced incentive for the contractor to innovate or optimize performance, as they face no direct threat from competitors for future work on this system. Thirdly, it raises concerns about the justification for sole-sourcing; if competition was feasible but avoided, it suggests potential inefficiencies or a lack of strategic sourcing. Finally, it limits transparency and public accountability, making it harder to assure taxpayers that their money is being spent wisely.

What does the contract duration (1967 days) imply about the program's effectiveness and the government's long-term strategy?

A contract duration of 1967 days (approximately 5.4 years) for engineering services related to C-RAM Sense and Warn capabilities suggests a long-term commitment by the Department of Defense to this particular system or technology. This extended period implies that the program is considered strategically important and likely involves ongoing development, sustainment, or significant upgrades rather than a one-off project. It could indicate a stable, albeit potentially inflexible, approach to meeting C-RAM needs. The effectiveness of the program itself cannot be determined solely from the duration; it hinges on the actual performance of the C-RAM system and the value delivered by the engineering support. A long duration without clear performance metrics or opportunities for re-competition could also signal a risk of technological stagnation or vendor lock-in.

How does this contract fit into the broader landscape of U.S. defense spending on counter-threat systems?

This $31.7 million contract for C-RAM Sense and Warn engineering services represents a component of the U.S. military's broader investment in protecting forces from indirect fire threats. Spending on counter-threat systems, including C-RAM, has been a priority, particularly in regions experiencing frequent attacks. While $31.7 million is a substantial sum for a single contract, it is a fraction of the overall defense budget and the specific allocations for missile defense and force protection. This contract likely supports a specific element within a larger C-RAM program, which itself is part of a wider network of defensive capabilities. Its significance lies in enabling the 'sense and warn' function, which is crucial for timely response to threats.

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

Solicitation ID: W31P4Q10R0154

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $31,749,460

Exercised Options: $31,749,460

Current Obligation: $31,749,460

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline