DoD awards $6.8M engineering services contract to Northrop Grumman, raising value-for-money questions due to sole-source nature

Contract Overview

Contract Amount: $6,803,254 ($6.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2023-11-20

End Date: 2026-01-21

Contract Duration: 793 days

Daily Burn Rate: $8.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: MCLEAN, FAIRFAX County, VIRGINIA, 22102

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $6.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The contract's duration of nearly three years suggests a need for sustained engineering support. 3. Northrop Grumman's extensive experience in defense contracting positions them as a capable provider. 4. The Cost Plus Fixed Fee (CPFF) contract type may incentivize cost overruns. 5. Lack of competition raises concerns about whether the government secured the best possible value. 6. The specific engineering services provided are not detailed, making direct performance benchmarking difficult.

Value Assessment

Rating: questionable

The contract's value of $6.8 million for engineering services over approximately 2.5 years warrants scrutiny, especially given the lack of competition. Without comparable sole-source awards for similar services, it's challenging to benchmark pricing effectively. The CPFF structure, while offering flexibility, can lead to higher final costs compared to fixed-price contracts if not managed rigorously. The government must ensure robust oversight to control costs and confirm that the services rendered represent a fair and reasonable price, despite the absence of competitive pressure.

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 only one vendor possesses the necessary capabilities or when urgency precludes a competitive process. The lack of competition means there was no opportunity for price negotiation based on multiple bids, potentially leading to a higher price than if it had been competed. The government's justification for a sole-source award would be critical to understanding why competition was bypassed.

Taxpayer Impact: Taxpayers may have paid a premium for these engineering services due to the absence of competitive bidding. Without a competitive process, there is less assurance that the selected contractor offered the most cost-effective solution available in the market.

Public Impact

The Department of the Army benefits from specialized engineering services to support its operations. This contract likely supports critical defense infrastructure or technology development within the Army. The geographic impact is centered in Virginia, where Northrop Grumman's operations are likely based or where the services are rendered. The contract may sustain or create jobs within Northrop Grumman's engineering workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can incentivize higher costs if not closely monitored.
Lack of detailed service description hinders independent assessment of value and performance.
The contract's duration suggests a long-term reliance, potentially delaying exploration of more cost-effective alternatives.

Positive Signals

Northrop Grumman is a large, established defense contractor with significant experience.
The contract is for essential engineering services, indicating a critical need within the Department of the Army.
The award is managed by the Department of the Army, a major component of the DoD with established procurement processes.

Sector Analysis

Engineering services are a critical component of the defense sector, encompassing design, development, testing, and maintenance of complex systems. The market for defense engineering services is substantial, dominated by large prime contractors like Northrop Grumman. This contract fits within the broader category of professional services supporting military readiness and technological advancement. Comparable spending benchmarks are difficult to establish without knowing the specific nature of the engineering work, but the overall defense engineering services market is valued in the tens of billions annually.

Small Business Impact

This contract was not competed and there is no indication of small business set-aside or subcontracting requirements. As a sole-source award to a large prime contractor, it is unlikely to directly benefit small businesses through set-asides. Subcontracting opportunities for small businesses would depend on Northrop Grumman's internal decisions and existing relationships, rather than being mandated by the contract terms.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. Accountability measures would be tied to the performance metrics and milestones outlined in the Cost Plus Fixed Fee agreement. Transparency is limited due to the sole-source nature and the proprietary details of engineering services, though contract award data is publicly available. Inspector General jurisdiction would apply if allegations of fraud, waste, or abuse arise.

Related Government Programs

Department of Defense Engineering Services
Army Professional Services Contracts
Northrop Grumman Defense Contracts
Sole-Source Defense Procurements
Cost Plus Fixed Fee Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Limited transparency on specific services

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $6.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. ENGINEERING 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 (Department of the Army).

What is the total obligated amount?

The obligated amount is $6.8 million.

What is the period of performance?

Start: 2023-11-20. End: 2026-01-21.

What specific engineering services are being provided under this contract, and how do they align with the Army's strategic objectives?

The provided data indicates the contract is for 'Engineering Services' under NAICS code 541330. However, the specific nature of these services is not detailed. Typically, engineering services in the defense sector can range from systems design and integration, software engineering, mechanical and electrical engineering, to specialized research and development support. To align with Army strategic objectives, these services would likely support modernization efforts, platform sustainment, or the development of new capabilities. Without further details on the Statement of Work (SOW), it is impossible to ascertain the precise alignment or criticality to the Army's mission.

What was the justification for awarding this contract on a sole-source basis instead of through full and open competition?

The justification for a sole-source award typically falls under specific exceptions outlined in federal acquisition regulations (e.g., FAR Part 6). Common reasons include the unique capability or proprietary nature of the service or item offered by only one source, urgent and compelling needs where competition is not feasible, or when a specific small business program applies. For a large contractor like Northrop Grumman, it's often related to unique technical expertise, existing system knowledge, or integration requirements that only they can fulfill. A formal Justification for Other Than Full and Open Competition (JOFOC) document would detail the specific rationale.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the final cost compared to other contract types like Firm-Fixed-Price (FFP)?

A Cost Plus Fixed Fee (CPFF) contract reimburses the contractor for allowable costs incurred plus a fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, allowing for flexibility. However, it places the risk of cost overruns primarily on the government, as the contractor is incentivized to incur costs to achieve the fixed fee. In contrast, a Firm-Fixed-Price (FFP) contract shifts most cost risk to the contractor, who is paid a predetermined price regardless of actual costs. Therefore, CPFF contracts can potentially result in higher final costs than FFP if not managed with stringent oversight to control expenditures.

What is Northrop Grumman's track record with similar engineering services contracts awarded by the Department of Defense?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of performing complex engineering services for the Department of Defense across various platforms and systems. They have extensive experience in areas such as aerospace, defense electronics, information systems, and shipbuilding. While specific details of their past performance on contracts similar to this $6.8 million award are not provided here, their status as a large, established entity suggests a substantial portfolio of relevant work. A deeper analysis would involve reviewing their past performance evaluations (e.g., CPARS) and the scope of previous engineering contracts they have held with the DoD.

Are there any benchmarks or industry standards for 'Engineering Services' (NAICS 541330) that can be used to assess the value of this $6.8 million award?

Benchmarking engineering services (NAICS 541330) is challenging without specific details on the scope of work, required expertise, and deliverables. Industry standards and pricing can vary significantly based on specialization (e.g., aerospace, civil, electrical, mechanical), project complexity, security clearances required, and geographic location. General market data for engineering services exists, but direct comparisons are difficult for specialized defense applications. The $6.8 million award over approximately 2.5 years ($2.72 million annually) provides a rough scale, but without knowing the labor mix, hours, and specific technical requirements, it's hard to determine if it represents good value compared to market rates or other government contracts.

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

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 7575 COLSHIRE DR, MCLEAN, VA, 22102

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: $8,195,873

Exercised Options: $6,803,254

Current Obligation: $6,803,254

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q21D0020

IDV Type: IDC

Timeline