DoD awards $34.8M for 95 cannons, raising questions about sole-source procurement and value

Contract Overview

Contract Amount: $34,861,522 ($34.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-09-24

End Date: 2023-12-31

Contract Duration: 1,193 days

Daily Burn Rate: $29.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PRODUCTION OF NINETY-FIVE (95) XM813 CANNONS.

Place of Performance

Location: MINNEAPOLIS, HENNEPIN County, MINNESOTA, 55442

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $34.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: PRODUCTION OF NINETY-FIVE (95) XM813 CANNONS. Key points: 1. The contract for 95 XM813 cannons was awarded on a sole-source basis, limiting competitive pricing. 2. The firm-fixed-price contract structure shifts some risk to the government. 3. The duration of the contract (nearly 4 years) suggests a complex or lengthy production process. 4. The absence of a small business set-aside indicates a focus on large prime contractors. 5. The procurement falls under the 'Small Arms, Ordnance, and Ordnance Accessories Manufacturing' NAICS code.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of the XM813 cannons. Without competitive bids, it's difficult to ascertain if the $34.8 million price represents a fair market value. The firm-fixed-price contract type, while providing cost certainty, can sometimes lead to higher prices if competition is absent. Further analysis would require comparing the per-unit cost to similar advanced ordnance systems, if available, or to historical pricing for comparable components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning Northrop Grumman Systems Corporation was the only vendor considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. The lack of competition means potential savings that could arise from a bidding war among suppliers are unlikely to be realized, potentially leading to a higher overall cost for the government.

Taxpayer Impact: Taxpayers may be paying a premium for these cannons due to the absence of a competitive bidding process. Without multiple offers, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Army, which will receive the 95 XM813 cannons for its operations. The contract delivers advanced ordnance capabilities essential for modern military engagements. The geographic impact is primarily within the United States, where the cannons will be manufactured and potentially deployed. The contract supports jobs within Northrop Grumman's defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Firm-fixed-price contract can lead to higher contractor profit margins if costs are lower than anticipated.
Lack of transparency in the sole-source justification process.
Long contract duration could indicate potential for cost overruns or schedule delays if not managed effectively.

Positive Signals

Procurement of advanced military hardware (XM813 cannons) enhances national defense capabilities.
Contract awarded to a known defense contractor with established production capabilities.
Firm-fixed-price contract provides budget certainty for the Department of Defense.

Sector Analysis

The defense industry, particularly the segment focused on ordnance and weapon systems manufacturing, is characterized by high R&D costs, long production cycles, and significant government reliance. This contract for XM813 cannons fits within this sector, supplying critical components for military modernization. Spending in this area is often driven by strategic defense needs and technological advancements, with major contractors like Northrop Grumman playing a key role. Comparable spending benchmarks would typically involve other large-scale weapon system procurements or upgrades.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The award to a large prime contractor like Northrop Grumman suggests that the primary manufacturing and assembly will be handled by the prime, with potential for subcontracting to other large or specialized firms. This approach may limit direct opportunities for small businesses to participate in this specific procurement, although they might be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The firm-fixed-price nature of the contract provides a degree of financial accountability by capping the government's liability. Transparency regarding the sole-source justification and the specific performance metrics would be crucial for assessing accountability. Inspector General involvement would likely be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Department of Defense Ordnance Procurement
Major Weapon System Manufacturing
Northrop Grumman Defense Contracts
XM813 Cannon Program

Risk Flags

Sole-source award lacks competitive pricing.
Potential for higher costs due to lack of competition.
Limited transparency on justification for sole-source procurement.
Firm-fixed-price contract can mask underlying cost efficiencies.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. PRODUCTION OF NINETY-FIVE (95) XM813 CANNONS.

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 $34.9 million.

What is the period of performance?

Start: 2020-09-24. End: 2023-12-31.

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

The provided data indicates the contract was 'NOT COMPETED,' implying a sole-source award. The specific justification for this sole-source determination is not detailed in the data. Typically, sole-source procurements are justified when only one responsible source can provide the required supplies or services, often due to unique capabilities, proprietary technology, or urgent and compelling needs where competition is not feasible. Without the official justification document, it's impossible to confirm the exact reasons. This lack of competition raises concerns about whether the government explored all avenues to ensure the best possible price and value for taxpayers.

How does the per-unit cost of the XM813 cannons compare to similar systems or historical data?

The total contract value is $34,861,522.08 for 95 cannons, resulting in a per-unit cost of approximately $367,000 ($34,861,522.08 / 95). Direct comparison to similar advanced ordnance systems is difficult without specific market data on comparable systems, especially given the sole-source nature of this award. Historical data on previous generations of cannons or similar large-caliber weapon systems procured by the DoD might offer some context, but the XM813 represents a specific technological advancement. The absence of competitive bids makes it challenging to establish a definitive benchmark for 'fair value' on a per-unit basis.

What are the key performance indicators (KPIs) and delivery milestones for this contract?

The provided data specifies a start date of September 24, 2020, and an end date of December 31, 2023, indicating a contract duration of approximately 1193 days (or just over 3 years). While this outlines the overall timeframe, specific key performance indicators (KPIs) related to quality, reliability, or technical performance of the cannons, as well as detailed delivery milestones (e.g., phased deliveries, acceptance criteria), are not included in the summary data. These details would typically be found within the contract's statement of work (SOW) and associated performance requirements documents.

What is Northrop Grumman's track record with similar large-scale defense manufacturing contracts?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in producing complex military systems, including aircraft, spacecraft, and weapon systems. They have a long history of fulfilling large government contracts. While specific details on their track record for producing cannons of this scale are not provided, their general profile suggests they possess the manufacturing capacity and technical expertise required. However, past performance on other contracts, especially sole-source awards, would be a critical factor in assessing the risk associated with this specific procurement.

What is the potential impact of this contract on the overall defense budget for ordnance?

This contract represents a $34.8 million expenditure specifically for 95 XM813 cannons. While significant for this particular system, its impact on the overall defense budget for ordnance depends on the total allocated funds for this category. Ordnance procurement is a component of the larger defense spending pie. The sole-source nature of this award could set a precedent or indicate a trend in how such specialized systems are procured, potentially influencing future budget allocations if similar procurement strategies are employed for other advanced weapon systems.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Small Arms, Ordnance, and Ordnance Accessories Manufacturing

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 4700 NATHAN LN N, PLYMOUTH, MN, 55442

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: $34,861,522

Exercised Options: $34,861,522

Current Obligation: $34,861,522

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56HZV20D0108

IDV Type: IDC

Timeline