Northrop Grumman awarded $27.3M for STARLITE ER sustainment, a sole-source contract with a Cost Plus Fixed Fee structure

Contract Overview

Contract Amount: $27,301,326 ($27.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-03-27

End Date: 2026-09-25

Contract Duration: 2,373 days

Daily Burn Rate: $11.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: UCA TASK ORDER AGAINST IDIQ W56JSR-20-D-0006 IN SUPPORT OF THE STARLITE ER SUSTAINMENT SUPPORT SERVICES

Place of Performance

Location: LINTHICUM HEIGHTS, ANNE ARUNDEL County, MARYLAND, 21090

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $27.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: UCA TASK ORDER AGAINST IDIQ W56JSR-20-D-0006 IN SUPPORT OF THE STARLITE ER SUSTAINMENT SUPPORT SERVICES Key points: 1. The contract's Cost Plus Fixed Fee (CPFF) structure may incentivize cost overruns, requiring close monitoring. 2. As a sole-source award, the lack of competition raises concerns about potential overpayment and reduced value for money. 3. The contract duration of approximately 6.5 years suggests a long-term need for these sustainment services. 4. The specific nature of 'STARLITE ER sustainment' implies critical support for a specialized system, potentially limiting viable alternatives. 5. Performance context is limited without details on the specific system being sustained and its operational importance. 6. The award falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code.

Value Assessment

Rating: questionable

Benchmarking the value of this CPFF contract is challenging without detailed cost breakdowns and comparison to similar sustainment services for comparable systems. The sole-source nature inherently limits price discovery, making it difficult to ascertain if the fixed fee accurately reflects the effort required or if it allows for excessive profit margins. Without competitive bids, it's hard to determine if the government is receiving a fair price for the services rendered. Further analysis of historical spending on this or similar systems would be necessary to establish a more robust value assessment.

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 typically occurs when only one vendor possesses the necessary capabilities, proprietary knowledge, or when urgency dictates a direct award. The lack of competition means that the government did not benefit from the price reductions and innovation that can arise from a competitive bidding process. This approach can lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down costs. The government's negotiating position is weakened without alternative sources to consider.

Public Impact

The primary beneficiaries are likely the Department of the Army and potentially other branches relying on the STARLITE ER system. Services delivered include sustainment support, ensuring the operational readiness and longevity of the STARLITE ER system. The geographic impact is likely concentrated where the STARLITE ER system is deployed and maintained, with a focus on Maryland for this specific award. Workforce implications may include specialized technical roles for Northrop Grumman employees involved in sustainment and maintenance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs.
Cost Plus Fixed Fee (CPFF) contract type can incentivize cost growth if not managed tightly.
Lack of transparency in cost build-up for CPFF contracts can obscure true value.
Long contract duration increases exposure to potential cost escalations over time.
Dependence on a single contractor for critical sustainment can create vendor lock-in.

Positive Signals

Northrop Grumman is an established defense contractor with significant experience.
Sustainment contracts are crucial for maintaining the operational effectiveness of complex systems.
The contract aims to ensure the continued functionality of the STARLITE ER system.
Fixed fee component provides some level of cost predictability for the government.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically supporting the manufacturing and sustainment of advanced navigation and guidance systems. The market for such specialized sustainment services is often characterized by high barriers to entry due to technical expertise and intellectual property. Comparable spending benchmarks would involve analyzing other sustainment contracts for similar complex defense systems, which often represent significant long-term investments for the government.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by 'sb': false. Furthermore, the prime contractor is Northrop Grumman Systems Corporation, a large business. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is unclear, though large sole-source contracts can sometimes limit opportunities for smaller specialized firms.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a Cost Plus Fixed Fee contract, rigorous financial oversight and auditing are essential to ensure costs are reasonable and the fixed fee is justified. Transparency is limited by the sole-source nature and the inherent complexity of CPFF structures. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency (DLA) Sustainment Programs
Naval Air Systems Command (NAVAIR) Support Contracts
Air Force Sustainment Center Contracts
Army Aviation and Missile Command (AMCOM) Support

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. UCA TASK ORDER AGAINST IDIQ W56JSR-20-D-0006 IN SUPPORT OF THE STARLITE ER SUSTAINMENT SUPPORT 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 $27.3 million.

What is the period of performance?

Start: 2020-03-27. End: 2026-09-25.

What is the specific system referred to as STARLITE ER, and what is its operational significance to the Department of the Army?

The STARLITE ER (Enhanced Resolution) system is a specialized intelligence, surveillance, and reconnaissance (ISR) payload, often integrated onto aerial platforms. Its operational significance lies in providing critical real-time or near-real-time imagery and data to support battlefield awareness, target identification, and mission planning. The 'ER' designation suggests an advanced capability for higher resolution imagery compared to previous versions. Sustainment of such a system is vital for maintaining its performance, reliability, and technological relevance in dynamic operational environments. Without this sustainment, the system's effectiveness could degrade, impacting the Army's intelligence gathering capabilities and overall mission success.

How does the Cost Plus Fixed Fee (CPFF) contract structure compare to other contract types in terms of risk and value for sustainment services?

Cost Plus Fixed Fee (CPFF) contracts are often used when the scope of work is not precisely defined or involves significant uncertainty, such as complex sustainment. The government agrees to pay the contractor's actual costs plus a predetermined fixed fee. This structure shifts some cost risk to the government, as they bear the burden of actual costs incurred. While the fixed fee provides some cost ceiling predictability, it can incentivize contractors to incur higher costs to justify the fee or potentially lead to less efficient performance compared to fixed-price contracts. For sustainment, where requirements can evolve, CPFF can offer flexibility but requires robust government oversight to manage costs effectively and ensure value. Fixed-price contracts, conversely, offer greater cost certainty for the government but may require more detailed upfront scope definition and can be less adaptable to unforeseen issues.

What are the potential risks associated with a sole-source award for critical system sustainment, and how can they be mitigated?

The primary risk of a sole-source award for critical system sustainment is the lack of competition, which can lead to inflated prices, reduced innovation, and potential complacency from the contractor. The government has limited leverage to negotiate favorable terms or drive down costs. Furthermore, it creates a dependency on a single vendor, potentially leading to 'vendor lock-in' and making it difficult to switch providers even if performance or pricing becomes unsatisfactory. Mitigation strategies include conducting thorough market research to identify potential alternative sources, negotiating the best possible terms and pricing within the sole-source context, implementing strong contract performance management and oversight, and planning for future competition or alternative solutions well in advance of contract expiration.

What historical spending patterns exist for Northrop Grumman's sustainment contracts within the Department of Defense, particularly for similar ISR systems?

Northrop Grumman has a long history of securing significant contracts with the Department of Defense for a wide array of defense systems, including ISR platforms. Analyzing their historical spending patterns for similar sustainment contracts would reveal trends in contract values, durations, and types (e.g., CPFF vs. fixed-price). For ISR systems, sustainment costs can be substantial due to the complexity of the technology, the need for frequent upgrades, and the high operational tempo. Historical data might show whether their pricing for sustainment has been competitive when compared to other large defense contractors performing similar services. Without access to specific historical data for STARLITE ER or directly comparable systems, a precise analysis is difficult, but Northrop Grumman's overall portfolio indicates substantial engagement in this domain.

How does the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code relate to the services provided under this contract?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' directly aligns with the nature of the STARLITE ER system and its sustainment. This code encompasses establishments primarily engaged in manufacturing instruments and related equipment for detecting, measuring, and controlling or displaying physical phenomena, as well as navigation, guidance, and control systems. The sustainment services provided by Northrop Grumman likely involve maintaining, repairing, and potentially upgrading the hardware and software components of the STARLITE ER system, which falls squarely within the scope of this manufacturing and support classification. It signifies that the contract supports the lifecycle management of sophisticated defense instrumentation.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

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: 1580B W NURSERY RD, LINTHICUM HEIGHTS, MD, 21090

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: $28,102,976

Exercised Options: $28,102,976

Current Obligation: $27,301,326

Actual Outlays: $13,525,885

Subaward Activity

Number of Subawards: 63

Total Subaward Amount: $10,791,276

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56JSR20D0006

IDV Type: IDC

Timeline