DoD's $33.4M Infrared Countermeasure Contract Awarded to Northrop Grumman Raises Value Concerns

Contract Overview

Contract Amount: $33,441,398 ($33.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2020-08-10

End Date: 2025-04-30

Contract Duration: 1,724 days

Daily Burn Rate: $19.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: 5 YEAR IDIQ FOR COMMON INFRARED COUNTERMEASURE (CIRCM) HARDWARE AND SERVICES TASK ORDER FOR ENGINEERING SERVICES

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $33.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 5 YEAR IDIQ FOR COMMON INFRARED COUNTERMEASURE (CIRCM) HARDWARE AND SERVICES TASK ORDER FOR ENGINEERING SERVICES Key points: 1. The contract's value proposition is questionable given the lack of competition and the cost-plus incentive fee structure. 2. Sole-source awards limit price discovery and can lead to inflated costs for taxpayers. 3. The absence of a competitive bidding process increases the risk of overpayment. 4. Performance context is limited due to the sole-source nature, making benchmarking difficult. 5. This contract falls within the specialized aerospace and defense manufacturing sector. 6. The duration of the contract (over 4 years) necessitates careful monitoring of costs and performance.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific technical requirements of common infrared countermeasures (CIRCM). Without competitive bids, it's difficult to assess if Northrop Grumman's pricing is aligned with market rates or if alternative solutions could offer better value. The cost-plus incentive fee structure, while intended to incentivize performance, can also lead to cost overruns if not managed rigorously. Further analysis of historical CIRCM procurements and similar specialized defense systems would be needed for a more robust comparison.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Northrop Grumman Systems Corporation. The rationale for this approach is not provided, but it typically suggests a lack of available alternatives, proprietary technology, or urgent need. The absence of multiple bidders means there was no direct price competition, potentially limiting the government's ability to secure the most favorable terms and pricing. This procurement strategy bypasses the standard process of soliciting offers from various qualified vendors.

Taxpayer Impact: Sole-source awards limit the government's leverage in price negotiations, potentially resulting in higher costs for taxpayers compared to a competitively procured contract. Without the pressure of competing bids, the awarded price may not reflect the lowest possible cost for the required goods and services.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other Department of Defense branches requiring advanced infrared countermeasure capabilities. The contract delivers essential hardware and services for sophisticated defense systems, enhancing aircraft survivability. The geographic impact is likely concentrated around military installations and operational theaters where these systems are deployed. Workforce implications include specialized engineering and manufacturing roles within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition increases the risk of paying a premium.
Cost-plus incentive fee contracts require diligent oversight to control costs.
Limited transparency into the sole-source justification.
Potential for vendor lock-in with specialized systems.

Positive Signals

Northrop Grumman is an established defense contractor with relevant expertise.
The contract addresses a critical defense capability (countermeasures).
The incentive fee structure aims to align contractor performance with government objectives.

Sector Analysis

This contract operates within the aerospace and defense manufacturing sector, specifically focusing on electronic warfare and defense systems. The market for such specialized components is often characterized by high barriers to entry due to technological complexity and stringent regulatory requirements. Comparable spending benchmarks are difficult to establish without detailed knowledge of the specific CIRCM technology and its unique applications, but defense spending on electronic warfare systems is substantial globally.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Northrop Grumman voluntarily engages small businesses in its supply chain for this specific effort. Further investigation into subcontracting plans would be needed to assess any indirect benefits.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Army's contracting and program management offices. Accountability measures are typically embedded within the contract's performance work statement and the cost-plus incentive fee structure, which links contractor payment to achieving specific milestones and performance metrics. Transparency is limited due to the sole-source nature; however, contract modifications and performance reports would be subject to internal DoD review and potentially Inspector General oversight if performance or cost issues arise.

Related Government Programs

Aircraft Survivability Equipment
Electronic Warfare Systems
Missile Warning Systems
Infrared Countermeasures
Defense Logistics Agency Procurement

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus contract type requires vigilant cost control.
Potential for technological obsolescence over contract duration.
Limited transparency into procurement justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 5 YEAR IDIQ FOR COMMON INFRARED COUNTERMEASURE (CIRCM) HARDWARE AND SERVICES TASK ORDER FOR 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 $33.4 million.

What is the period of performance?

Start: 2020-08-10. End: 2025-04-30.

What is the specific technology or system being procured under this contract, and what are its key capabilities?

This contract is for Common Infrared Countermeasure (CIRCM) hardware and services. CIRCM systems are designed to detect incoming infrared-guided missiles and deploy countermeasures to defeat them, thereby protecting aircraft. These systems are a critical component of aircraft survivability equipment, employing advanced sensor technology and electronic warfare techniques. The specific capabilities would include missile detection, threat identification, and the deployment of appropriate countermeasures, likely involving flares or directed energy. The 'common' aspect suggests an effort to standardize this capability across various platforms within the Department of Defense.

Why was this contract awarded on a sole-source basis, and what alternatives were considered?

The provided data indicates this contract was 'NOT COMPETED,' signifying a sole-source award. The specific justification for this approach is not detailed in the summary. Typically, sole-source awards are made when only one responsible source can provide the required supplies or services. This could be due to proprietary technology, unique capabilities possessed by a single contractor, or urgent and compelling circumstances where competition is not feasible. Without further documentation, it's impossible to definitively state the alternatives considered or the precise rationale, but it implies that Northrop Grumman was deemed the only viable provider at the time of award.

How does the Cost Plus Incentive Fee (CPIF) contract type typically function, and what are the risks associated with it for this procurement?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and receives a target fee, but the final fee is adjusted based on performance against pre-determined targets (e.g., cost, schedule, or technical performance). For this CIRCM contract, the fee would likely be adjusted based on achieving specific performance metrics related to the hardware and services. The primary risk for the government is that while the fee is incentivized, the 'cost' portion is still reimbursed. If cost targets are missed, the government still pays the allowable costs, potentially leading to higher overall expenditures than anticipated, even if performance targets are met. Rigorous oversight is crucial to manage cost growth.

What is Northrop Grumman's track record with similar defense contracts, particularly in electronic warfare or countermeasure systems?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in aerospace and defense technologies, including electronic warfare, radar systems, and various defense electronics. They have a significant history of developing and producing complex systems for military applications. While specific details on their CIRCM program performance under this contract require deeper analysis of contract performance reports, their general track record suggests they possess the technical expertise and manufacturing capabilities necessary for such a specialized procurement. Past performance reviews and award histories for similar programs would provide a more granular assessment.

How does the $33.4 million total contract value compare to historical spending on CIRCM systems or similar defense electronics by the Department of Defense?

The $33.4 million total contract value over approximately five years (August 2020 to April 2025) represents a moderate investment in specialized defense hardware and services. To assess its comparability, one would need to examine historical spending data for CIRCM systems across different military branches and compare it with spending on other electronic warfare or aircraft survivability equipment. Given the advanced nature of CIRCM technology, this figure might be within the expected range for a sole-source award for engineering services and hardware for a specific system, especially if it involves significant research, development, or sustainment activities. However, without broader market data or specific program cost histories, a definitive comparison is difficult.

What are the potential risks associated with the long contract duration (over 4 years) for a technology-intensive area like infrared countermeasures?

A contract duration of over four years for technology-intensive systems like CIRCM presents several risks. Firstly, technological obsolescence is a significant concern; advancements in threat capabilities or countermeasure technology could render the procured system less effective or outdated before the contract concludes. Secondly, cost escalation over such a long period can be substantial, especially with cost-reimbursement elements, as inflation and unforeseen technical challenges impact expenses. Thirdly, maintaining contractor focus and performance over an extended period requires continuous oversight and engagement. Finally, the long duration might delay the adoption of potentially superior, newer technologies that emerge during the contract's life.

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: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 600 HICKS RD, ROLLING MEADOWS, IL, 60008

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: $33,441,398

Exercised Options: $33,441,398

Current Obligation: $33,441,398

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $12,201,578

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W58RGZ19D0110

IDV Type: IDC

Timeline