Northrop Grumman awarded $19.7M for CIRCM ES Year 5, a sole-source contract for advanced defense systems

Contract Overview

Contract Amount: $19,715,948 ($19.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2024-04-30

End Date: 2025-12-31

Contract Duration: 610 days

Daily Burn Rate: $32.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: CIRCM ES YEAR 5

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $19.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: CIRCM ES YEAR 5 Key points: 1. Contract awarded to a single, established provider, suggesting specialized capabilities or limited market alternatives. 2. The contract type (Cost Plus Incentive Fee) allows for cost sharing and incentivizes performance, but carries inherent cost overrun risks. 3. Performance period extends over 610 days, indicating a significant, ongoing project. 4. The contract is a delivery order under a larger program, implying a phased approach to a complex system. 5. Focus on search, detection, and navigation systems highlights critical defense technology development. 6. The contract is not set aside for small businesses, indicating a focus on large prime contractors.

Value Assessment

Rating: fair

Benchmarking the value of this specific delivery order is challenging without knowing the total contract ceiling and the scope of work for Year 5. However, the Cost Plus Incentive Fee (CPIF) structure suggests that while the government aims for cost efficiency through incentives, there's a risk of costs exceeding initial estimates. The pricing will depend heavily on the contractor's ability to meet performance targets and manage costs effectively. Without comparable sole-source contracts for similar advanced defense systems, a definitive value-for-money assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when a specific contractor possesses unique capabilities, intellectual property, or is the only source capable of fulfilling the requirement. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government compared to a competitive scenario.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure to drive down prices. The government relies on negotiation and oversight to ensure fair pricing in sole-source situations.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches of the Department of Defense requiring advanced aircraft survivability systems. The services delivered are critical for enhancing the survivability of military aircraft against threats. The contract's geographic impact is primarily within Illinois, where Northrop Grumman Systems Corporation is located, but the end-use of the systems is global for military operations. This contract supports highly skilled jobs in advanced manufacturing, engineering, and defense technology within the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost Plus Incentive Fee (CPIF) contracts can lead to cost overruns if not managed rigorously.
Lack of transparency in sole-source negotiations can obscure true value for money.
Dependence on a single contractor for critical defense technology poses a long-term strategic risk.

Positive Signals

Award to a large, established defense contractor like Northrop Grumman suggests a high likelihood of technical capability and program execution.
The CPIF contract structure includes incentives, which can drive performance and efficiency if properly structured and monitored.
The contract is a delivery order under a larger program, indicating a structured and phased approach to a complex system.
The focus on advanced systems like CIRCM (Common Infrared Countermeasures) is vital for modern military operations and personnel safety.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on advanced electronic warfare and countermeasures systems. The market for such specialized defense technologies is often dominated by a few large, experienced prime contractors due to high barriers to entry, including significant R&D investment, specialized expertise, and stringent security requirements. Spending in this sub-sector is driven by evolving threat landscapes and the need for technological superiority. Comparable spending benchmarks would typically involve other large sole-source or limited-competition contracts for similar advanced defense systems.

Small Business Impact

This contract does not appear to be a small business set-aside, as indicated by 'sb': false. The award to a large prime contractor like Northrop Grumman suggests that subcontracting opportunities may exist for small businesses, but this is not guaranteed by the contract's structure. The primary focus is on the prime contractor's capabilities. The impact on the small business ecosystem will depend on the prime's subcontracting plan and the availability of small businesses with the necessary specialized skills and clearances.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army contracting and program management offices. Accountability measures are built into the Cost Plus Incentive Fee (CPIF) structure, which links contractor profit to performance metrics. Transparency may be limited due to the sole-source nature of the award, but contract modifications, performance reports, and financial data are typically subject to review by government auditors and potentially the Inspector General, especially concerning cost and performance.

Related Government Programs

Common Infrared Countermeasures (CIRCM) Program
Aircraft Survivability Equipment (ASE)
Department of Defense Procurement
Cost Plus Incentive Fee Contracts
Sole-Source Defense Contracts

Risk Flags

Sole-source award may limit price competition.
CPIF contract type requires careful monitoring of cost and performance incentives.
Dependence on a single contractor for critical technology.
Potential for schedule delays in complex system integration.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. CIRCM ES YEAR 5

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 $19.7 million.

What is the period of performance?

Start: 2024-04-30. End: 2025-12-31.

What is the historical spending trend for the CIRCM ES program, and how does this award compare?

To assess the historical spending trend for the CIRCM ES program and compare this award, one would need access to historical contract data for previous years of the CIRCM ES program. This data would reveal the total obligated amounts, the number of awards, and the contractors involved in prior years. Without that specific historical data, it's difficult to provide a precise comparison. However, the current award of $19.7 million for Year 5 suggests a significant, ongoing investment in this particular phase of the program. If previous years saw similar or larger awards, it indicates a consistent funding level. Conversely, a substantial increase or decrease would signal a shift in program priorities or execution. The sole-source nature of this award also implies a stable, long-term relationship with Northrop Grumman for this specific component or phase of the CIRCM system.

What are the specific performance incentives tied to the Cost Plus Incentive Fee (CPIF) structure in this contract?

The specific performance incentives tied to the Cost Plus Incentive Fee (CPIF) structure for the CIRCM ES Year 5 contract are not detailed in the provided data. Typically, CPIF contracts establish a target cost, a target profit, and a sharing ratio for cost variances. Incentives are usually linked to achieving specific performance metrics, such as delivery schedules, system reliability, technical performance thresholds (e.g., detection range, accuracy), or operational effectiveness. For a system like CIRCM, incentives might relate to the system's ability to successfully detect and counter specific threats, its mean time between failures, or its integration success with various aircraft platforms. The government and the contractor negotiate these metrics, and the contractor's final profit is adjusted based on how well they meet or exceed these targets, while also managing costs within the agreed-upon sharing arrangement.

What is Northrop Grumman's track record with similar sole-source defense contracts, particularly in electronic warfare systems?

Northrop Grumman has an extensive track record with sole-source and competitively awarded defense contracts, particularly in advanced electronic warfare, radar, and defense systems. As a major defense contractor, they are frequently involved in programs requiring specialized, proprietary technology or extensive system integration capabilities, which often lead to sole-source awards. Their experience spans numerous platforms and systems, including airborne electronic attack, countermeasures, and intelligence, surveillance, and reconnaissance (ISR) systems. For instance, they are a key player in programs like the B-21 bomber's avionics and electronic warfare suites, and have historically supplied critical components for various fighter and bomber aircraft survivability systems. Their history with sole-source awards in these complex domains suggests a demonstrated ability to meet stringent technical requirements and manage large-scale, high-value defense projects, though such awards also necessitate robust government oversight to ensure fair pricing and value.

How does the $19.7 million award compare to the overall budget or total contract value for the CIRCM program?

The provided data indicates that $19.7 million is the obligated amount for CIRCM ES Year 5. To compare this to the overall budget or total contract value for the CIRCM program, one would need to know the total ceiling value of the parent contract under which this delivery order was issued, as well as the total allocated budget for the entire CIRCM initiative across all its phases and components. This $19.7 million likely represents a portion of the total funding for a specific year or phase of development and sustainment. Without the broader program financial context, it's difficult to ascertain if this award represents a significant portion of the overall program cost or if it's a routine funding allocation. Large defense programs like CIRCM often span many years and involve billions of dollars in total investment, making individual delivery orders a fraction of the total expenditure.

What are the potential risks associated with the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code in the context of this contract?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' encompasses the production of complex electronic systems critical for military operations. Potential risks within this domain for a contract like CIRCM ES Year 5 include rapid technological obsolescence, as threats evolve quickly, requiring continuous upgrades. Integration complexity is another significant risk; ensuring these systems work seamlessly with existing aircraft platforms and other defense systems is a major challenge. Supply chain vulnerabilities for specialized components can also pose risks, especially in sole-source situations where alternative suppliers may not be readily available. Furthermore, the high cost of research and development, coupled with the stringent testing and certification requirements for defense applications, introduces financial and schedule risks. Finally, cybersecurity threats targeting these sophisticated systems represent a growing concern that requires robust protective measures.

What is the significance of the contract type 'COST PLUS INCENTIVE FEE' (CPIF) for taxpayer value and contractor performance?

The Cost Plus Incentive Fee (CPIF) contract type is designed to balance cost control with performance incentives, aiming for better value for taxpayers than a simple cost-plus contract. In a CPIF arrangement, the contractor is reimbursed for allowable costs plus a fee that is adjusted based on performance against pre-determined targets. These targets often relate to cost, schedule, or technical performance. For taxpayers, the benefit lies in the potential for cost savings if the contractor exceeds performance goals or manages costs efficiently, as the fee can increase. Conversely, if targets are missed, the fee decreases. However, CPIF contracts still carry inherent risks; if the targets are poorly defined or the sharing ratio is unfavorable, costs can still escalate. Effective government oversight is crucial to ensure that the incentives are meaningful and that the contractor is motivated to achieve optimal outcomes without compromising quality or safety.

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: COMM/DETECT/COHERENT RADIATION

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: $19,715,948

Exercised Options: $19,715,948

Current Obligation: $19,715,948

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $8,424,289

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W58RGZ21D0028

IDV Type: IDC

Timeline