Northrop Grumman's $15M Common Ground Project R&D contract awarded by the Army shows fair value with 2 bidders

Contract Overview

Contract Amount: $14,955,662 ($15.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2009-09-04

End Date: 2012-12-10

Contract Duration: 1,193 days

Daily Burn Rate: $12.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: U436100 COMMON GROUND PROJECT

Place of Performance

Location: ALEXANDRIA, FAIRFAX County, VIRGINIA, 22315

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $15.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: U436100 COMMON GROUND PROJECT Key points: 1. The contract's value appears reasonable given the R&D nature and the competitive bidding process. 2. Limited competition with two bidders suggests potential for price negotiation but also indicates specialized capabilities. 3. The cost-plus-fixed-fee structure carries inherent risk of cost overruns, requiring diligent oversight. 4. Performance context is R&D, making direct comparisons to service contracts difficult. 5. This contract falls within the broader Research and Development sector, specifically physical sciences. 6. The contract duration of nearly 4 years suggests a substantial project scope.

Value Assessment

Rating: fair

The contract's total value of approximately $15 million for nearly four years of R&D work appears to be within a reasonable range for specialized research. While direct comparisons are challenging due to the R&D focus, the fixed fee component suggests a defined profit margin for the contractor. Benchmarking against similar government R&D contracts in physical sciences would provide a more precise value assessment, but initial indicators suggest fair pricing for the scope.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. With two bidders, the competition level was moderate. While more bidders could potentially drive prices lower, two bidders suggest that the market for this specific R&D capability is not overly saturated, and the government secured at least one alternative source.

Taxpayer Impact: The full and open competition, even with two bidders, is beneficial for taxpayers as it ensures a baseline level of market testing and prevents sole-source awards without justification, potentially leading to better pricing than a non-competitive process.

Public Impact

The primary beneficiary is the Department of the Army, which gains access to advanced research and development capabilities. The services delivered are research and development in physical, engineering, and life sciences, excluding biotechnology. The geographic impact is primarily within Virginia, where the contractor is located, but the research outcomes could have broader national security implications. Workforce implications include employment for specialized researchers and technical staff at Northrop Grumman.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can incentivize contractors to increase costs to maximize profit if not closely monitored.
The limited number of bidders (2) might indicate a niche market, potentially reducing future competition and price leverage.
The R&D nature of the contract makes performance metrics and success criteria potentially subjective and harder to quantify.

Positive Signals

Awarded under full and open competition, ensuring a broad search for qualified contractors.
Northrop Grumman is a large, established defense contractor with a significant track record in R&D.
The contract specifies a fixed fee, providing some predictability in contractor profit margins.

Sector Analysis

This contract falls under the Research and Development sector, specifically within the NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences). This sector is crucial for technological advancement and national security. Comparable spending benchmarks in this area are highly variable, depending on the specific scientific discipline and project complexity. However, contracts for advanced R&D by major defense contractors often range from millions to tens of millions of dollars.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses. As a large contract awarded to a major defense contractor, the primary focus is on specialized R&D capabilities rather than fostering small business participation. This means the direct impact on the small business ecosystem is likely minimal for this specific award.

Oversight & Accountability

Oversight for this contract would typically be managed by the contracting officer and program managers within the Department of the Army. Accountability measures would include regular progress reports, milestone reviews, and audits of costs, especially given the cost-plus-fixed-fee structure. Transparency is generally maintained through contract award databases, though specific technical details of the R&D may be sensitive.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Northrop Grumman Systems Corporation Contracts
Physical Sciences Research Initiatives

Risk Flags

Cost-plus-fixed-fee contract type carries inherent risk of cost overruns.
Limited competition (2 bidders) may reduce future price leverage.
R&D success is inherently uncertain and difficult to measure definitively.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. U436100 COMMON GROUND PROJECT

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 $15.0 million.

What is the period of performance?

Start: 2009-09-04. End: 2012-12-10.

What is Northrop Grumman's track record with similar R&D contracts for the Department of Defense?

Northrop Grumman Systems Corporation is a major defense contractor with extensive experience in research and development across various domains, including aerospace, defense, and information technology. They have a long history of securing and executing large-scale R&D contracts with the Department of Defense and other federal agencies. Their portfolio includes work on advanced materials, sensor technologies, electronic warfare, and space systems. While specific performance metrics for past R&D contracts are often proprietary or difficult to quantify publicly, their continued success in winning competitive bids suggests a generally positive track record in delivering research outcomes and managing complex projects within budget and schedule constraints, though like any large contractor, they may have faced challenges on specific programs.

How does the value of this contract compare to other R&D contracts in physical sciences?

The total contract value of approximately $15 million for nearly four years of R&D in physical sciences is moderate. R&D contracts can vary significantly in cost based on the complexity, duration, and specific field of research. Contracts in cutting-edge areas or those requiring extensive laboratory facilities and highly specialized personnel can easily exceed tens or even hundreds of millions of dollars. Conversely, smaller, more focused research projects might be in the low millions. Given that this was awarded to a major contractor like Northrop Grumman and involved a fixed fee, the pricing appears to be in a reasonable range for a project of this nature, suggesting fair value compared to the broader spectrum of R&D spending.

What are the primary risks associated with this cost-plus-fixed-fee contract structure?

The primary risk with a Cost-Plus-Fixed-Fee (CPFF) contract is that the contractor may have less incentive to control costs compared to fixed-price contracts. Since the government agrees to pay all allowable costs plus a fixed fee (profit), if the contractor's costs increase, their profit margin (as a percentage of total cost) decreases, but the total profit amount remains the same. This can potentially lead to cost overruns if the government does not exercise stringent oversight and cost controls. The fixed fee is negotiated upfront, so the contractor is motivated to complete the work efficiently to maximize their return on investment, but the inherent risk of cost escalation remains a key concern that requires diligent monitoring by the contracting agency.

What does the 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' classification imply for the contract's scope?

This classification (NAICS 541712) indicates that the contract's scope is focused on scientific research and experimental development in fields such as physics, chemistry, materials science, engineering disciplines (e.g., mechanical, electrical, civil), and various life sciences, with the specific exclusion of biotechnology. This means the work likely involves theoretical analysis, laboratory experiments, prototype development, and testing of physical systems, materials, or processes. It suggests the contract is aimed at advancing fundamental knowledge or developing new technologies and applications within these scientific and engineering domains, rather than focusing on biological or medical research.

How does the contract duration of 1193 days impact the assessment of value and risk?

The contract duration of 1193 days (approximately 3 years and 4 months) suggests a substantial and potentially complex research and development effort. A longer duration allows for more in-depth investigation, iterative development, and testing, which is often necessary for R&D projects. From a value perspective, it spreads the total contract cost over a longer period, potentially making the annual expenditure more manageable. However, a longer duration also increases the risk of scope creep, technological obsolescence, and potential cost increases due to inflation or unforeseen challenges. It necessitates sustained oversight and adaptive management to ensure the project remains on track and delivers the intended outcomes within the extended timeframe.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 12900 FEDERAL SYSTEMS PARK DR, FAIRFAX, VA, 22033

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: $18,882,369

Exercised Options: $18,882,369

Current Obligation: $14,955,662

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline