Northrop Grumman received over $12M for aircraft parts repair/overhaul, a contract awarded without competition

Contract Overview

Contract Amount: $12,286,803 ($12.3M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2006-11-20

End Date: 2016-04-30

Contract Duration: 3,449 days

Daily Burn Rate: $3.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: REPAIR/OVERHAUL

Place of Performance

Location: MELBOURNE, BREVARD County, FLORIDA, 32904

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $12.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: REPAIR/OVERHAUL Key points: 1. The contract's value of over $12 million was awarded without competition, raising questions about potential cost efficiencies. 2. The duration of the contract, spanning nearly 10 years, suggests a long-term need for these specific repair and overhaul services. 3. Awarded as a Cost Plus Fixed Fee (CPFF) type, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. 4. The contract was awarded to a single, large defense contractor, Northrop Grumman Systems Corporation, indicating a specialized service requirement. 5. The lack of competition suggests potential risks related to price escalation and limited market testing for alternative solutions. 6. The contract's focus on 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' points to a critical but niche area within defense logistics.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids and the specific nature of aircraft parts repair and overhaul. The Cost Plus Fixed Fee (CPFF) contract type can sometimes lead to higher costs if not closely managed, as the contractor is incentivized to incur costs to achieve the fixed fee. Without comparable contract data or market analysis, it's difficult to definitively assess if the $12.2 million spent represents a fair price for the services rendered over its nearly 10-year duration.

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. This typically occurs when only one responsible source is available or when urgent and compelling circumstances necessitate a non-competitive award. The lack of competition limits the government's ability to leverage market forces to secure the best possible pricing and terms.

Taxpayer Impact: Taxpayers may have paid a premium for these services due to the absence of competitive bidding, potentially missing out on cost savings that could have been achieved through a more open procurement process.

Public Impact

The primary beneficiaries are the Department of Defense, ensuring the continued operational readiness of aircraft through specialized repair and overhaul services. The services delivered include the maintenance, repair, and overhaul of critical aircraft parts, contributing to the overall airworthiness and performance of military aviation assets. The contract's geographic impact is centered in Florida (ST, SN), suggesting a concentration of defense logistics and maintenance operations in that state. The contract supports specialized technical expertise within Northrop Grumman, potentially sustaining a workforce skilled in complex aircraft component repair.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may have led to higher costs for taxpayers.
The long contract duration (nearly 10 years) could indicate a lack of innovation or alternative solutions being explored.
Cost Plus Fixed Fee contracts require robust oversight to prevent cost overruns.
Sole-source awards can reduce transparency in pricing and service delivery.

Positive Signals

Ensures continued operational readiness of critical aircraft assets.
Awarded to a known, experienced defense contractor (Northrop Grumman).
Addresses a specific and likely complex need for aircraft parts repair/overhaul.
The contract duration suggests a stable and predictable service provision.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on the maintenance, repair, and overhaul (MRO) of aircraft components. The MRO market is a significant segment of the broader aerospace industry, driven by the need to maintain aging fleets and ensure operational readiness. Spending in this area is often characterized by long-term contracts with specialized providers due to the high technical expertise and certifications required. Comparable spending benchmarks are difficult to establish without more specific details on the types of aircraft parts involved, but the overall defense MRO market represents billions of dollars annually.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have significant subcontracting implications for small businesses based on the provided data. The award to a large prime contractor like Northrop Grumman suggests that the primary focus was on specialized capabilities rather than broad small business participation. This could limit opportunities for small businesses that might otherwise provide components or services related to aircraft parts repair.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. As a Cost Plus Fixed Fee contract, rigorous financial oversight is crucial to monitor allowable costs and ensure the fixed fee remains appropriate. Transparency is limited due to the sole-source nature of the award, making public assessment of accountability measures more challenging.

Related Government Programs

Aircraft Maintenance and Repair
Defense Logistics Support
Aerospace Component Manufacturing
Military Aircraft Sustainment
Defense Procurement

Risk Flags

Sole-source award
Long contract duration
Cost Plus Fixed Fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.3 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. REPAIR/OVERHAUL

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 $12.3 million.

What is the period of performance?

Start: 2006-11-20. End: 2016-04-30.

What is the specific nature of the 'Other Aircraft Parts and Auxiliary Equipment' that were repaired or overhauled under this contract?

The provided data indicates the contract (NA 336413) falls under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing.' This broad category typically encompasses components that are not engines, airframes, or avionics but are nonetheless critical for aircraft operation. Examples could include landing gear components, hydraulic systems parts, environmental control system parts, or specialized structural elements. Without further details from the contract itself, pinpointing the exact parts is speculative. However, the long duration and sole-source award suggest these parts are highly specialized, potentially proprietary, or require unique repair capabilities possessed by Northrop Grumman.

How does the Cost Plus Fixed Fee (CPFF) structure potentially impact the final cost compared to other contract types for this service?

The Cost Plus Fixed Fee (CPFF) structure reimburses the contractor for all allowable costs incurred during performance, plus a predetermined fixed fee representing profit. For taxpayers, this structure carries inherent risks. While the fee is fixed, the total cost is variable, meaning the government pays for all legitimate expenses. If costs escalate due to unforeseen issues, inefficiencies, or scope creep, the total expenditure increases. This contrasts with fixed-price contracts where the contractor bears more risk for cost overruns. For specialized repair services like aircraft parts overhaul, CPFF can be justified when the scope is uncertain, but it necessitates stringent government oversight to control costs and ensure the fixed fee remains reasonable relative to the effort.

What are the potential risks associated with awarding a nearly 10-year contract without competition?

Awarding a contract of this magnitude and duration without competition presents several risks. Firstly, the government loses the opportunity to benefit from price competition, potentially leading to higher costs than if multiple bidders had vied for the contract. Secondly, without competitive pressure, there may be less incentive for the contractor to innovate, improve efficiency, or offer cost-saving solutions over the contract's life. Thirdly, the long-term commitment could lock the government into a specific technology or service provider, making it difficult to adapt to future technological advancements or market changes. Finally, sole-source awards can sometimes raise concerns about fairness and the optimal use of taxpayer funds, necessitating robust justification and oversight.

What does the 'Defense Contract Management Agency' (DCMA) role typically entail for a contract like this?

The Defense Contract Management Agency (DCMA) plays a crucial role in overseeing contracts awarded by the Department of Defense. For this Northrop Grumman contract, DCMA would likely be responsible for a range of functions, including monitoring contract performance against requirements, ensuring compliance with contract terms and conditions, and verifying the allowability, allocability, and reasonableness of costs claimed by the contractor. Given the CPFF structure, DCMA's financial oversight would be particularly critical, involving audits and reviews of the contractor's accounting systems and incurred costs. They also manage contract modifications, facilitate communication between the government and contractor, and ensure timely delivery of goods or services.

How does this contract fit into the broader landscape of defense spending on aircraft sustainment and readiness?

This contract represents a component of the broader defense spending dedicated to aircraft sustainment and readiness, specifically focusing on the repair and overhaul of critical parts. Defense budgets allocate significant resources to ensure military aircraft remain operational, which includes maintenance, spare parts, upgrades, and specialized repair services. Contracts like this, even if sole-source, are essential for maintaining the readiness of aging fleets or highly specialized aircraft where unique repair capabilities are required. While the $12.2 million is a specific amount, it contributes to the overall objective of maintaining air superiority and operational capability, which is a cornerstone of national defense strategy.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 2000 W NASA BLVD, MELBOURNE, FL, 32904

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $12,286,803

Exercised Options: $12,286,803

Current Obligation: $12,286,803

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA870806D0001

IDV Type: IDC

Timeline