DoD awards $91.4M C-RAM System Integration Task Order 5 to Northrop Grumman, raising value-for-money questions

Contract Overview

Contract Amount: $91,394,229 ($91.4M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-10-03

End Date: 2009-09-30

Contract Duration: 728 days

Daily Burn Rate: $125.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: C-RAM SYSTEM INTEGRATION TASK ORDER 5

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35805

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $91.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: C-RAM SYSTEM INTEGRATION TASK ORDER 5 Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 2. Limited competition raises concerns about optimal pricing and potential for inflated costs. 3. The task order was awarded on a sole-source basis, bypassing competitive bidding processes. 4. Performance duration of 728 days suggests a significant, ongoing integration effort. 5. The engineering services NAICS code indicates a focus on technical and design expertise. 6. The contract's value, while substantial, needs benchmarking against similar complex system integration projects.

Value Assessment

Rating: questionable

The $91.4 million award for C-RAM System Integration Task Order 5 warrants scrutiny due to its sole-source nature and cost-plus-fixed-fee pricing structure. Without competitive bidding, it's difficult to ascertain if the government secured the best possible price. The cost-plus-fixed-fee arrangement, while allowing for flexibility, can sometimes lead to higher overall costs if not managed rigorously, as the contractor is reimbursed for allowable costs plus a fixed fee. Benchmarking this against similar large-scale defense system integration projects would be crucial to determine if the pricing is fair and reasonable.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This task order was awarded on a sole-source basis, meaning it was not competed. This approach bypasses the standard competitive bidding process, which typically involves soliciting proposals from multiple vendors and selecting the best value. Sole-source awards are generally reserved for situations where only one vendor can provide the required goods or services, or in cases of urgent need. The lack of competition here limits the government's ability to leverage market forces to drive down costs and ensure the most innovative solutions are considered.

Taxpayer Impact: Taxpayers may not be receiving the best value for their money when contracts are awarded without competition. The absence of multiple bids means there's less pressure on the contractor to offer competitive pricing, potentially leading to higher expenditures.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches of the Department of Defense requiring C-RAM system integration. The services delivered involve complex engineering and integration of C-RAM systems, crucial for missile defense. The geographic impact is primarily within Alabama, where the contractor is located, but the system's deployment could have national security implications. The contract supports highly skilled engineering and technical workforce within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Lack of competition may reduce opportunities for innovative solutions from a wider market.
The task order was awarded without a small business set-aside, potentially limiting small business participation.
The contract duration and value suggest a complex project where cost overruns are a possibility.

Positive Signals

Northrop Grumman is a major defense contractor with extensive experience in complex systems integration.
The contract addresses a critical defense capability (C-RAM systems).
The engineering services provided are essential for the successful implementation and functionality of advanced defense systems.
The fixed fee component of the contract provides some level of cost predictability for the contractor's profit.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the broader aerospace and defense industry. The defense sector is characterized by long-term, high-value contracts, often involving complex technological integration. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would involve analyzing other large-scale system integration contracts within the DoD, particularly those related to missile defense or advanced weapon systems.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that opportunities for small businesses to participate in this specific task order may be limited, potentially concentrated through Northrop Grumman's own supply chain. The absence of a set-aside could impact the broader small business ecosystem within the defense contracting space, as larger prime contractors may dominate the execution of such significant projects.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and program management offices. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, including cost reporting, performance milestones, and quality assurance. Transparency is often limited in sole-source defense contracts, but reporting requirements to Congress and internal DoD oversight bodies would exist. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Command and Control Systems
Aerospace Engineering Services
Defense Logistics Support
Weapon System Integration

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $91.4 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. C-RAM SYSTEM INTEGRATION TASK ORDER 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 $91.4 million.

What is the period of performance?

Start: 2007-10-03. End: 2009-09-30.

What is the track record of Northrop Grumman Systems Corporation in delivering complex defense system integration projects?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of delivering complex systems integration for the U.S. military. They have been involved in numerous high-profile programs, including aircraft, spacecraft, and missile defense systems. Their experience spans decades, encompassing research, development, manufacturing, and sustainment of advanced technologies. While their track record is generally strong in terms of technical capability, like any large contractor, they have faced scrutiny on specific projects regarding cost, schedule, and performance. For C-RAM system integration, their expertise in radar, command and control, and effector integration is relevant. A detailed review of past performance on similar integration tasks, including any past performance issues or awards, would provide a more granular understanding of their suitability for this specific task order.

How does the $91.4 million value of this task order compare to similar C-RAM system integration contracts?

Benchmarking the $91.4 million value of this specific task order against similar C-RAM system integration contracts is challenging without access to a comprehensive database of comparable procurements. However, given that C-RAM systems are sophisticated, multi-component defense solutions, this value appears substantial but not necessarily outside the expected range for complex integration efforts. Factors influencing cost include the scope of integration (e.g., hardware, software, network, testing), the specific C-RAM system components being integrated, the level of customization required, and the duration of the integration effort. Sole-source awards, like this one, can also inflate costs compared to competitively bid contracts. A thorough analysis would require identifying contracts with similar scope, complexity, and duration, ideally those that were competitively procured, to establish a fair market price.

What are the primary risks associated with a sole-source award for a critical defense system integration?

The primary risks associated with a sole-source award for a critical defense system integration like the C-RAM Task Order 5 include: 1. **Higher Costs:** Without competition, the government may pay a premium as there is less incentive for the contractor to offer the lowest possible price. 2. **Reduced Innovation:** A sole-source award limits the opportunity to explore potentially more innovative or cost-effective solutions that other qualified contractors might offer. 3. **Lack of Transparency:** The justification for a sole-source award needs to be robust, and without it, there's a risk of perceived or actual impropriety. 4. **Contractor Leverage:** The sole-source contractor may have increased leverage in negotiations regarding scope, schedule, and cost changes. 5. **Potential for Complacency:** The absence of competitive pressure could theoretically lead to reduced diligence in cost control or schedule adherence, although contractor reputation and existing performance metrics mitigate this.

What is the expected effectiveness of the C-RAM system integration being performed under this contract?

The expected effectiveness of the C-RAM system integration under this contract is high, assuming successful execution by Northrop Grumman. C-RAM (Counter Rocket, Artillery, and Mortar) systems are designed to detect, track, and intercept incoming threats such as rockets, artillery shells, and mortar rounds. The 'System Integration Task Order 5' suggests this is part of an ongoing effort to enhance or expand the capabilities of an existing C-RAM system. Effective integration ensures that all components—radar, command and control software, engagement systems, and potentially communication links—work seamlessly together. This seamless operation is critical for timely threat detection and interception, thereby protecting personnel and assets. The success hinges on the contractor's ability to manage complex technical interfaces and ensure system reliability under demanding operational conditions.

How has federal spending on engineering services for defense systems evolved over the past five years?

Federal spending on engineering services for defense systems has generally seen a consistent or increasing trend over the past five years, driven by modernization efforts, geopolitical tensions, and the need to maintain technological superiority. Agencies like the Department of Defense (DoD) allocate significant budgets towards research, development, testing, and evaluation (R&DTE), which heavily rely on specialized engineering services. This includes areas like systems integration, cybersecurity engineering, aerospace engineering, and specialized software development. While specific figures fluctuate based on annual appropriations and program priorities, the overall demand for high-level engineering expertise in the defense sector remains robust. Factors such as the development of next-generation platforms, upgrades to existing weapon systems (like C-RAM), and the integration of new technologies (AI, hypersonics) contribute to sustained or growing expenditure in this category.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

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

Address: 213 WYNN DRIVE, HUNTSVILLE, AL, 35805

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $91,394,229

Exercised Options: $91,394,229

Current Obligation: $91,394,229

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W31P4Q06D0029

IDV Type: IDC

Timeline