DoD's $200.9M supplemental buy for electronic components awarded to Northrop Grumman, lacking competition

Contract Overview

Contract Amount: $200,915,662 ($200.9M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2007-08-29

End Date: 2010-08-31

Contract Duration: 1,098 days

Daily Burn Rate: $183.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY07 SUPPLEMENTAL BUY

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $200.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: FY07 SUPPLEMENTAL BUY Key points: 1. Value for money is questionable due to the sole-source nature of the award. 2. Competition dynamics are absent, raising concerns about price discovery and potential overpayment. 3. Risk indicators include the lack of competition and reliance on a single contractor. 4. Performance context is limited, with a firm fixed-price contract over three years. 5. Sector positioning is within electronic component manufacturing, a critical defense supply chain area.

Value Assessment

Rating: questionable

Benchmarking the value for money is challenging without competitive bids. The $200.9 million award for electronic components, while substantial, lacks a clear comparison point to assess if the price reflects market rates or if a more competitive process could have yielded savings. The firm fixed-price structure provides cost certainty but does not inherently guarantee optimal value without a competitive baseline.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one source is capable of meeting the requirement, or in urgent situations. The absence of multiple bidders means the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium, as the contractor faced no pressure to offer the lowest possible price. This also limits transparency into the true market cost of these electronic components.

Public Impact

The Department of Defense benefits from the acquisition of critical electronic components. Services delivered include the supply of specialized electronic parts essential for military systems. Geographic impact is primarily within Illinois, where Northrop Grumman Systems Corporation is located. Workforce implications are likely concentrated within Northrop Grumman's manufacturing and engineering teams.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competitive bidding could lead to inflated costs for taxpayers.
Sole-source awards can reduce the incentive for contractors to offer competitive pricing.
Limited transparency into the pricing structure due to the absence of multiple bids.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Award to an established contractor like Northrop Grumman suggests a degree of reliability.
Contract addresses a specific need for supplemental electronic components.

Sector Analysis

This contract falls within the broader electronics manufacturing sector, specifically focusing on components likely critical for defense systems. The market for specialized defense electronics can be characterized by high barriers to entry, proprietary technology, and a limited number of qualified suppliers. Spending in this area is often driven by specific program requirements and national security needs, making direct comparisons to commercial benchmarks difficult.

Small Business Impact

This contract was not set aside for small businesses and was awarded to a large corporation. There is no indication of subcontracting plans for small businesses within the provided data. This award does not directly contribute to the small business ecosystem's participation in defense contracting.

Oversight & Accountability

Oversight mechanisms would typically involve contract administration by the Department of the Air Force and potentially audits by the Defense Contract Audit Agency. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Procurement
Electronic Component Supply Chain
Northrop Grumman Contracts
Department of the Air Force Acquisitions

Risk Flags

Sole-source award lacks competition
Potential for inflated pricing
Limited transparency in cost structure
Reliance on a single supplier for critical components

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $200.9 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. FY07 SUPPLEMENTAL BUY

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 Air Force).

What is the total obligated amount?

The obligated amount is $200.9 million.

What is the period of performance?

Start: 2007-08-29. End: 2010-08-31.

What is Northrop Grumman's track record with the Department of Defense for similar electronic component contracts?

Northrop Grumman Systems Corporation is a major defense contractor with a long history of supplying various components and systems to the Department of Defense. While specific data on their track record for identical electronic component contracts is not provided here, their extensive experience suggests familiarity with DoD requirements and quality standards. However, the absence of competition for this particular $200.9 million supplemental buy means that direct performance comparisons against other potential suppliers for this specific need are not available. Future performance will be key to assessing the value delivered under this sole-source award.

How does the $200.9 million value compare to similar supplemental buys for electronic components?

Direct comparison of the $200.9 million value to similar supplemental buys for electronic components is challenging without access to a broader dataset of comparable sole-source or competitively awarded contracts for the same or similar components. The supplemental nature of the buy suggests it was an unplanned or additional requirement beyond the original scope. The firm fixed-price contract type offers cost certainty, but the lack of competition prevents an assessment of whether this price is optimal compared to what might have been achieved through a bidding process. Benchmarking would require identifying contracts with identical or highly similar National Stock Numbers (NSNs) or product descriptions, awarded under comparable market conditions.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of $200.9 million include potential overpayment due to the absence of price competition, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency into the pricing structure. There's also a risk of vendor lock-in, making it difficult to switch suppliers in the future. Furthermore, if Northrop Grumman faces production issues or delays, the government has limited leverage compared to a situation with multiple competing vendors. The reliance on a single source for critical components can also pose a supply chain risk.

How effective is a firm fixed-price contract in ensuring program effectiveness for electronic components?

A firm fixed-price (FFP) contract is generally effective in ensuring cost control for the government, as the contractor assumes most of the risk for cost overruns. For electronic components, this means the Department of Defense has a clear understanding of the total cost upfront. However, effectiveness in terms of program success also depends on the contractor's ability to deliver the specified components on time and to the required quality standards. While FFP provides cost certainty, it does not inherently guarantee performance or timely delivery. The quality and reliability of the components themselves are crucial for the overall effectiveness of the defense systems they are integrated into.

What are the historical spending patterns for electronic component manufacturing (NAICS 334419) by the Department of Defense?

Historical spending patterns for electronic component manufacturing (NAICS 334419) by the Department of Defense are substantial, reflecting the critical role these parts play in modern military hardware. While the specific $200.9 million supplemental buy for Northrop Grumman is a single data point, the DoD consistently invests billions annually in this sector through various contract types and competition levels. Spending fluctuates based on modernization programs, sustainment requirements, and geopolitical factors. Sole-source awards, like this one, are not uncommon in specialized defense electronics where few suppliers exist, but they represent a portion of the overall spending, with competitive contracts forming the majority.

What is the significance of this contract being a 'supplemental buy'?

A 'supplemental buy' typically indicates that this procurement is an addition to an existing contract or program, or addresses an unforeseen increase in demand or a new requirement that arose after initial planning. For the Department of Defense, this could mean that existing systems require more components than initially projected, or that a new urgent need has emerged. The supplemental nature, combined with the sole-source award, suggests a potentially time-sensitive requirement where initiating a full competitive process might have been deemed impractical or too slow, though this raises questions about initial planning and risk management.

Industry Classification

NAICS: Manufacturing › Semiconductor and Other Electronic Component Manufacturing › Other Electronic Component Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $200,915,662

Exercised Options: $200,915,662

Current Obligation: $200,915,662

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862506D6453

IDV Type: IDC

Timeline