DoD's $187M LAIRCM contract awarded to Northrop Grumman, raising questions about competition and value

Contract Overview

Contract Amount: $186,756,861 ($186.8M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2008-02-22

End Date: 2011-01-31

Contract Duration: 1,074 days

Daily Burn Rate: $173.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IDIQ LAIRCM CY08 PURCHASE

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $186.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: IDIQ LAIRCM CY08 PURCHASE Key points: 1. Contract awarded on a sole-source basis, limiting competitive pricing. 2. Significant contract value suggests potential for substantial taxpayer investment. 3. Lack of competition may indicate limited market availability or strategic sourcing. 4. Performance period spans over two years, requiring ongoing oversight. 5. Contract type is Firm Fixed Price, which can shift risk to the contractor. 6. Awarded by the Department of the Air Force, indicating a defense-specific need.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specific nature of the LAIRCM system. Without competitive bids, it's difficult to ascertain if the $187 million represents a fair market price. The firm fixed-price structure offers some cost certainty, but the absence of competition prevents a direct comparison to similar contracts or market rates for comparable systems. Further analysis would require understanding the system's unique capabilities and the contractor's cost structure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Northrop Grumman Systems Corporation, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified for unique capabilities or national security reasons, they inherently limit price discovery and can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The lack of competition means taxpayers may not have benefited from the cost savings that typically arise from a competitive bidding environment. The government may have paid a premium due to the absence of alternative suppliers.

Public Impact

The primary beneficiaries are the Department of Defense and specifically the Air Force, receiving advanced aircraft protection systems. The contract delivers critical components and support for the Large Aircraft Infrared Countermeasures (LAIRCM) system, enhancing aircraft survivability. The geographic impact is primarily within the United States, supporting defense operations and potentially related manufacturing hubs. Workforce implications may include specialized engineering, manufacturing, and logistics roles within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Lack of transparency in the sole-source justification requires scrutiny.
Long-term sustainment costs for complex defense systems can be significant.
Dependence on a single supplier can create supply chain risks.

Positive Signals

Firm Fixed Price contract shifts some cost risk to the contractor.
LAIRCM system provides critical defense capabilities, enhancing national security.
Northrop Grumman is an established defense contractor with relevant expertise.

Sector Analysis

The defense electronics sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Contracts for advanced systems like LAIRCM are often awarded to a limited number of prime contractors due to specialized knowledge and security requirements. The market size for such specialized defense systems is substantial, driven by ongoing global security needs. This contract fits within the broader category of electronic warfare and defense system manufacturing, where spending can reach billions annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the sole-source nature of the award limits opportunities for small businesses to participate as prime contractors. While Northrop Grumman may engage small businesses as subcontractors, the primary award does not directly benefit the small business ecosystem through set-asides. The impact on small businesses is indirect and dependent on the prime contractor's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would fall under the Department of Defense's procurement and contract management regulations. The Air Force is responsible for monitoring performance, ensuring delivery, and managing payments. Given the sole-source nature, the Defense Contract Audit Agency (DCAA) may play a role in auditing costs if deemed necessary. Transparency is limited by the non-competitive award, but contract modifications and performance reports would be subject to internal DoD oversight.

Related Government Programs

Aircraft Survivability Equipment
Electronic Warfare Systems
Department of Defense Procurement
Air Force Weapon Systems
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award raises concerns about price reasonableness and competition.
Lack of competitive bidding limits transparency and potential cost savings for taxpayers.
Contract duration and value necessitate close monitoring of performance and costs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $186.8 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. IDIQ LAIRCM CY08 PURCHASE

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 $186.8 million.

What is the period of performance?

Start: 2008-02-22. End: 2011-01-31.

What is the specific functionality and importance of the LAIRCM system?

The Large Aircraft Infrared Countermeasures (LAIRCM) system is a critical defense technology designed to protect large military aircraft from infrared-guided missiles. It works by detecting incoming missiles, identifying them as threats, and then employing countermeasures to defeat the missile's guidance system. This typically involves using directed infrared energy to jam the missile's seeker or decoy flares to distract it. The LAIRCM system is vital for ensuring the survivability of high-value assets like transport aircraft, bombers, and VIP transports during missions in hostile environments. Its effectiveness directly contributes to the safety of aircrews and the successful completion of military operations.

Why was this contract awarded on a sole-source basis?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the government's needs. For advanced defense systems like LAIRCM, this can be due to proprietary technology, unique manufacturing capabilities, or extensive prior development and integration work by a specific contractor. Northrop Grumman, as the likely developer or primary integrator of the LAIRCM system, may have possessed the exclusive rights, specialized knowledge, or necessary infrastructure to fulfill this particular contract requirement. The justification would need to demonstrate that competition was not feasible or would not be in the government's best interest, often citing national security or technological exclusivity.

What are the potential risks associated with a sole-source defense contract of this magnitude?

A sole-source defense contract of $187 million carries several potential risks. Firstly, the absence of competition can lead to inflated pricing, as the government lacks the leverage that multiple bids provide. This means taxpayers may be paying more than necessary. Secondly, there's a risk of contractor complacency; without competitive pressure, the contractor might be less incentivized to innovate or improve efficiency. Thirdly, reliance on a single supplier creates supply chain vulnerability. If Northrop Grumman faces production issues, delays, or financial instability, the delivery of critical defense capabilities could be jeopardized, impacting national security readiness. Finally, sole-source awards can sometimes indicate a lack of market research or a failure to foster broader competition in the defense industrial base.

How does the Firm Fixed Price (FFP) contract type impact risk allocation?

The Firm Fixed Price (FFP) contract type allocates most of the cost risk to the contractor, Northrop Grumman, in this case. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. If their costs exceed the agreed-upon price, the contractor absorbs the loss. Conversely, if their costs are lower than anticipated, they retain the profit. This structure provides the government with cost certainty, as the final price is fixed. However, it can also incentivize contractors to cut corners on quality or performance to manage their costs, necessitating robust government oversight to ensure contract requirements are fully met.

What is the historical spending context for LAIRCM or similar systems?

Historical spending on the LAIRCM program and similar aircraft survivability equipment (ASE) systems by the Department of Defense has been substantial over the years. These systems are continuously upgraded and fielded across various aircraft platforms to counter evolving threats. Contracts for ASE, including LAIRCM, often run into hundreds of millions or even billions of dollars cumulatively over their lifecycle, reflecting the high cost of advanced technology, integration, and sustainment. The $187 million awarded in CY08 for this specific purchase is consistent with the significant investment the DoD makes in protecting its air assets. Tracking historical spending patterns for LAIRCM reveals a consistent need and budget allocation for this critical capability.

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 (UEI: 967356127)

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $186,767,941

Exercised Options: $186,767,941

Current Obligation: $186,756,861

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA862506D6453

IDV Type: IDC

Timeline