DoD awards Northrop Grumman $272M for EW Systems, raising concerns about competition and value

Contract Overview

Contract Amount: $272,035,115 ($272.0M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2001-10-03

End Date: 2012-07-31

Contract Duration: 3,954 days

Daily Burn Rate: $68.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003583684!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !NOT DISCERNABLE !334419!E! !3! ! !C! ! !99990909!B! ! !A! !D!N!R!1!001!N!1G!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! !FA8523!0001! !

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $272.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK… Key points: 1. Significant contract value of $272M awarded to a single large business. 2. Lack of competition raises questions about price discovery and potential overpayment. 3. The contract type (Cost Plus Award Fee) can incentivize cost overruns. 4. The sector is Electronics and Communication Equipment, a critical area for defense.

Value Assessment

Rating: questionable

The contract value of $272M for EW Systems is substantial. Without competitive bidding, it's difficult to assess if this price is reasonable compared to market rates or similar government contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This significantly limits price discovery and may lead to higher costs for taxpayers as there was no market pressure to offer the best price.

Taxpayer Impact: The lack of competition on a contract of this magnitude means taxpayers may be paying a premium for these EW systems.

Public Impact

Taxpayers may be overpaying for essential electronic warfare systems due to a lack of competitive bidding. The long contract duration (2001-2012) suggests a long-term reliance on these systems, making the initial pricing even more critical. The award to a single large corporation concentrates significant defense spending within one entity.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Positive Signals

Sector Analysis

The Electronics and Communication Equipment sector is vital for national defense, encompassing advanced systems for surveillance, communication, and electronic warfare. Benchmarks for such specialized systems are often difficult to establish due to proprietary technology and unique requirements.

Small Business Impact

This contract was awarded to Northrop Grumman Systems Corporation, a large defense contractor. There is no indication of small business participation in this specific award, suggesting a missed opportunity for small business engagement.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure the government is receiving fair value. The cost-plus award fee structure requires diligent monitoring of performance and costs to control expenditures.

Related Government Programs

Risk Flags

Tags

search-detection-navigation-guidance-aer, department-of-defense, il, definitive-contract, 100m-plus

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $272.0 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 200603!000048!5700!FA8523!WR-ALC-LSK EW SYSTEMS !F0960302C0332 !A!N! !N! !P00018!20051003!20060930!005128988!008255408!016435559!N!NORTHROP GRUMMAN SYSTEMS CORPO!600 HICKS RD !ROLLING MEADOW !IL!60008!65338!031!17!ROLLING MEADOWS !COOK !ILLINOIS !+000003583684!N!N!000000000000!5865!ELCT CNTRMSRS, CNTR-CNTR-MSRS & QCK RCTN CPBLTY EQ!A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !NOT DISCERNABLE !334419!E! !3! ! !C! ! !999

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 $272.0 million.

What is the period of performance?

Start: 2001-10-03. End: 2012-07-31.

What was the justification for awarding this contract on a sole-source basis?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or a lack of viable alternatives. Without further documentation, it's impossible to determine the specific rationale, but it's crucial for ensuring the government wasn't foregoing potential cost savings from competition.

How were costs controlled and value ensured under the Cost Plus Award Fee structure?

Cost Plus Award Fee contracts aim to incentivize contractor performance by linking a portion of the fee to achieving specific performance metrics. Effective oversight by the contracting agency is essential to scrutinize costs, validate performance against award criteria, and ensure the overall value delivered aligns with taxpayer investment.

What is the long-term strategic impact of awarding such a large contract without competition?

Awarding large, long-term contracts without competition can stifle innovation and create vendor lock-in. It may also reduce the government's leverage in future negotiations and potentially lead to higher sustainment costs if the initial system is not cost-effectively designed or procured.

Industry Classification

NAICS: ManufacturingNavigational, Measuring, Electromedical, and Control Instruments ManufacturingSearch, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation (UEI: 967356127)

Address: 500 HICKS RD 600, ROLLING MEADOW, IL, 60008

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $272,035,115

Exercised Options: $272,035,115

Current Obligation: $272,035,115

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline

Start Date: 2001-10-03

Current End Date: 2012-07-31

Potential End Date: 2012-07-31 00:00:00

Last Modified: 2016-12-21

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