DoD's $1.6B LAIRCM Follow-On contract awarded to Northrop Grumman, a sole-source, firm-fixed-price deal

Contract Overview

Contract Amount: $1,603,584,167 ($1.6B)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2012-02-17

End Date: 2022-04-30

Contract Duration: 3,725 days

Daily Burn Rate: $430.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ACAT 1C, ASC/WLY, LAIRCM FOLLOW-ON (LAF)

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $1.60 billion to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: ACAT 1C, ASC/WLY, LAIRCM FOLLOW-ON (LAF) Key points: 1. The contract's significant value suggests a critical, long-term need for the LAIRCM system. 2. Sole-source award raises questions about potential price inflation and lack of competitive pressure. 3. Firm-fixed-price structure shifts cost risk to the contractor, but requires careful initial pricing. 4. The long duration (over 10 years) indicates a sustained program of record. 5. The contract's focus on electronic component manufacturing points to a complex, technology-intensive product. 6. Lack of small business participation is noted, with no set-aside or reported subcontracting. 7. The contract's value is substantial, exceeding typical spending for many component manufacturing contracts.

Value Assessment

Rating: questionable

Benchmarking the value of this $1.6 billion contract is challenging due to its sole-source nature and specific system focus. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The firm-fixed-price (FFP) award suggests that the government has confidence in the contractor's ability to accurately estimate costs, but it also means that any cost savings realized by the contractor are retained, potentially leading to higher profit margins if the initial price was not aggressively negotiated. The long duration and high value imply a critical system, but the lack of competition prevents a direct comparison to similar systems or components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Northrop Grumman Systems Corporation, was solicited. This typically occurs when a system is unique, proprietary, or when there are no other responsible sources capable of meeting the government's needs. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, which could lead to higher costs for taxpayers.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for this system, as there was no market pressure to drive down prices. This also limits opportunities for innovation from other potential suppliers.

Public Impact

The primary beneficiaries are the Department of Defense and its aircrews, who receive advanced missile warning and countermeasure systems. The contract delivers critical electronic components essential for the operation of the Large Aircraft Infrared Countermeasures (LAIRCM) system. The geographic impact is national, supporting defense readiness across various Air Force installations. Workforce implications include specialized manufacturing and engineering roles within Northrop Grumman and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Lack of small business involvement means missed opportunities for economic inclusion and diverse supplier bases.
The long contract duration could lead to vendor lock-in and reduced flexibility for future technology upgrades.
The high dollar value requires robust oversight to ensure performance and prevent cost overruns, despite FFP.
The specific nature of the components may create dependencies that are difficult to break.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor, providing budget certainty for the government.
The sustained award indicates a critical and validated need for the LAIRCM system's capabilities.
Northrop Grumman's established role suggests a high level of technical expertise and system integration capability.
The contract supports a vital defense capability, enhancing aircraft survivability.
Long-term nature allows for stable planning and resource allocation for this essential program.

Sector Analysis

This contract falls within the broader 'Other Electronic Component Manufacturing' sector (NAICS 334419), which encompasses the production of various electronic components not elsewhere classified. The market for defense-related electronic components is highly specialized, often characterized by long development cycles, stringent quality requirements, and significant R&D investment. Spending in this sector for defense applications is substantial, driven by the need for advanced technologies in areas like aerospace, communications, and defense systems. Comparable spending benchmarks are difficult to establish due to the unique nature of the LAIRCM system, but the $1.6 billion value over a decade places it among significant defense manufacturing contracts.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb: false'. Furthermore, there is no explicit mention of subcontracting plans or goals for small businesses. This suggests that the prime contract was awarded entirely to a large business, Northrop Grumman, and opportunities for small businesses to participate in this specific contract may be limited unless they are part of Northrop Grumman's supply chain. The lack of small business participation in such a large contract represents a missed opportunity to leverage the innovation and agility of the small business sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, likely involving the Air Force as the procuring agency. Given the significant value and sole-source nature, robust oversight is crucial. This would typically include regular performance reviews, audits, and potentially the involvement of the Defense Contract Management Agency (DCMA). Transparency is facilitated through contract awards databases, but detailed performance metrics and cost breakdowns may be less accessible due to the sole-source and proprietary nature of the system. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Survivability Equipment
Missile Warning Systems
Electronic Warfare Systems
Defense Electronics Manufacturing
Northrop Grumman Defense Contracts
Air Force Procurement

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation
Limited small business participation
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.60 billion to NORTHROP GRUMMAN SYSTEMS CORPORATION. ACAT 1C, ASC/WLY, LAIRCM FOLLOW-ON (LAF)

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 $1.60 billion.

What is the period of performance?

Start: 2012-02-17. End: 2022-04-30.

What is the historical spending trend for the LAIRCM program or similar systems?

Historical spending data for the LAIRCM program prior to this specific follow-on contract would provide crucial context. Analyzing previous contract awards for LAIRCM components or related systems from Northrop Grumman or other vendors can reveal spending patterns, identify potential cost escalations, and assess the program's lifecycle cost. Without access to detailed historical data specific to LAIRCM, comparisons to other missile warning or countermeasure systems within the DoD can offer a broader perspective on typical investment levels for such critical technologies. However, the unique capabilities of LAIRCM may make direct comparisons difficult. Understanding the cumulative investment over time is key to assessing the long-term financial commitment and the program's overall value proposition.

How does the per-unit cost of components under this contract compare to industry benchmarks or previous contracts?

Determining the per-unit cost for components under this $1.6 billion contract is challenging without detailed pricing breakdowns, which are often not publicly disclosed, especially for sole-source awards. The firm-fixed-price (FFP) nature means the government agreed to a set price per unit or for a defined scope. To assess value, one would ideally compare these unit prices to those from competitive solicitations for similar components, or to historical prices paid by the DoD or other agencies for the same or comparable items. Given the sole-source award to Northrop Grumman, direct comparison is difficult. Industry benchmarks for specialized defense electronic components can vary widely based on technology, volume, and customization. A thorough analysis would require access to proprietary cost data or detailed technical specifications to identify comparable market rates.

What are the specific risks associated with a sole-source award for critical defense systems like LAIRCM?

Sole-source awards for critical defense systems like LAIRCM present several key risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive environment, as the contractor faces less pressure to minimize costs. This can result in suboptimal value for taxpayer money. Secondly, it can stifle innovation, as potential competitors are excluded from participating and offering alternative solutions or technological advancements. Thirdly, it can create vendor lock-in, making it difficult and costly to switch suppliers or adopt new technologies in the future. Finally, sole-source contracts require more intensive government oversight to ensure fair pricing and adequate performance, as the usual market checks and balances are absent. This increases the burden on contracting officers and program managers to validate costs and performance.

What is Northrop Grumman's track record with the LAIRCM program and similar defense contracts?

Northrop Grumman has a significant track record with the LAIRCM program, as evidenced by this follow-on contract. They are the incumbent provider, suggesting a history of successful development, production, and integration of the system. Their performance on previous contracts, including delivery timeliness, quality adherence, and technical support, would have informed the decision to award this sole-source follow-on contract. Analyzing their broader portfolio of defense contracts, particularly those involving complex electronic systems and aircraft survivability equipment, can provide further insight into their capabilities, reliability, and cost management practices. Past performance reviews and contract award histories available through federal procurement databases would offer specific data points on their execution.

How does the duration and value of this contract compare to other major defense electronics manufacturing contracts?

This contract, valued at approximately $1.6 billion over a period of roughly 10 years (from award date Feb 2012 to end date Apr 2022, though duration calculation is 3725 days), is substantial. Major defense electronics manufacturing contracts can range widely, but a decade-long, billion-dollar award for a specific system component indicates a program of significant strategic importance and long-term sustainment needs. Compared to typical component manufacturing contracts, this is on the higher end, reflecting the complexity and criticality of the LAIRCM system. Contracts for major platforms (like aircraft or ships) are often larger, but this contract represents a significant investment in a specific, high-value subsystem. The duration is also notable, suggesting a stable, long-term requirement rather than short-term procurement.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

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 MEADOWS, IL, 60008

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,614,051,241

Exercised Options: $1,610,035,241

Current Obligation: $1,603,584,167

Actual Outlays: $20,227,875

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline