DoD awards Northrop Grumman $413.6M for LAIRCM production, extending through 2028

Contract Overview

Contract Amount: $413,590,835 ($413.6M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2022-04-01

End Date: 2028-12-29

Contract Duration: 2,464 days

Daily Burn Rate: $167.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: DON LAIRCM FY22 PRODUCTION WRA, ASSOCIATED SEPM, AND TECHNICAL STUDIES. THIS CONTRACT ALSO ESTABLISHES OPTION YEAR 1 CLINS FOR FY23 DON LAIRCM PRODUCTION WRAS AND ASSOCIATED SEPM

Place of Performance

Location: ROLLING MEADOWS, COOK County, ILLINOIS, 60008

State: Illinois Government Spending

Plain-Language Summary

Department of Defense obligated $413.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: DON LAIRCM FY22 PRODUCTION WRA, ASSOCIATED SEPM, AND TECHNICAL STUDIES. THIS CONTRACT ALSO ESTABLISHES OPTION YEAR 1 CLINS FOR FY23 DON LAIRCM PRODUCTION WRAS AND ASSOCIATED SEPM Key points: 1. Contract value represents significant investment in critical defense technology. 2. Sole-source award raises questions about potential for competitive pricing. 3. Long-term nature of the contract suggests sustained need for these systems. 4. Performance risk is moderate given the established nature of the technology. 5. This contract positions Northrop Grumman as a key supplier for a vital defense capability. 6. Focus on production and technical studies indicates ongoing development and sustainment.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar sole-source awards for advanced defense systems. The fixed-price incentive structure aims to align contractor and government interests, but the initial award amount of over $413 million for a multi-year period indicates a substantial investment. Further analysis would require understanding the specific components and services included, as well as the historical pricing trends for this particular system.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Northrop Grumman was the only vendor considered. This approach is often used for highly specialized or proprietary systems where only one contractor possesses the necessary expertise or technology. While it ensures access to critical capabilities, it limits opportunities for price discovery through competition and may result in higher costs for the government compared to a competed procurement.

Taxpayer Impact: The lack of competition means taxpayers may not benefit from the cost savings typically achieved through a bidding process. This could translate to a higher overall expenditure for this defense system.

Public Impact

The Department of the Navy benefits from the continued production and support of the Large Aircraft Infrared Countermeasures (LAIRCM) system. This contract ensures the availability of advanced threat detection and countermeasures for military aircraft. The geographic impact is national, supporting defense readiness across various operational theaters. Workforce implications include sustained employment for engineers, technicians, and manufacturing personnel at Northrop Grumman and its subcontractors.

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 sole-source justifications can obscure true value for money.
Long-term contract duration may reduce flexibility to adapt to evolving technological needs or market conditions.
Dependence on a single supplier for critical defense technology poses a strategic risk.

Positive Signals

Contract ensures continued availability of a critical defense system (LAIRCM).
Fixed-price incentive structure incentivizes contractor performance and cost control.
Long-term award provides stability for production and sustainment planning.
Northrop Grumman has a track record in developing and producing advanced defense systems.

Sector Analysis

The defense electronics and systems manufacturing sector is characterized by high R&D costs, long product lifecycles, and significant government investment. Contracts like this for the LAIRCM system are crucial for maintaining technological superiority and operational effectiveness in airborne defense. The market is often dominated by a few large prime contractors due to the complexity and security requirements. Spending benchmarks for similar advanced electronic warfare systems can range from tens to hundreds of millions of dollars annually, depending on the system's sophistication and deployment scale.

Small Business Impact

This contract does not appear to include specific small business set-asides. As a sole-source award to a large prime contractor, the primary subcontracting opportunities for small businesses will be determined by Northrop Grumman's internal procurement strategies. It is essential to monitor subcontracting plans to ensure small businesses have adequate opportunities to participate in the supply chain for this critical defense system.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of Defense's contracting and program management offices. The fixed-price incentive structure includes provisions for performance monitoring and potential adjustments based on cost and schedule outcomes. Transparency may be limited due to the sole-source nature, but contract performance reviews and audits by the Defense Contract Audit Agency (DCAA) and potentially the Government Accountability Office (GAO) would provide accountability.

Related Government Programs

Aircraft Survivability Equipment
Electronic Warfare Systems
Missile Warning Systems
Defense Production Contracts
Northrop Grumman Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long-term dependency on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $413.6 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. DON LAIRCM FY22 PRODUCTION WRA, ASSOCIATED SEPM, AND TECHNICAL STUDIES. THIS CONTRACT ALSO ESTABLISHES OPTION YEAR 1 CLINS FOR FY23 DON LAIRCM PRODUCTION WRAS AND ASSOCIATED SEPM

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 Navy).

What is the total obligated amount?

The obligated amount is $413.6 million.

What is the period of performance?

Start: 2022-04-01. End: 2028-12-29.

What is the historical spending trend for the LAIRCM system under Northrop Grumman?

Analyzing historical spending for the LAIRCM system requires access to detailed contract data beyond the current award. Typically, such systems involve initial development contracts followed by multi-year production and sustainment agreements. Northrop Grumman has been a long-standing provider of LAIRCM technology, suggesting a consistent investment over several fiscal years. Without specific historical data points for this contract or related predecessor contracts, it's difficult to establish a precise spending trend. However, the current award of over $413 million for a period extending to late 2028 indicates a significant and sustained commitment by the Department of Defense to this capability, implying substantial prior investment and likely continued funding in future years for upgrades or expanded deployment.

How does the pricing of this LAIRCM contract compare to similar defense systems?

Directly comparing the pricing of this $413.6 million LAIRCM contract to similar defense systems is challenging without access to proprietary cost data and specific system functionalities. The LAIRCM system is a sophisticated piece of electronic warfare technology designed for aircraft survivability, involving complex hardware, software, and integration. Its price is influenced by factors such as the number of units procured, the specific aircraft platforms it will be integrated onto, the level of customization required, and the research and development costs amortized over the production run. Sole-source awards, like this one, inherently limit direct price comparisons with competitively procured systems. However, given the advanced nature and critical role of LAIRCM, the awarded amount appears consistent with the high-value, specialized nature of defense procurement in this category.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract revolve around the lack of competitive pressure. This can lead to suboptimal pricing, where the government may pay more than it would in a competitive environment. There's also a risk of reduced innovation or efficiency, as the contractor may face less incentive to find cost-saving measures or develop cutting-edge improvements without the threat of losing business to competitors. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch to alternative solutions in the future. Dependence on a single supplier for a critical defense system also introduces supply chain risks, such as potential disruptions due to the contractor's financial stability, production issues, or geopolitical factors affecting their operations.

What is Northrop Grumman's track record with the LAIRCM system?

Northrop Grumman has a well-established and extensive track record with the Large Aircraft Infrared Countermeasures (LAIRCM) system. They have been the prime contractor responsible for the development, production, and sustainment of LAIRCM for many years, equipping a wide range of U.S. military aircraft. Their experience includes integrating the system onto various platforms and providing ongoing technical support and upgrades. This long-standing relationship and demonstrated performance history are likely key factors contributing to the sole-source nature of subsequent contracts, as they possess the institutional knowledge, proprietary technology, and proven capability required for this specialized defense system.

How does this contract contribute to the overall effectiveness of military aviation defense?

This contract is crucial for maintaining and enhancing the survivability of military aircraft against infrared-guided missile threats. The LAIRCM system detects, jams, and decoys incoming missiles, significantly reducing the risk of attack. By ensuring the continued production and availability of these systems through Northrop Grumman, the Department of Defense bolsters the operational effectiveness and safety of its aircrews and aircraft. This capability is vital for missions in contested environments, allowing aircraft to operate more safely and successfully, thereby contributing directly to mission accomplishment and overall air power projection.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, 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

Solicitation ID: N0001922R0001

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $413,590,835

Exercised Options: $413,590,835

Current Obligation: $413,590,835

Actual Outlays: $569,495

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $484,000

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline