DoD awards $76.5M contract for M1002 cartridges to Northrop Grumman, raising questions about competition and value

Contract Overview

Contract Amount: $76,545,058 ($76.5M)

Contractor: Northrop Grumman Innovation Systems LLC

Awarding Agency: Department of Defense

Start Date: 2007-03-28

End Date: 2010-11-24

Contract Duration: 1,337 days

Daily Burn Rate: $57.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMNET OF 30,000 - 54,500 120MM, TPMT-T, M1002 CARTRIDGES

Place of Performance

Location: MINNEAPOLIS, HENNEPIN County, MINNESOTA, 55442

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $76.5 million to NORTHROP GRUMMAN INNOVATION SYSTEMS LLC for work described as: PROCUREMNET OF 30,000 - 54,500 120MM, TPMT-T, M1002 CARTRIDGES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (over 3 years) suggests a long-term need for these specialized munitions. 3. The contract's value of over $76 million indicates a substantial investment in military ordnance. 4. Lack of competition raises concerns about whether the government secured the best possible price. 5. The specific nature of the M1002 cartridge suggests a critical role in military operations. 6. Oversight and justification for the sole-source award are crucial for ensuring taxpayer value.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source awards for the M1002 cartridge. However, the absence of competition inherently limits the government's ability to negotiate the lowest possible price. The firm-fixed-price structure provides some cost certainty, but the overall value proposition is weakened by the lack of competitive bidding. Further analysis would require understanding the specific technical requirements and market availability of these specialized munitions.

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 Innovation Systems LLC, was considered. The justification for this approach is not detailed in the provided data. A lack of competition means there was no opportunity for other manufacturers to bid, potentially leading to higher prices than if multiple companies had competed for the contract. This limits the government's ability to leverage market forces for cost savings.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, it's difficult to ascertain if the price reflects the best value achievable in a competitive market.

Public Impact

The primary beneficiaries are the Department of the Army, receiving critical ammunition for its operations. The contract delivers M1002 cartridges, essential components for specific military platforms. The geographic impact is likely concentrated around military installations where these munitions are utilized or stored. Workforce implications include sustained employment at Northrop Grumman's facilities involved in the production of these cartridges.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Lack of transparency in the justification for sole-source procurement hinders accountability.
Long contract duration without competition may reduce incentives for cost efficiency over time.
Limited public data on the specific capabilities and necessity of M1002 cartridges makes independent value assessment difficult.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to an established defense contractor like Northrop Grumman suggests reliability in supply.
The contract addresses a specific, likely critical, military requirement.

Sector Analysis

The ammunition manufacturing sector is a critical component of the defense industrial base. This contract falls under the 'Ammunition (except Small Arms) Manufacturing' industry. The market for specialized military munitions can be limited, often involving a few key suppliers capable of meeting stringent defense requirements. Spending in this area is driven by military readiness needs and technological advancements in ordnance. Comparable spending benchmarks would typically involve other large-scale, sole-source or limited-competition awards for similar types of munitions.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, there is no explicit mention of subcontracting plans for small businesses within the provided data. Consequently, the direct impact on the small business ecosystem from this specific award is likely minimal, although Northrop Grumman may engage small businesses as part of its broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and auditing functions. The firm-fixed-price nature provides some cost control, but the sole-source award necessitates rigorous justification and review to ensure fair and reasonable pricing. Transparency is limited by the lack of public detail regarding the sole-source justification. Inspector General involvement would typically be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Department of Defense Ammunition Procurement
Northrop Grumman Defense Contracts
Military Ordnance Manufacturing
Army Ammunition Supply Chain

Risk Flags

Sole-source award lacks competitive justification.
Potential for inflated pricing due to lack of competition.
Limited transparency regarding the necessity and specific application of the M1002 cartridge.
Long contract duration without competitive re-evaluation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $76.5 million to NORTHROP GRUMMAN INNOVATION SYSTEMS LLC. PROCUREMNET OF 30,000 - 54,500 120MM, TPMT-T, M1002 CARTRIDGES

Who is the contractor on this award?

The obligated recipient is NORTHROP GRUMMAN INNOVATION SYSTEMS LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Army).

What is the total obligated amount?

The obligated amount is $76.5 million.

What is the period of performance?

Start: 2007-03-28. End: 2010-11-24.

What is the specific military application and necessity of the M1002 cartridge?

The M1002 cartridge is a component used in specific military systems, likely related to artillery or mortar systems. While the exact application is not detailed in the provided data, its procurement by the Department of the Army suggests a critical role in current or future operational capabilities. Understanding its specific function, such as target type, range, or effectiveness against certain threats, would be crucial for a comprehensive assessment of its necessity and the justification for a sole-source award. Without this context, it's difficult to fully evaluate the strategic importance of this particular munition.

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

The provided data indicates the contract was 'NOT COMPETED,' signifying a sole-source award. Typically, sole-source contracts are justified when only one responsible source can provide the required supplies or services, often due to unique capabilities, proprietary technology, or urgent and compelling circumstances. For this M1002 cartridge procurement, the justification likely stems from Northrop Grumman's exclusive ability to manufacture this specific munition, possibly due to patents, specialized tooling, or unique manufacturing processes. A thorough review of the official justification documentation would be necessary to confirm the precise reasons and assess their validity.

How does the per-unit cost of these cartridges compare to similar munitions, if data were available?

Direct comparison of the per-unit cost for the M1002 cartridge is not possible with the given data, especially since it was a sole-source award. In a competitive environment, the government would benchmark prices against similar items or historical data. For sole-source contracts, agencies often conduct price analyses based on cost breakdowns, historical pricing, or commercial price lists if applicable. Without access to Northrop Grumman's cost structure or data on comparable munitions from other manufacturers, any per-unit cost assessment would be speculative. The total award of $76,545,057.77 for an unspecified quantity (within the 30,000-54,500 range) suggests a per-unit cost potentially ranging from approximately $1,400 to $2,550, but this is a broad estimate.

What is Northrop Grumman's track record with similar defense contracts, particularly for munitions?

Northrop Grumman is a major defense contractor with extensive experience in aerospace and defense systems, including munitions. The company has a long history of producing various types of ordnance and related technologies for the U.S. military and international partners. While specific details of their past performance on contracts directly analogous to the M1002 cartridge are not provided here, their status as a prime contractor for complex defense systems suggests a significant capacity for production, quality control, and program management. Past performance evaluations, often available through government databases like the Contractor Performance Assessment Reporting System (CPARS), would offer a more detailed insight into their reliability and execution on previous contracts.

What are the potential risks associated with a long-term, sole-source contract for ammunition?

The primary risks associated with a long-term, sole-source contract for ammunition include potential cost overruns due to a lack of competitive pressure, reduced innovation from the supplier, and a lack of flexibility if military requirements change. Without competition, the contractor may have less incentive to control costs or improve efficiency over the contract's duration. Furthermore, reliance on a single supplier can create supply chain vulnerabilities. If Northrop Grumman faces production issues or decides to discontinue the product line, the Department of Defense might face significant challenges in finding an alternative source, especially for specialized munitions like the M1002 cartridge.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: AMMUNITION AND EXPLOSIVES

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

Address: 5050 LINCOLN DRIVE, MINNEAPOLIS, MN, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $76,545,058

Exercised Options: $76,545,058

Current Obligation: $76,545,058

Contract Characteristics

Cost or Pricing Data: NO

Timeline