DoD awards Northrop Grumman $377.8M contract for tank training ammunition and refurbishment

Contract Overview

Contract Amount: $377,728,772 ($377.7M)

Contractor: Northrop Grumman Systems Corporation

Awarding Agency: Department of Defense

Start Date: 2022-05-26

End Date: 2028-12-06

Contract Duration: 2,386 days

Daily Burn Rate: $158.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 120MM TANK TRAINING AMMUNITION AND M1002 AMMUNITION CAN REFURBISHMENT M1002 NEW PRODUCTION M865A1 NEW PRODUCTION

Place of Performance

Location: MINNEAPOLIS, HENNEPIN County, MINNESOTA, 55442

State: Minnesota Government Spending

Plain-Language Summary

Department of Defense obligated $377.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION for work described as: 120MM TANK TRAINING AMMUNITION AND M1002 AMMUNITION CAN REFURBISHMENT M1002 NEW PRODUCTION M865A1 NEW PRODUCTION Key points: 1. Contract value represents significant investment in armored vehicle readiness. 2. Full and open competition suggests a competitive bidding process. 3. Firm-fixed-price contract type shifts cost risk to the contractor. 4. Long duration indicates a sustained need for these munitions. 5. Contractor's extensive experience in defense systems likely influenced selection. 6. Focus on training and refurbishment suggests a balance between current needs and lifecycle management.

Value Assessment

Rating: good

The contract value of $377.8 million over approximately six years for tank training ammunition and refurbishment appears reasonable given the scope. While specific per-unit cost benchmarks are not publicly available for this specialized defense procurement, the firm-fixed-price structure incentivizes cost control by Northrop Grumman. Benchmarking against similar large-scale ammunition procurements would be necessary for a more precise value assessment, but the competitive nature of the award suggests a degree of price discovery.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of three bids suggests a healthy level of competition for this significant defense requirement. A competitive process like this generally leads to better price discovery and potentially more favorable terms for the government compared to sole-source or limited competition scenarios.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the best value for the significant investment in defense munitions.

Public Impact

The U.S. Army benefits from a reliable supply of essential training and refurbished ammunition for its Abrams tanks. This contract supports the readiness and operational capabilities of armored units. The contract's duration ensures a consistent supply chain for critical munitions. It sustains jobs within the defense manufacturing sector, particularly at Northrop Grumman's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if production complexities are underestimated.
Dependence on a single contractor for a critical defense capability.
Geopolitical factors could impact raw material availability and cost.

Positive Signals

Firm-fixed-price contract mitigates cost escalation risk for the government.
Long-term contract provides supply chain stability for the Army.
Northrop Grumman's established expertise in munitions manufacturing.
Competitive award process likely secured favorable pricing.

Sector Analysis

This contract falls within the defense manufacturing sector, specifically focusing on ammunition production. The market for military munitions is characterized by high barriers to entry, significant R&D investment, and long procurement cycles driven by government defense budgets. Comparable spending benchmarks would typically involve other large-scale contracts for artillery, missile, or small arms ammunition, often awarded by major defense agencies.

Small Business Impact

This contract was not awarded as a small business set-aside, and there is no indication of specific subcontracting goals for small businesses within the provided data. The primary awardee is a large defense contractor. While large prime contracts can sometimes trickle down to small businesses through subcontracting opportunities, the direct impact on the small business ecosystem is not explicitly detailed here.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price contract type, which holds the contractor responsible for meeting cost and performance specifications. Transparency is generally maintained through contract award databases, though specific performance metrics and detailed cost breakdowns may be considered sensitive.

Related Government Programs

Department of Defense Ammunition Procurement
Army Combat Vehicle Programs
Defense Industrial Base Manufacturing
Northrop Grumman Defense Contracts

Risk Flags

Potential for supply chain disruptions
Quality control risks in manufacturing
Dependence on single prime contractor
Fluctuations in raw material costs

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $377.7 million to NORTHROP GRUMMAN SYSTEMS CORPORATION. 120MM TANK TRAINING AMMUNITION AND M1002 AMMUNITION CAN REFURBISHMENT M1002 NEW PRODUCTION M865A1 NEW PRODUCTION

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 Army).

What is the total obligated amount?

The obligated amount is $377.7 million.

What is the period of performance?

Start: 2022-05-26. End: 2028-12-06.

What is Northrop Grumman's track record with similar ammunition contracts?

Northrop Grumman has a substantial history of producing and supplying various types of munitions and defense systems for the U.S. military and allied nations. The company is a major defense contractor with extensive experience in areas such as missile systems, aerospace, and advanced electronics, which often intersect with ammunition production and integration. While specific details on past tank ammunition contracts are proprietary, their overall portfolio suggests a strong capability to handle complex manufacturing and supply chain requirements. Their long-standing presence in the defense sector indicates a proven ability to meet stringent quality, performance, and delivery standards mandated by the Department of Defense.

How does the pricing of this contract compare to historical ammunition procurements?

Direct comparison of the $377.8 million total contract value to historical ammunition procurements is challenging without specific unit cost data and accounting for inflation and evolving technological requirements. However, the firm-fixed-price nature of this award suggests the government has negotiated a ceiling price, transferring most cost overrun risks to Northrop Grumman. The fact that it was awarded under full and open competition with three bidders implies that the pricing was scrutinized against market alternatives and likely reflects a competitive market assessment at the time of award. Historical data on large-caliber ammunition contracts would be needed for a more granular benchmark.

What are the primary risks associated with this contract for the government?

The primary risks for the government in this contract revolve around ensuring consistent quality and timely delivery of critical munitions. While the firm-fixed-price structure mitigates cost escalation, there's a risk that Northrop Grumman might face production challenges, supply chain disruptions, or quality control issues that could impact delivery schedules or performance. Dependence on a single contractor for a significant portion of tank training ammunition also presents a strategic risk. Furthermore, unforeseen geopolitical events could affect the availability and cost of raw materials, potentially straining the contractor's ability to meet terms without impacting the fixed price.

How effective is this contract in ensuring the U.S. Army's training readiness?

This contract is designed to directly enhance the U.S. Army's training readiness by ensuring a steady supply of essential tank training ammunition and the refurbishment of existing M1002 rounds. Training is critical for maintaining crew proficiency and tactical effectiveness, and a reliable ammunition pipeline is fundamental to achieving this. The contract's duration (ending in late 2028) suggests a long-term commitment to supporting training needs. By covering new production and refurbishment, it addresses both immediate requirements and the lifecycle management of ammunition assets, contributing to sustained operational readiness.

What are the historical spending patterns for tank training ammunition?

Historical spending on tank training ammunition by the Department of Defense has fluctuated based on operational tempo, force structure changes, and budget allocations. Large-scale contracts for munitions are typically awarded periodically to ensure adequate stockpiles and meet training demands. Spending patterns are influenced by the number of active armored units, the frequency and intensity of training exercises, and the phasing out or upgrading of older ammunition types. The total value of such contracts can range from tens to hundreds of millions of dollars annually, depending on the specific types of ammunition and the overall defense spending climate.

What is the significance of the M1002 ammunition refurbishment component?

The M1002 ammunition refurbishment component of this contract is significant as it represents a cost-effective approach to maintaining a ready supply of training rounds. Refurbishing existing ammunition extends its service life, reduces the need for entirely new production, and can be more environmentally sound. This aspect of the contract highlights a strategic focus on lifecycle management and resource optimization within the Army's munitions sustainment strategy. It ensures that valuable assets are utilized to their full potential, contributing to both cost savings and operational readiness.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W52P1J21R0035

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Northrop Grumman Corporation

Address: 4700 NATHAN LN N, PLYMOUTH, MN, 55442

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: $1,586,968,166

Exercised Options: $377,728,772

Current Obligation: $377,728,772

Subaward Activity

Number of Subawards: 77

Total Subaward Amount: $160,086,263

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline