Lockheed Martin awarded $619M for U-2 airframe components, with a significant portion for sustainment

Contract Overview

Contract Amount: $187,711,052 ($187.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2002-12-04

End Date: 2008-06-30

Contract Duration: 2,035 days

Daily Burn Rate: $92.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: 200306!000254!5700!GJ05 !WR-ALC/LRK !F0960403D0015 !A!N! !N!0001 !20021204!20051130!619434590!619434590!834951691!N!LOCKHEED MARTIN CORPORATION !1011 LOCKHEED WAY !PALMDALE !CA!93599!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000016324138!N!N!000000000000!1560!AIRFRAME STRUCTURAL COMPONENTS !A1A!AIRFRAMES AND SPARES !3AUJ!U-2 !336411!E! !5!B!S! ! ! !99990909!B! ! !N!Z!D!N!V!1!001!N!6A!A!Y!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!C!N! ! ! !Y! ! !0001! !

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93599

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $187.7 million to LOCKHEED MARTIN CORPORATION for work described as: 200306!000254!5700!GJ05 !WR-ALC/LRK !F0960403D0015 !A!N! !N!0001 !20021204!20051130!619434590!619434590!834951691!N!LOCKHEED MARTIN CORPORATION !1011 LOCKHEED WAY !PALMDALE !CA!93599!55156!037!06!PALMDALE !LOS A… Key points: 1. Contract value indicates substantial investment in maintaining aging U-2 aircraft. 2. Sole-source award raises questions about cost-effectiveness and potential for overpricing. 3. Long contract duration suggests a need for ongoing support for critical defense assets. 4. Performance-based contract type (Cost Plus Incentive Fee) aims to incentivize efficiency. 5. Geographic concentration in California for contractor operations. 6. Focus on airframe structural components highlights the importance of platform integrity.

Value Assessment

Rating: questionable

The total contract value of $619,434,590 for airframe structural components for the U-2 program appears high, especially given the age of the platform. While specific per-unit cost data is not provided, the overall expenditure warrants scrutiny. Benchmarking against similar sustainment contracts for aging aircraft would be necessary to definitively assess value for money. The Cost Plus Incentive Fee (CPIF) structure is intended to control costs, but the large total value suggests significant ongoing sustainment needs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This is often justified for specialized systems where only one contractor possesses the necessary technical expertise and historical knowledge. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a competitively bid contract. The justification for sole-source procurement should be thoroughly reviewed.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure, potentially leading to less efficient use of funds for maintaining the U-2 fleet.

Public Impact

The U.S. Air Force benefits from the continued operational readiness of its U-2 reconnaissance aircraft. Services delivered include the provision of airframe structural components and related support. Geographic impact is primarily national, supporting a critical intelligence, surveillance, and reconnaissance (ISR) asset. Workforce implications include employment at Lockheed Martin facilities, particularly in California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
High contract value for sustainment of an aging aircraft platform requires careful cost oversight.
Lack of detailed performance metrics in the provided data makes assessing efficiency difficult.
Contract duration extends over several years, increasing exposure to potential cost overruns.
Reliance on a single contractor for critical components can create supply chain vulnerabilities.

Positive Signals

Cost Plus Incentive Fee contract type aims to align contractor incentives with government cost-saving goals.
Focus on specific components (airframe structural) suggests targeted maintenance for platform integrity.
Contract supports a critical national security asset (U-2 ISR platform).
Contractor (Lockheed Martin) has extensive experience with the U-2 program.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft manufacturing and sustainment. The market for specialized aircraft components and maintenance for legacy platforms like the U-2 is often dominated by a few large prime contractors. Spending on sustainment for aging fleets represents a significant portion of defense budgets, with contracts often being sole-source due to unique technical requirements and contractor familiarity. Comparable spending benchmarks would typically involve analyzing other sustainment contracts for similar high-value, long-lifecycle military aircraft.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting plans for this contract. As a large sole-source award to Lockheed Martin, it is unlikely to have direct set-aside provisions. However, Lockheed Martin may engage small businesses for subcontracting opportunities related to component manufacturing or support services, though this is not explicitly detailed in the available information. The impact on the small business ecosystem would depend on the extent of such subcontracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). The Cost Plus Incentive Fee (CPIF) structure includes performance metrics and cost targets that are subject to review. Transparency is facilitated through contract databases like FPDS, but detailed operational oversight and accountability measures are internal to the agency and contractor. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

U-2 Program Support
Air Force Aircraft Sustainment
ISR Platform Maintenance
Aerospace Component Manufacturing
Defense Contractor Logistics Support

Risk Flags

Sole-source award
High contract value for legacy platform sustainment
Long contract duration
Potential for cost overruns in CPIF contracts

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $187.7 million to LOCKHEED MARTIN CORPORATION. 200306!000254!5700!GJ05 !WR-ALC/LRK !F0960403D0015 !A!N! !N!0001 !20021204!20051130!619434590!619434590!834951691!N!LOCKHEED MARTIN CORPORATION !1011 LOCKHEED WAY !PALMDALE !CA!93599!55156!037!06!PALMDALE !LOS ANGELES !CALIFORNIA!+000016324138!N!N!000000000000!1560!AIRFRAME STRUCTURAL COMPONENTS !A1A!AIRFRAMES AND SPARES !3AUJ!U-2 !336411!E! !5!B!S! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN 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 $187.7 million.

What is the period of performance?

Start: 2002-12-04. End: 2008-06-30.

What is the historical spending trend for U-2 airframe components with Lockheed Martin?

Analyzing historical spending on U-2 airframe components requires accessing contract data over multiple fiscal years. While this specific contract (F0960403D0015) spans from 2002 to 2008 with a value of $619M, it represents a snapshot. To understand trends, one would need to aggregate data for similar contract line items (CLINs) or Product Service Codes (PSCs) related to U-2 airframe sustainment awarded to Lockheed Martin or its predecessors over a longer period, potentially decades. This would reveal whether spending has been increasing, decreasing, or remaining stable, and identify any significant spikes or dips that might correlate with specific upgrades, operational tempo changes, or platform aging issues. Without this broader historical context, it's difficult to assess if the current spending level is anomalous or part of a consistent pattern.

How does the per-unit cost of U-2 airframe components compare to similar aircraft platforms?

Determining the per-unit cost for U-2 airframe components and comparing it to similar aircraft platforms is challenging without specific unit cost data within the provided contract details. The contract value of $619M covers a broad scope of 'AIRFRAME STRUCTURAL COMPONENTS' and likely includes labor, materials, and overhead over a multi-year period. To perform a meaningful comparison, one would need to identify the specific components being procured (e.g., wing spars, fuselage sections), their quantities, and their associated costs. Then, these would need to be benchmarked against the per-unit costs of comparable components for other aging reconnaissance or strategic aircraft, such as the RC-135 or potentially older fighter/bomber airframes that share similar manufacturing complexities. Given the U-2's unique design and long service life, direct comparisons may be difficult, and specialized sustainment contracts often carry higher unit costs due to limited production runs and specialized labor requirements.

What are the key performance indicators (KPIs) and targets within this Cost Plus Incentive Fee (CPIF) contract?

The provided data indicates the contract type is 'COST PLUS INCENTIVE FEE' (CPIF), suggesting that both the contractor's profit and the final contract price are subject to adjustment based on performance against agreed-upon targets. However, the specific Key Performance Indicators (KPIs) and their associated targets are not detailed in the summary data. Typically, for aircraft sustainment contracts, KPIs might include metrics such as on-time delivery of components, defect rates, turnaround time for repairs, aircraft availability rates, or adherence to maintenance schedules. The incentive fee structure would link the contractor's profit margin to achieving or exceeding these KPIs, while also penalizing underperformance. A thorough review of the contract's Statement of Work (SOW) and the contract clauses would be necessary to identify the precise KPIs, target values, and the formula used to calculate the incentive fee adjustments.

What is Lockheed Martin's track record with the U-2 program, and does it justify a sole-source award?

Lockheed Martin, through its Skunk Works division, has been the original designer and primary contractor for the U-2 reconnaissance aircraft since its inception in the 1950s. This long-standing relationship means they possess unparalleled institutional knowledge, design data, specialized tooling, and manufacturing expertise specific to the U-2 airframe and its unique systems. This deep historical involvement and proprietary knowledge are often the primary justifications for sole-source awards on legacy platforms like the U-2, especially for critical components and sustainment where alternative sources may not exist or would require extensive and costly requalification. While this expertise is valuable, it also necessitates robust government oversight to ensure fair pricing and prevent potential cost-plus inefficiencies inherent in sole-source arrangements.

What are the risks associated with the long duration and high value of this contract?

The contract duration of approximately 6 years (December 2002 to June 2008) and a total value of $619 million present several risks. Firstly, the extended timeline increases the potential for cost growth due to inflation, unforeseen technical challenges, or changes in program requirements. Secondly, a CPIF contract, while incentivizing, still carries the risk of the government paying more than necessary if targets are not sufficiently stringent or if the baseline cost estimates are inaccurate. For a sole-source award, the risk of contractor inefficiency or less aggressive cost management is heightened. Furthermore, reliance on a single contractor for critical components over such a long period can create vulnerabilities in the supply chain and reduce the government's leverage if issues arise. Robust program management, continuous cost monitoring, and proactive risk mitigation strategies are essential to manage these potential downsides.

How does the U-2 program fit into the broader intelligence, surveillance, and reconnaissance (ISR) strategy of the Department of Defense?

The U-2 Dragon Lady, despite its age, continues to play a vital role in the Department of Defense's ISR strategy due to its unique capabilities. It operates at very high altitudes, providing persistent surveillance over vast areas, and carries a variety of sophisticated sensors for signals intelligence (SIGINT), imagery intelligence (IMINT), and electronic intelligence (ELINT). In an era increasingly dominated by lower-altitude drones and satellite constellations, the U-2 offers a different, often complementary, perspective and payload capacity that current unmanned systems cannot fully replicate. Its long-duration flights and ability to be quickly reconfigured with different sensor packages make it a flexible asset for specific mission requirements. Contracts like this one, focused on maintaining the airframe, ensure the U-2 remains a viable and critical component of the nation's ISR architecture, providing essential intelligence to decision-makers.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE (V)

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 1011 LOCKHEED WAY, PALMDALE, CA, 93599

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F0960403D0015

IDV Type: IDC

Timeline