DoD's $9B Lockheed Martin contract for space systems research and development awarded without competition

Contract Overview

Contract Amount: $9,032,712,307 ($9.0B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2001-11-16

End Date: 2021-01-31

Contract Duration: 7,016 days

Daily Burn Rate: $1.3M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200207!000021!5700!CZ62 !SMC/PKJ LOS ANGELES AFB !F0470102C0002 !A!N! !N! !20011116!20070630!872978978!196596688!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!+000012250000!N!N!000000000000!AR92!RDTE/SPACE - OTHER - APPLIED RESEARCH !A2 !MISSILE AND SPACE SYSTEMS !3GFK!MILSTAR !541710!E! !1! ! ! ! ! !99990909!B! ! !B! !D!N!J!2!001!N!2A!Z!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001!

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $9.03 billion to LOCKHEED MARTIN CORP for work described as: 200207!000021!5700!CZ62 !SMC/PKJ LOS ANGELES AFB !F0470102C0002 !A!N! !N! !20011116!20070630!872978978!196596688!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA… Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Long contract duration of over 19 years suggests a sustained need for these specialized services. 3. Significant funding allocated, indicating a high-priority program within the Department of Defense. 4. Contractor has a long-standing relationship with the government, potentially influencing competition. 5. Focus on research, development, testing, and evaluation (RDT&E) for advanced space systems. 6. Geographic concentration of contractor operations in California may have regional economic implications.

Value Assessment

Rating: questionable

The contract's value of over $9 billion over nearly two decades is substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or alternative solutions. The lack of competition raises concerns about whether the government secured the best possible value for its investment. Further analysis would be needed to assess if the pricing reflects fair market value for the specialized R&D services provided.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source procurement, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the unique capabilities or technology required for the project. However, it limits the government's ability to leverage competition to drive down costs and ensure the most innovative solutions are considered. The absence of bidders means price negotiation is critical.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings typically achieved through competitive bidding. The government must rely on robust negotiation and oversight to ensure fair pricing.

Public Impact

The primary beneficiary is the Department of Defense, which receives advanced space systems research and development. Services delivered include applied research and development in space systems, crucial for national security. Geographic impact is concentrated in California, where Lockheed Martin's operations are based. Workforce implications include highly skilled jobs in aerospace engineering, research, and development within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Long-term nature of the contract could reduce flexibility to adapt to changing technological needs.
Sole-source award raises concerns about potential contractor lock-in and limited innovation.
Significant financial commitment without competitive validation.

Positive Signals

Contract supports critical national security objectives in space.
Long duration indicates a stable, long-term partnership for specialized expertise.
Contractor is a major player with extensive experience in space systems.
Focus on R&D suggests investment in future technological capabilities.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on applied research in space systems. The aerospace and defense industry is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Spending in this area is critical for maintaining technological superiority. Comparable spending benchmarks would likely be within large-scale, multi-year R&D programs for advanced defense technologies.

Small Business Impact

This contract does not appear to have a small business set-aside component. Given the sole-source nature and the specialized, large-scale R&D involved, it is unlikely that small businesses would be primary awardees. However, Lockheed Martin may engage small businesses as subcontractors, which would be a critical factor in assessing the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA) and potentially the Department of Defense's Inspector General. Given the sole-source nature and significant value, robust oversight mechanisms are crucial to ensure performance, cost control, and adherence to contract terms. Transparency would be enhanced through regular reporting requirements and potential audits.

Related Government Programs

Military Space Systems
Aerospace Research and Development
National Defense Contracts
Advanced Technology Development
Satellite Technology Programs

Risk Flags

Sole-source award
High contract value
Long contract duration
Lack of competition
Potential for cost overruns
Limited transparency in pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $9.03 billion to LOCKHEED MARTIN CORP. 200207!000021!5700!CZ62 !SMC/PKJ LOS ANGELES AFB !F0470102C0002 !A!N! !N! !20011116!20070630!872978978!196596688!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!+000012250000!N!N!000000000000!AR92!RDTE/SPACE - OTHER - APPLIED RESEARCH !A2 !MISSILE AND SPACE SYSTEMS !3GFK!MILSTAR !541710!E! !1! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $9.03 billion.

What is the period of performance?

Start: 2001-11-16. End: 2021-01-31.

What is Lockheed Martin's track record with similar sole-source R&D contracts for the Department of Defense?

Lockheed Martin Corporation has a long and extensive history of securing large, sole-source contracts with the Department of Defense, particularly in areas of advanced technology and space systems. Their track record includes numerous multi-billion dollar agreements for developing and producing complex defense platforms, such as fighter jets, satellites, and missile systems. While these sole-source awards are often justified by unique capabilities and proprietary technology, they consistently draw scrutiny regarding price reasonableness and the absence of competitive pressure. Analyzing past performance on similar sole-source R&D contracts would involve reviewing cost overruns, schedule adherence, and any documented instances of price adjustments or audits that might indicate the effectiveness of oversight and negotiation in the absence of competition.

How does the per-unit cost or value proposition of this contract compare to other government R&D efforts in space systems?

Benchmarking the value proposition of this $9 billion sole-source contract is challenging due to the lack of competitive data. Typically, value is assessed by comparing the contractor's proposed costs against independent government cost estimates, historical pricing for similar work, or bids from other potential vendors. In a sole-source scenario, the government relies heavily on negotiation and cost realism analysis. Without access to detailed cost breakdowns and negotiation records, it's difficult to definitively state if the per-unit cost is competitive. However, the sheer scale and duration suggest a significant investment, and the absence of competition inherently limits the ability to establish a clear market-based value comparison.

What are the primary risks associated with awarding such a large contract on a sole-source basis?

The primary risks associated with awarding a contract of this magnitude ($9 billion) on a sole-source basis are significant. Firstly, there is a heightened risk of paying a non-competitive price, as the government lacks the leverage that competition provides to drive down costs. Secondly, there's a potential for reduced innovation, as the contractor may have less incentive to explore novel or more cost-effective solutions when their position is guaranteed. Thirdly, contractor performance risk can be elevated; while Lockheed Martin is a reputable firm, the absence of competitive pressure could theoretically lead to complacency or less rigorous execution. Finally, there's a strategic risk if the technology or approach becomes obsolete, and the long-term commitment makes pivoting difficult or costly.

How effective are the oversight mechanisms for long-term, sole-source R&D contracts within the Department of Defense?

Oversight mechanisms for long-term, sole-source R&D contracts within the Department of Defense are designed to mitigate the risks inherent in non-competitive awards. These typically include rigorous contract administration by agencies like the Defense Contract Management Agency (DCMA), which monitors performance, schedule, and costs. Requirements for detailed progress reports, technical reviews, and audits are standard. For R&D contracts, oversight often focuses on ensuring milestones are met, research objectives are achieved, and funds are used efficiently. However, the effectiveness can vary depending on the complexity of the technology, the clarity of contract requirements, and the resources allocated to oversight personnel. Inspector General investigations can also play a role in identifying fraud, waste, or abuse.

What has been the historical spending pattern for similar space systems R&D programs within the DoD over the last decade?

Historical spending patterns for similar space systems R&D programs within the DoD over the last decade show a consistent and significant investment, driven by evolving threats, technological advancements, and the increasing importance of space domain awareness and capabilities. While specific program figures fluctuate, the overall trend indicates a sustained, often increasing, allocation of resources towards space-based intelligence, surveillance, reconnaissance (ISR), communications, and missile warning systems. Budgets for programs like the Space Development Agency (SDA) and various classified initiatives have grown substantially. This contract, with its substantial funding and long duration, aligns with this broader trend of prioritizing and investing heavily in advanced space technologies for national security.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: RESEARCH AND DEVELOPMENT › Space R&D Services

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: 1111 LOCKHEED MARTIN WAY, SUNNYVALE, CA, 94089

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $7,281,150,651

Exercised Options: $7,346,284,832

Current Obligation: $9,032,712,307

Actual Outlays: $2,223,378

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline