DoD's $3.7B Lockheed Martin contract for aeronautical systems support shows long-term engagement and cost-plus award fee structure

Contract Overview

Contract Amount: $3,693,487,225 ($3.7B)

Contractor: Lockheed Martin Aeronautical Systems Support Company

Awarding Agency: Department of Defense

Start Date: 1997-02-05

End Date: 2006-09-30

Contract Duration: 3,524 days

Daily Burn Rate: $1.0M/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $3.69 billion to LOCKHEED MARTIN AERONAUTICAL SYSTEMS SUPPORT COMPANY for work described as: Key points: 1. The contract's duration of over 9 years suggests a sustained need for these aeronautical systems. 2. A cost-plus award fee structure incentivizes contractor performance while allowing for cost reimbursement. 3. The contract was awarded through full and open competition, indicating a broad search for qualified bidders. 4. The significant value points to a critical role in the Department of Defense's operational capabilities. 5. The contract's completion date in 2006 suggests it is no longer active, providing historical context. 6. The award was managed by the Defense Contract Management Agency, a key oversight body for DoD contracts.

Value Assessment

Rating: fair

This contract, valued at over $3.7 billion, represents a substantial investment in aeronautical systems support. The cost-plus award fee (CPAF) structure means that while costs are reimbursed, the contractor can earn additional fees based on performance metrics. Benchmarking this specific CPAF contract against similar long-term, high-value defense support contracts would be necessary for a precise value-for-money assessment. However, the extended duration and significant funding indicate a perceived value by the Department of Defense.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition after exclusion of sources,' which implies that while the competition was broad, specific sources may have been excluded for defined reasons. The presence of 'full and open competition' generally suggests that multiple bidders were considered, leading to a more competitive pricing environment. The number of bidders is not specified, but the process indicates an effort to secure the best value through competitive means.

Taxpayer Impact: Taxpayers benefit from a competitive bidding process that aims to secure the most cost-effective solution for essential aeronautical systems support, potentially reducing overall expenditure compared to a sole-source award.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units relying on the supported aeronautical systems. Services delivered likely include maintenance, repair, logistics, and technical support for complex aircraft or related systems. The contract's location in Texas suggests a significant impact on the regional aerospace and defense workforce. This contract supports the readiness and operational effectiveness of military aviation assets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The CPAF structure, while incentivizing, can lead to cost overruns if not tightly managed, requiring robust oversight.
The long duration of the contract (over 9 years) could indicate potential for scope creep or evolving requirements that may impact final costs.
The 'exclusion of sources' clause, if not clearly justified, could limit competition and potentially increase costs.
The lack of specific performance metrics in the provided data makes it difficult to assess the effectiveness of the award fee component.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process aimed at achieving best value.
The CPAF structure provides incentives for the contractor to meet or exceed performance expectations.
The sustained nature of the contract indicates a reliable and trusted relationship between the DoD and Lockheed Martin for critical support.
Managed by the Defense Contract Management Agency, ensuring a level of oversight and accountability.

Sector Analysis

This contract falls within the aerospace and defense sector, a critical industry for national security. The market for aeronautical systems support is characterized by high barriers to entry, specialized expertise, and long-term relationships between government agencies and prime contractors. Spending in this area is driven by the need to maintain aging fleets and develop next-generation military aircraft. Comparable spending benchmarks would typically involve analyzing annual defense budgets allocated to aircraft maintenance, sustainment, and upgrade programs.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications for small businesses stemming from a set-aside. However, as a large prime contract awarded to Lockheed Martin, there may be opportunities for small businesses to participate as subcontractors, depending on Lockheed Martin's subcontracting plan and the specific nature of the services required.

Oversight & Accountability

The contract was managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and conditions, including cost, schedule, and performance. The Cost Plus Award Fee (CPAF) structure implies that performance is monitored against specific criteria to determine award fees, suggesting a degree of performance-based oversight. Transparency would be enhanced by public reporting of performance metrics and fee awards, which is not detailed here. Inspector General jurisdiction would apply for investigations into fraud, waste, or abuse.

Related Government Programs

Aircraft Maintenance and Repair Services
Defense Logistics Support
Aerospace Systems Procurement
Military Aircraft Sustainment Programs
Lockheed Martin Defense Contracts

Risk Flags

Long contract duration may increase risk of cost escalation.
Cost-plus award fee structure requires diligent oversight to ensure value.
Exclusion of sources could limit competitive pricing if not fully justified.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.69 billion to LOCKHEED MARTIN AERONAUTICAL SYSTEMS SUPPORT COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN AERONAUTICAL SYSTEMS SUPPORT COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $3.69 billion.

What is the period of performance?

Start: 1997-02-05. End: 2006-09-30.

What specific aeronautical systems or platforms did this contract support?

The provided data does not specify the exact aeronautical systems or platforms supported by this contract. However, given the contractor (Lockheed Martin Aeronautical Systems Support Company) and the agency (Department of Defense), it is highly probable that the contract covered support for major military aircraft, such as fighter jets (e.g., F-16, F-22, F-35), transport aircraft, or reconnaissance platforms. Support typically includes a range of services such as depot-level maintenance, component repair, logistics management, technical data provision, and engineering support necessary to maintain the operational readiness of these complex and critical assets.

How does the Cost Plus Award Fee (CPAF) structure typically function in a contract of this magnitude?

In a Cost Plus Award Fee (CPAF) contract, the contractor is reimbursed for all allowable costs incurred in performing the contract. In addition to cost reimbursement, the contractor has the opportunity to earn an award fee based on performance against pre-defined criteria. These criteria are usually outlined in an "award fee plan" and are evaluated by the government. The government then determines the amount of award fee, if any, to be paid, typically on a periodic basis. This structure aims to incentivize superior performance by rewarding contractors beyond just meeting basic requirements, while still providing cost control mechanisms through the evaluation of performance.

What were the key performance indicators (KPIs) used to determine the award fee for this contract?

The specific Key Performance Indicators (KPIs) used to determine the award fee for this particular contract are not detailed in the provided data. Typically, for a contract supporting aeronautical systems, KPIs could include metrics such as aircraft mission capable rates, on-time delivery of repaired components, turnaround times for maintenance tasks, reduction in unscheduled maintenance events, adherence to safety standards, and responsiveness to urgent operational needs. The effectiveness of the award fee mechanism hinges on clearly defined, measurable, and achievable KPIs that align with the Department of Defense's strategic objectives for the supported systems.

What is the significance of the contract being awarded through 'full and open competition after exclusion of sources'?

The designation 'full and open competition after exclusion of sources' indicates that the contract was initially intended for broad competition, but certain potential sources were excluded. This exclusion must be justified based on specific criteria outlined in federal acquisition regulations, such as national security concerns, sole-source capabilities of other firms, or specific technological requirements. While it implies a competitive process was initiated, the exclusion of sources could potentially limit the breadth of competition compared to a purely 'full and open' competition without exclusions. The justification for exclusion is critical to understanding the impact on price discovery and overall value for taxpayers.

What was the historical spending pattern for this type of aeronautical systems support prior to this contract?

The provided data focuses on a single contract awarded in 1997 and ending in 2006. It does not offer insight into historical spending patterns for similar aeronautical systems support prior to this contract. To understand historical trends, one would need to examine previous contracts for the same or similar systems, analyze budget allocations for sustainment and maintenance over multiple fiscal years, and compare spending across different defense platforms. This contract's value of $3.7 billion over its duration suggests a significant and ongoing requirement for support, likely reflecting consistent or increasing needs in defense aviation sustainment.

What is the typical risk profile associated with long-term, high-value defense support contracts like this one?

Long-term, high-value defense support contracts carry several inherent risks. These include cost growth due to evolving requirements, inflation, or unforeseen technical challenges; schedule delays impacting operational readiness; performance deficiencies affecting the reliability of critical assets; and contractor performance issues. For CPAF contracts, there's also the risk that the award fee structure may not perfectly align incentives or that the government's evaluation process is subjective. Furthermore, reliance on a single contractor for extended periods can reduce flexibility and potentially lead to vendor lock-in. Robust contract management, clear performance metrics, and proactive risk mitigation strategies are essential to manage these potential downsides.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 2251 LAKE PARK DR SE, SMYRNA, GA, 30080

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline