DoD awards $41.7M to Lockheed Martin for F-22 sustainment, raising questions on competition and value

Contract Overview

Contract Amount: $41,710,362 ($41.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-10-30

End Date: 2026-04-30

Contract Duration: 2,374 days

Daily Burn Rate: $17.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: F-22 SUSTAINMENT MISSION CRITICAL REPLENISHMENT SPARES

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $41.7 million to LOCKHEED MARTIN CORPORATION for work described as: F-22 SUSTAINMENT MISSION CRITICAL REPLENISHMENT SPARES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract duration of nearly 2400 days suggests long-term sustainment needs for critical aircraft. 3. Focus on replenishment spares indicates a need to maintain operational readiness for the F-22 fleet. 4. The 'cost plus fixed fee' structure may incentivize cost escalation if not closely monitored. 5. Lack of competition raises concerns about whether the government is achieving the best possible value. 6. The contract's value, while substantial, needs benchmarking against similar sustainment efforts for advanced aircraft.

Value Assessment

Rating: questionable

The contract's value of $41.7 million for F-22 sustainment spares is difficult to benchmark without detailed cost breakdowns and comparisons to similar sole-source awards. The 'cost plus fixed fee' pricing structure, while common for complex sustainment, carries inherent risks of cost overruns if not rigorously managed. The absence of competitive bidding means there's no direct market comparison to assess if the pricing is optimal. Further analysis of the fixed fee percentage and the contractor's historical performance on similar contracts would be necessary to provide a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of Defense did not solicit bids from multiple suppliers. This approach is typically used when only one supplier possesses the necessary capabilities, technology, or proprietary knowledge to fulfill the requirement. In this case, Lockheed Martin is the original manufacturer of the F-22, making them the likely sole source for specialized replenishment spares. The lack of competition means there was no opportunity for price negotiation based on multiple offers, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, potentially resulting in taxpayers paying a premium for these critical aircraft spares.

Public Impact

The primary beneficiaries are the U.S. Air Force and its F-22 Raptor fighter jet fleet, ensuring operational readiness. Services delivered include the provision of mission-critical replenishment spares essential for aircraft maintenance and repair. The geographic impact is primarily centered around Air Force bases where F-22s are stationed and maintained. Workforce implications include supporting specialized manufacturing and logistics roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can incentivize higher costs if not managed effectively.
Long contract duration may obscure potential for cost savings through alternative solutions.
Lack of transparency in cost build-up due to sole-source nature.
Dependence on a single contractor for critical spares can create supply chain vulnerabilities.

Positive Signals

Ensures availability of critical spares for a key national defense asset (F-22).
Leverages the original equipment manufacturer's expertise for specialized parts.
Provides necessary sustainment to maintain high operational readiness rates.
Long-term contract provides stability for planning and resource allocation.
Contract is managed by the Department of the Air Force, an experienced contracting entity.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex supply chains, and significant government investment. Contracts for aircraft sustainment, particularly for advanced platforms like the F-22, are often dominated by the original equipment manufacturers due to specialized knowledge and proprietary parts. The total addressable market for aircraft sustainment globally is in the hundreds of billions of dollars annually. This specific contract fits within the niche of fighter aircraft component replenishment, a critical but specialized segment of the broader defense industrial base.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the sole-source nature and the specialized requirements for F-22 spares, it is unlikely that small businesses would be primary awardees. However, Lockheed Martin, as the prime contractor, may have subcontracting obligations to small businesses as part of its broader supply chain management, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Accountability measures would be embedded within the contract terms, including performance metrics and reporting requirements. Transparency is limited due to the sole-source nature and the proprietary aspects of aircraft manufacturing. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

F-22 Raptor Sustainment Program
Air Force Aircraft Maintenance and Repair Contracts
Defense Logistics Agency (DLA) Spare Parts Procurement
Aerospace Component Manufacturing Contracts
Cost-Plus-Fixed-Fee (CPFF) Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Critical defense asset sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.7 million to LOCKHEED MARTIN CORPORATION. F-22 SUSTAINMENT MISSION CRITICAL REPLENISHMENT SPARES

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $41.7 million.

What is the period of performance?

Start: 2019-10-30. End: 2026-04-30.

What is Lockheed Martin's track record with F-22 sustainment contracts?

Lockheed Martin, as the prime contractor for the F-22 program, has a long-standing track record in its sustainment. This includes previous contracts for logistics, maintenance, and spare parts. Historically, performance has been critical for maintaining the operational readiness of this advanced fighter jet. However, specific performance metrics and any past issues related to cost overruns or delivery delays on similar sustainment contracts would require deeper investigation into contract performance reports and DoD Inspector General findings. The company's extensive experience is a key factor in its sole-source position for specialized components.

How does the $41.7 million value compare to similar F-22 sustainment efforts?

Direct comparison of the $41.7 million value is challenging without access to detailed cost breakdowns and the specific types of spares procured. However, F-22 sustainment is known to be a high-cost, complex undertaking due to the aircraft's advanced technology and limited production run. Annual sustainment costs for the F-22 fleet have historically been in the hundreds of millions of dollars. This $41.7 million award represents a portion of that overall sustainment budget, likely focused on specific replenishment needs over a defined period. Benchmarking would require comparing the unit costs of individual spares or the cost per flight hour against historical data or similar sole-source awards for other advanced fighter aircraft.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract are related to cost and performance. Without competition, there is a reduced incentive for the contractor (Lockheed Martin) to minimize costs, potentially leading to higher prices than if the contract were competed. The 'cost plus fixed fee' structure, while providing flexibility, can also lead to cost growth if the contractor's costs exceed initial estimates, with the fixed fee remaining constant. Furthermore, dependence on a single supplier for critical spares can create supply chain vulnerabilities and potential delays if the contractor faces production or logistical issues. Effective government oversight is crucial to mitigate these risks.

How effective is the 'cost plus fixed fee' structure for this type of contract?

The 'cost plus fixed fee' (CPFF) structure is often used for complex, high-risk, or R&D-intensive contracts where the scope of work or final costs are difficult to define precisely at the outset. For aircraft sustainment involving specialized, low-volume spares, CPFF can provide the necessary flexibility for the contractor to procure or manufacture parts without upfront cost certainty. The 'fixed fee' provides the contractor with a predetermined profit margin. However, it places the burden of cost control on the government, requiring robust oversight to ensure costs are reasonable and allocable. If not managed diligently, CPFF contracts can lead to cost overruns as the contractor may have less incentive to control expenses compared to fixed-price contracts.

What are historical spending patterns for F-22 sustainment?

Historical spending on F-22 sustainment has been substantial, reflecting the high operational costs associated with maintaining a fleet of advanced, fifth-generation fighter aircraft. Annual sustainment budgets have typically ranged from several hundred million dollars to over a billion dollars, encompassing a wide array of services including depot maintenance, component repair, logistics support, and spare parts procurement. This $41.7 million award is a component of that larger, ongoing sustainment effort. Analyzing year-over-year spending trends, the proportion allocated to spare parts versus maintenance, and the impact of fleet size changes would provide a clearer picture of historical patterns.

What are the implications of the contract duration (2374 days)?

The contract duration of 2374 days (approximately 6.5 years) indicates a long-term commitment to sustaining the F-22 fleet. This extended period suggests that the replenishment spares are needed for ongoing operational readiness and potentially for the foreseeable future of the F-22's service life. A longer duration can offer stability and predictability for both the government and the contractor, potentially allowing for better planning and resource allocation. However, it also means that the government is committed to this specific supplier and pricing structure for an extended period, potentially missing out on cost savings that could arise from market changes or technological advancements if the contract were shorter or more flexible.

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

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1 LOCKHEED BLVD BLDG 10, FORT WORTH, TX, 76108

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: $41,710,362

Exercised Options: $41,710,362

Current Obligation: $41,710,362

Actual Outlays: $219,365

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $2,324,628

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA820518D0001

IDV Type: IDC

Timeline