Over $129M for F-16 spares, awarded to Lockheed Martin, highlights sole-source procurement challenges

Contract Overview

Contract Amount: $129,019,428 ($129.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-03-09

End Date: 2020-05-31

Contract Duration: 4,832 days

Daily Burn Rate: $26.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROVISION SPARES FOR F-16 AIRCRAFT.

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $129.0 million to LOCKHEED MARTIN CORPORATION for work described as: PROVISION SPARES FOR F-16 AIRCRAFT. Key points: 1. Contract awarded to a single supplier raises questions about price competitiveness. 2. Long contract duration suggests a sustained need for these critical aircraft components. 3. The firm-fixed-price structure aims to control costs but relies on fair initial pricing. 4. Focus on F-16 sustainment indicates ongoing investment in legacy platforms. 5. Geographic concentration in Texas for this contract. 6. Lack of competition may limit opportunities for alternative suppliers and innovation.

Value Assessment

Rating: fair

Benchmarking the value for this contract is challenging due to its sole-source nature and the specific nature of F-16 spares. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. The long duration and significant dollar amount suggest a critical need, but the absence of competition prevents a direct comparison to market rates or alternative providers. Further analysis would require access to internal cost data or historical pricing trends for similar F-16 components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple potential suppliers. This approach is typically used when a specific product or service is only available from one source, or in cases of urgent need where competition is impractical. The lack of competition means that the government did not benefit from the price discovery mechanisms that typically occur in a competitive bidding process, potentially leading to higher costs.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The U.S. Air Force benefits from the continued availability of essential spare parts for its F-16 fighter jet fleet. This contract ensures the operational readiness and sustainment of a significant portion of the Air Force's combat aircraft. The primary impact is on the military's ability to maintain and deploy F-16 aircraft. Workforce implications are likely concentrated within Lockheed Martin's facilities, particularly in Texas, supporting specialized manufacturing and logistics roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Long contract duration (over 10 years) increases exposure to potential cost overruns or price escalations.
Lack of transparency in the sole-source justification process.
Dependence on a single supplier for critical aircraft components poses a supply chain risk.
Limited opportunities for small businesses to participate as prime contractors or through competitive subcontracting.

Positive Signals

Ensures availability of critical spare parts for a key military asset (F-16).
Provides long-term sustainment for a vital defense platform.
Firm-fixed-price contract offers some cost certainty for the government.
Contract awarded to a known, experienced manufacturer with a history on the F-16 program.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Contracts for aircraft parts, especially for legacy platforms like the F-16, are crucial for maintaining military readiness. Spending in this sub-sector often involves specialized manufacturing and complex supply chains. Comparable spending benchmarks are difficult to establish without detailed cost breakdowns, but sustainment contracts for major weapon systems represent a substantial portion of defense budgets.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the sole-source nature and the prime contractor being Lockheed Martin, opportunities for small businesses would likely be through subcontracting. The lack of a formal competition may limit the visibility and accessibility of these subcontracting opportunities for small businesses within the F-16 supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Air Force is responsible for ensuring contract compliance and performance. Transparency is limited due to the sole-source award. Inspector General investigations could be initiated if performance issues or allegations of impropriety arise, but the initial award process lacks the inherent transparency of a competitive bid.

Related Government Programs

F-16 Aircraft Sustainment
Aerospace Parts Manufacturing
Defense Logistics Support
Military Aircraft Maintenance
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award lacks competitive pricing.
Long contract duration increases risk exposure.
Potential for price escalation over the contract term.
Dependence on a single supplier for critical components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $129.0 million to LOCKHEED MARTIN CORPORATION. PROVISION SPARES FOR F-16 AIRCRAFT.

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 $129.0 million.

What is the period of performance?

Start: 2007-03-09. End: 2020-05-31.

What is Lockheed Martin's track record with F-16 sustainment contracts?

Lockheed Martin has a long and established history as the original equipment manufacturer (OEM) for the F-16 Fighting Falcon. They have consistently been the primary provider of sustainment, upgrades, and spare parts for the F-16 fleet globally. Their track record includes managing complex supply chains, providing technical support, and delivering components essential for the aircraft's operational readiness. While this long-standing relationship ensures expertise, it also underscores the challenges in introducing competition for sustainment parts, as the OEM often possesses unique knowledge and tooling.

How does the value of this contract compare to other F-16 spare parts procurements?

Direct comparison of this $129 million contract to other F-16 spare parts procurements is challenging without specific details on the types of parts included and the contract's duration. However, given the F-16's extensive service life and global deployment, sustainment contracts of this magnitude are not uncommon. The key differentiator here is the sole-source award. Typically, competitive procurements for similar volumes of parts might yield different price points. The long duration (over 10 years) suggests a comprehensive agreement covering a wide range of components, making it a significant, albeit potentially less cost-optimized, investment.

What are the primary risks associated with a sole-source award for critical aircraft spares?

The primary risks associated with a sole-source award for critical aircraft spares include potential overpricing due to lack of competition, reduced incentive for the contractor to innovate or improve efficiency, and a heightened risk of supply chain disruptions if the sole provider faces issues. Taxpayers may bear a higher cost burden. Furthermore, it can stifle the development of alternative suppliers and limit the government's flexibility in sourcing parts in the future. Dependence on a single entity for essential components also creates strategic vulnerabilities.

How effective is the firm-fixed-price (FFP) contract type in managing costs for spare parts?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs when the scope of work is well-defined and risks are relatively low. For spare parts, FFP provides cost certainty to the buyer, as the price is set at the outset and does not typically increase due to contractor cost overruns. However, its effectiveness hinges on the accuracy of the initial price negotiation. In a sole-source scenario, the 'firm' price might be set at a higher baseline than in a competitive environment. The long duration of this contract could also incorporate escalation clauses, impacting the 'firmness' of the price over time.

What are the historical spending patterns for F-16 sustainment by the Department of Defense?

Historical spending patterns for F-16 sustainment by the Department of Defense have been substantial and ongoing for decades, reflecting the aircraft's long service life and its role as a workhorse fighter jet. The DoD consistently allocates significant funds towards maintaining the F-16 fleet, covering everything from routine maintenance and repairs to major overhauls and the procurement of spare parts. Spending fluctuates based on fleet readiness requirements, modernization programs, and the phasing in of newer aircraft. This specific contract represents a portion of that continuous, large-scale investment in keeping the F-16 operational.

What is the potential impact of this contract on the F-16's operational readiness?

This contract is directly aimed at ensuring the operational readiness of the F-16 fleet by providing necessary spare parts. By securing a supply of these components, the Air Force can minimize aircraft downtime due to maintenance issues and ensure that F-16s are available for training, deployment, and combat missions. The long duration suggests a commitment to sustained readiness for this platform. The effectiveness hinges on the timely delivery of quality parts as specified in the contract.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $137,760,821

Exercised Options: $137,323,175

Current Obligation: $129,019,428

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline