DoD's $61.7M C-130J sustainment contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $61,741,468 ($61.7M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2017-08-01

End Date: 2021-05-27

Contract Duration: 1,395 days

Daily Burn Rate: $44.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: IGF::OT::IGF C-130J WEAPON SYSTEM LONG TERM SUSTAINMENT

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $61.7 million to LOCKHEED MARTIN CORP for work described as: IGF::OT::IGF C-130J WEAPON SYSTEM LONG TERM SUSTAINMENT Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, allowing for shared cost savings. 2. Long-term sustainment of the C-130J weapon system indicates critical operational need. 3. Sole-source award raises questions about potential price overruns and lack of market pressure. 4. Contract duration of 1395 days suggests a significant, ongoing requirement. 5. The contract's value, while substantial, needs benchmarking against similar sustainment efforts. 6. Focus on weapon system sustainment highlights the importance of readiness and operational availability.

Value Assessment

Rating: questionable

The contract's cost-plus-incentive-fee structure aims to control costs by sharing savings with the contractor. However, without competitive bidding, it is difficult to ascertain if the negotiated rates represent fair market value. Benchmarking against other long-term weapon system sustainment contracts, particularly those for similar aircraft, would be necessary to assess pricing effectiveness. The absence of competition inherently limits the ability to validate value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was considered. This approach is typically justified when a unique capability or proprietary technology is involved, or in cases of urgent need where competition is not feasible. The lack of competition means there was no direct price comparison from alternative providers, potentially leading to less favorable pricing for the government.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust government oversight to ensure costs are reasonable and justified.

Public Impact

The U.S. Air Force and other branches operating the C-130J aircraft are the primary beneficiaries, ensuring operational readiness. Services delivered include long-term sustainment, maintenance, and support for the C-130J weapon system. The contract has implications for the workforce involved in maintaining and supporting these critical aircraft. Geographic impact is likely widespread, covering bases and operational theaters where C-130J aircraft are deployed.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Cost-plus-incentive-fee contracts can lead to cost growth if not managed diligently.
Lack of competition may reduce incentives for contractor innovation and efficiency.
Long-term sustainment contracts can create vendor lock-in, making future competition difficult.

Positive Signals

Awarding to the original equipment manufacturer (Lockheed Martin) ensures access to specialized knowledge and parts.
The incentive fee structure encourages cost control and performance improvement.
Sustainment contracts are crucial for maintaining the operational readiness of vital military assets.
The contract duration suggests a stable, long-term partnership for critical support.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Sustainment contracts, like this one for the C-130J, are a substantial part of the sector's revenue, focusing on maintaining the operational capability of complex weapon systems. The market for such specialized sustainment services is often dominated by the original equipment manufacturers due to proprietary knowledge and integrated supply chains. Comparable spending benchmarks for aircraft sustainment can vary widely based on aircraft type, age, and operational tempo.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the focus on specialized weapon system sustainment, it is unlikely that significant subcontracting opportunities for small businesses would be mandated or readily available, unless specifically negotiated by the prime contractor. The impact on the small business ecosystem is likely minimal for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus-incentive-fee structure requires diligent monitoring of costs and performance metrics to ensure the incentive fee is earned appropriately and that overall costs remain reasonable. Transparency is facilitated through contract reporting requirements, but the sole-source nature limits public visibility into the negotiation process.

Related Government Programs

C-130 Hercules Sustainment Programs
Air Mobility Command Logistics Support Contracts
Defense Logistics Agency Aviation Support
Aircraft Weapon System Maintenance Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $61.7 million to LOCKHEED MARTIN CORP. IGF::OT::IGF C-130J WEAPON SYSTEM LONG TERM SUSTAINMENT

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 $61.7 million.

What is the period of performance?

Start: 2017-08-01. End: 2021-05-27.

What is Lockheed Martin's track record with C-130J sustainment contracts?

Lockheed Martin Corporation, as the original equipment manufacturer (OEM) for the C-130J Super Hercules, has an extensive and established track record in providing sustainment services for this aircraft. Their involvement spans the entire lifecycle of the aircraft, from production to long-term operational support. This includes providing spare parts, technical data, maintenance, repair, and overhaul services. Given their sole-source position for many sustainment aspects, their historical performance is critical in assessing the value and reliability of ongoing support. Past performance reviews and data from previous sustainment contracts would offer insights into their efficiency, responsiveness, and cost management in fulfilling similar requirements for the U.S. Air Force and international partners operating the C-130J.

How does the $61.7 million value compare to similar C-130J sustainment contracts?

Directly comparing the $61.7 million value of this specific contract (2017-2021) to other C-130J sustainment contracts requires access to detailed data on contract scope, duration, and specific services rendered. However, sustainment costs for complex military aircraft can range from millions to billions of dollars over their operational life. This particular contract, valued at approximately $15 million annually, appears to be for a specific set of sustainment activities rather than a comprehensive, cradle-to-grave support package. Benchmarking would ideally involve comparing the cost per flight hour, cost per aircraft supported, or the cost of specific maintenance actions against similar contracts awarded to Lockheed Martin or other OEMs for comparable aircraft types. Without such detailed comparative data, assessing whether $61.7 million represents a good or fair value is challenging, especially given the sole-source nature of this award.

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

The primary risks associated with this sole-source sustainment contract are centered around cost and performance. Without competition, there is a reduced incentive for Lockheed Martin to offer the most competitive pricing, potentially leading to higher costs for the Department of Defense (DoD) and taxpayers. Price escalation over the contract's duration is a significant risk, especially with a cost-plus-incentive-fee structure where cost overruns can be shared. Furthermore, a lack of competitive pressure might lead to complacency in service delivery or innovation. There's also a risk of vendor lock-in, making it difficult and costly to transition to alternative support providers in the future. Ensuring robust government oversight and negotiation is crucial to mitigate these risks.

How effective is the cost-plus-incentive-fee (CPIF) structure in managing costs for this contract?

The Cost-Plus-Incentive-Fee (CPIF) structure is designed to incentivize the contractor to control costs while achieving performance targets. Under CPIF, the final profit is adjusted based on the relationship between the final costs and the target costs. If the contractor performs below target costs, both the government and the contractor share in the savings, increasing the contractor's profit. Conversely, if costs exceed the target, the contractor's profit is reduced. This structure aims to align the contractor's financial interests with the government's objective of cost efficiency. However, the effectiveness of CPIF heavily relies on the accuracy of the initial cost targets, the clarity of performance metrics, and diligent government oversight to prevent manipulation or gaming of the system. For this contract, the success of CPIF depends on how well Lockheed Martin manages sustainment operations and how effectively the DoD monitors expenditures and performance.

What are the historical spending patterns for C-130J weapon system sustainment by the DoD?

Historical spending patterns for C-130J weapon system sustainment by the DoD represent a significant and ongoing investment. The C-130J is a critical asset for tactical airlift across multiple military branches, necessitating continuous support to maintain operational readiness. Annual spending on sustainment typically includes costs for spare parts, depot maintenance, field support, engineering services, and upgrades. Over the lifespan of the C-130J fleet, total sustainment costs have amounted to billions of dollars. This spending is influenced by factors such as the size of the fleet, operational tempo, aging of the aircraft, and the availability of new technologies. Contracts for sustainment are often long-term and awarded to the prime contractor, Lockheed Martin, reflecting the specialized nature of the support required. Analyzing historical spending trends reveals a consistent demand for sustainment, underscoring its importance in the defense budget.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 86 SOUTH COBB DR, MARIETTA, GA, 30063

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: $61,741,468

Exercised Options: $61,741,468

Current Obligation: $61,741,468

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $132,054

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA850416D0001

IDV Type: IDC

Timeline