DoD's $34M Lockheed Martin contract for C-5 software updates raises questions on competition and value

Contract Overview

Contract Amount: $34,147,067 ($34.1M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2021-09-30

End Date: 2026-03-18

Contract Duration: 1,630 days

Daily Burn Rate: $20.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: C-5 SOFTWARE UPDATES

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $34.1 million to LOCKHEED MARTIN CORP for work described as: C-5 SOFTWARE UPDATES Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over five years suggests a long-term need for these software services. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not closely managed. 4. Lack of competition may indicate a lack of market alternatives or a strategic decision by the agency. 5. Performance is tied to critical C-5 aircraft sustainment, highlighting its operational importance. 6. The contract's value, while substantial, needs benchmarking against similar software sustainment efforts.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without comparable sole-source software sustainment contracts. The Cost Plus Fixed Fee structure requires rigorous oversight to ensure costs remain reasonable and that the fixed fee is appropriate for the effort. Benchmarking against industry standards for custom computer programming services, particularly for complex defense systems, is crucial. Without competitive bids, it's challenging to determine if the government is receiving optimal value for the $34.1 million obligated.

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. This typically occurs when only one responsible source can provide the required services, often due to proprietary technology, unique capabilities, or urgent needs. The absence of competition means there was no opportunity for multiple vendors to bid, which could have driven down prices through a competitive bidding process. This approach limits the government's ability to explore alternative solutions or secure potentially lower costs.

Taxpayer Impact: The lack of competition means taxpayers may not be benefiting from the most cost-effective solution available. Without a competitive environment, there is a reduced incentive for the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Air Force and the operational readiness of the C-5 Galaxy aircraft fleet. Services delivered include custom computer programming to update and maintain critical software for the C-5 aircraft. The geographic impact is primarily within the United States, supporting Air Force bases where C-5 aircraft are stationed or maintained. Workforce implications include specialized software engineers and technicians employed by Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type requires diligent oversight to control costs.
Long contract duration (over 5 years) increases exposure to potential cost escalations.
Lack of transparency in pricing due to non-competitive nature.

Positive Signals

Contract supports critical sustainment of a major strategic airlift asset (C-5 Galaxy).
Awardee (Lockheed Martin) is a known entity with extensive experience in defense systems.
Contract aims to ensure continued operational capability and modernization of vital aircraft software.

Sector Analysis

This contract falls within the Information Technology (IT) and Defense sectors, specifically focusing on custom computer programming services for aerospace applications. The market for specialized software sustainment for legacy defense platforms is often dominated by original equipment manufacturers or firms with deep domain knowledge. Spending benchmarks for such services can vary widely based on system complexity and criticality, but contracts in the tens of millions of dollars for multi-year sustainment are not uncommon for major weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. Lockheed Martin is a large prime contractor. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is unclear, though large prime contracts can sometimes flow down to small businesses for specialized services.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Given the sole-source nature and Cost Plus Fixed Fee structure, rigorous financial and performance oversight is essential. Transparency may be limited due to the non-competitive award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

C-5 Galaxy Aircraft Sustainment
Aerospace Software Development
Defense IT Services
Custom Computer Programming
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns without strict oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.1 million to LOCKHEED MARTIN CORP. C-5 SOFTWARE UPDATES

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

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 $34.1 million.

What is the period of performance?

Start: 2021-09-30. End: 2026-03-18.

What is Lockheed Martin's track record with similar sole-source software sustainment contracts for DoD aircraft?

Lockheed Martin, as a major defense contractor, has a long history of sole-source and competitively awarded contracts for the sustainment and modernization of various aircraft platforms, including the C-5. Their track record often involves complex, long-term support agreements where they possess unique technical data or intellectual property. While specific data on similar sole-source software sustainment contracts is not publicly detailed here, their extensive experience suggests a capacity to perform such work. However, the absence of competition in these instances necessitates careful review of pricing and performance metrics to ensure value for taxpayer dollars, as oversight becomes paramount.

How does the $34.1 million value compare to other C-5 software sustainment efforts or similar aircraft programs?

Direct comparison of this $34.1 million contract value for C-5 software updates is challenging without access to detailed historical spending data for the C-5 program or comparable sole-source contracts for other large military aircraft. However, the value represents a significant investment over its five-year duration, averaging over $6.8 million annually. This figure needs to be benchmarked against the total lifecycle cost of the C-5 fleet and the criticality of the software being updated. Industry averages for sustainment of complex aerospace systems can range widely, but such figures are generally considered substantial and indicative of the specialized nature of the work.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee contract for software sustainment?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive environment. The government lacks the benefit of market forces driving efficiency and cost reduction. Secondly, the Cost Plus Fixed Fee (CPFF) structure, while providing a defined profit margin (the fixed fee), allows the contractor to recover all allowable costs. This can create an incentive for the contractor to incur higher costs, as their profit is not directly tied to cost savings. Effective oversight is critical to mitigate these risks by scrutinizing costs and ensuring the fixed fee remains appropriate for the effort.

How effective are the current oversight mechanisms for ensuring performance and value in this contract?

The effectiveness of oversight mechanisms for this contract hinges on the diligence of the Department of the Air Force's program management and contracting officers. For a sole-source CPFF contract, robust oversight is crucial. This includes detailed cost audits, performance monitoring against defined milestones and deliverables, and regular reviews of the contractor's performance and financial reporting. The presence of an Inspector General provides an avenue for investigating potential fraud, waste, or abuse. However, the inherent limitations of sole-source procurement and CPFF structures mean that proactive and stringent oversight is the primary defense against potential inefficiencies or cost overruns.

What is the historical spending trend for C-5 software sustainment or similar services provided by Lockheed Martin?

Analyzing historical spending trends for C-5 software sustainment specifically requires access to detailed contract databases and historical procurement records. Without that granular data, it's difficult to provide a precise trend. However, it is reasonable to assume that sustainment costs for major defense platforms like the C-5 are ongoing and can fluctuate based on modernization needs, obsolescence issues, and operational tempo. Lockheed Martin, as the prime contractor for much of the C-5's lifecycle, would likely have been the recipient of previous sustainment-related contracts. Trends in defense IT spending generally show increasing investment in software sustainment and modernization due to evolving threats and technological advancements.

Are there alternative solutions or technologies that could fulfill the C-5 software update requirements more cost-effectively?

The possibility of alternative solutions or technologies is significantly constrained by the sole-source nature of this award. When a contract is awarded without competition, the agency has likely determined that only the incumbent contractor, Lockheed Martin, can provide the required services, possibly due to proprietary software, unique integration knowledge, or specific security requirements tied to the C-5 platform. To assess cost-effectiveness of alternatives, a competitive process would typically be required, allowing other vendors to propose different approaches or technologies. Without such a process, it is difficult to definitively state whether more cost-effective solutions exist.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services

Product/Service Code: IT AND TELECOM - APLLICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA852517R0007

Pricing Type: COST PLUS FIXED FEE (U)

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: $34,147,067

Exercised Options: $34,147,067

Current Obligation: $34,147,067

Subaward Activity

Number of Subawards: 12

Total Subaward Amount: $8,247,482

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852518D0001

IDV Type: IDC

Timeline