DoD's $37.1M Lockheed Martin contract for engineering support lacks competition, raising value concerns

Contract Overview

Contract Amount: $37,118,930 ($37.1M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2023-01-25

End Date: 2024-01-24

Contract Duration: 364 days

Daily Burn Rate: $102.0K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUSTAINING ENGINEERING AND TECHNICAL SUPPORT SERVICES (SETSS)

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $37.1 million to LOCKHEED MARTIN CORP for work described as: SUSTAINING ENGINEERING AND TECHNICAL SUPPORT SERVICES (SETSS) Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. The cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 3. Lack of competition is a significant risk indicator for achieving optimal value for taxpayer dollars. 4. The contract duration of one year provides limited opportunity for performance-based adjustments. 5. This award represents a small fraction of the overall Department of Defense engineering services spending. 6. The absence of small business participation is noted, with no set-aside provisions.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex engineering services, can lead to higher costs if not managed rigorously. Without comparison to other bids or market rates for similar services, it's difficult to definitively assess if the $37.1 million represents a fair price. The absence of competition suggests potential for overpayment.

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 vendors. This approach is typically used when only one vendor possesses the necessary specialized capabilities or when urgency dictates a rapid award. The lack of competition means there was no opportunity for multiple companies to bid, which could have driven down prices through a competitive bidding process. This limits the government's ability to ensure it is receiving the best possible price.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding, potentially leading to higher overall expenditure for these services.

Public Impact

The Department of Defense benefits from sustained engineering and technical support services, crucial for maintaining complex defense systems. This contract supports the operational readiness and technological advancement of Air Force assets. The primary beneficiaries are the military personnel and defense infrastructure reliant on these engineering services. Workforce implications include the continued employment of specialized engineers and technical staff at Lockheed Martin. Geographic impact is primarily centered around the locations where Lockheed Martin's engineering teams operate and support defense activities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to inflated costs for taxpayers.
Cost-plus-fixed-fee contract type may not sufficiently incentivize cost efficiency.
Lack of transparency in the procurement process due to sole-source nature.
No small business participation or subcontracting opportunities identified.
Limited duration of one year restricts long-term performance evaluation and potential for renegotiation.

Positive Signals

Awarded to a known, established contractor with a track record in defense engineering.
Contract addresses critical engineering and technical support needs for the Department of Defense.
Fixed fee component provides some level of cost predictability within the CPFF structure.
Services are essential for maintaining the operational capabilities of defense systems.

Sector Analysis

The engineering services sector within the defense industry is highly specialized, characterized by long-term relationships and significant barriers to entry. Contracts like this are vital for maintaining the complex technological infrastructure of military branches. The total addressable market for defense engineering services is substantial, with major contractors like Lockheed Martin playing a dominant role. This contract fits within the broader category of professional, scientific, and technical services supporting national defense.

Small Business Impact

This contract was not awarded as a small business set-aside, and the data indicates no explicit provisions for small business subcontracting. Lockheed Martin, a large prime contractor, is likely to perform the majority of the work internally. This means that opportunities for small businesses to participate in this specific contract are minimal, potentially limiting their access to federal defense spending and impacting the broader small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Air Force's contracting and program management offices. Accountability measures are inherent in the contract's terms and conditions, including reporting requirements and performance standards. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Engineering Services
Sustaining Engineering Support
Technical Support Services
Department of Defense Contracts
Air Force Procurement

Risk Flags

Sole-source award
Lack of competition
Cost-plus-fixed-fee contract type
No small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.1 million to LOCKHEED MARTIN CORP. SUSTAINING ENGINEERING AND TECHNICAL SUPPORT SERVICES (SETSS)

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 $37.1 million.

What is the period of performance?

Start: 2023-01-25. End: 2024-01-24.

What is Lockheed Martin's track record with similar engineering support contracts for the Department of Defense?

Lockheed Martin Corporation has an extensive history of providing complex engineering, logistics, and technical support services to the Department of Defense across various branches and programs. They are a major defense contractor with significant experience in areas such as aircraft sustainment, missile systems development, and space technology integration. Their track record includes numerous large-scale contracts, some of which have faced scrutiny regarding cost overruns or performance issues, while others are considered successful in delivering critical capabilities. Specific to sustaining engineering and technical support services (SETSS), Lockheed Martin routinely manages contracts that require deep technical expertise, long-term program support, and integration with existing military platforms. Analyzing their past performance on similar sole-source or competitively awarded contracts would provide context for their ability to deliver on this $37.1 million award, including their history with cost management under CPFF structures and adherence to delivery schedules.

How does the $37.1 million value compare to similar engineering support contracts awarded by the Air Force or DoD?

Comparing the $37.1 million value of this specific contract requires looking at the scale and scope of similar engineering and technical support services procured by the Department of Defense, particularly the Air Force. While $37.1 million is a substantial sum, it may represent a moderate-sized contract within the vast DoD budget. Larger, multi-year contracts for major weapon system sustainment or platform-specific engineering support can easily run into hundreds of millions or even billions of dollars. However, for a one-year contract focused on 'sustaining engineering and technical support services,' its value should be benchmarked against contracts of similar duration and service scope. The lack of competition makes direct value comparison difficult, as a competitive process would likely yield a more precise market-driven price. Without access to a database of comparable sole-source awards or detailed cost breakdowns, assessing whether $37.1 million is high, low, or fair is speculative, but the absence of competition inherently raises concerns about achieving optimal value.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for engineering services?

Sole-source contracts carry the inherent risk of reduced price competition, potentially leading to higher costs for the government as the contractor faces less pressure to offer the most competitive pricing. The cost-plus-fixed-fee (CPFF) structure presents another set of risks. While the 'fixed fee' provides a predictable profit margin for the contractor, the 'cost-plus' element means the government reimburses the contractor for allowable costs incurred, plus that fixed fee. This can incentivize the contractor to incur higher costs, as their fee remains constant regardless of the total project cost. Effective oversight is crucial to manage these risks, ensuring that all costs are reasonable, allocable, and necessary. Without robust oversight and clear performance metrics, the government may end up paying more than necessary for the services rendered, and the contractor may have less motivation to seek cost efficiencies.

How effective are sustaining engineering and technical support services (SETSS) in ensuring the longevity and performance of defense systems?

Sustaining engineering and technical support services (SETSS) are critical for ensuring the long-term operational effectiveness, reliability, and safety of complex defense systems. These services encompass a range of activities, including identifying and resolving design deficiencies, implementing obsolescence management strategies, providing technical documentation updates, and offering engineering support for fielded systems. Effective SETSS helps to extend the lifecycle of valuable defense assets, reduce unexpected failures, and ensure that systems can be maintained and upgraded to meet evolving threats and operational requirements. The quality and responsiveness of SETSS directly impact the readiness of military forces. Conversely, inadequate or poorly managed SETSS can lead to increased downtime, higher maintenance costs, reduced system performance, and potentially compromise mission success.

What is the historical spending trend for engineering services within the Department of the Air Force?

Historical spending trends for engineering services within the Department of the Air Force (and the DoD broadly) show a consistent and significant investment in maintaining and advancing its technological capabilities. This spending fluctuates based on modernization programs, sustainment needs for aging fleets, and the development of new platforms. Over the past decade, the Air Force has allocated tens of billions of dollars annually towards research, development, testing, evaluation, and sustainment, a significant portion of which falls under engineering and technical support categories. Factors influencing these trends include geopolitical events, budget appropriations, and the strategic priorities of different administrations. While specific figures for 'sustaining engineering and technical support services' as a distinct category can vary, the overall demand for specialized engineering expertise remains high, reflecting the complexity and critical nature of Air Force operations.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

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: $42,359,767

Exercised Options: $42,359,767

Current Obligation: $37,118,930

Subaward Activity

Number of Subawards: 20

Total Subaward Amount: $3,179,228

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852519D0001

IDV Type: IDC

Timeline