DoD's $163.5M U-2 Support Contract Awarded to Lockheed Martin Without Competition

Contract Overview

Contract Amount: $163,493,369 ($163.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-04-01

End Date: 2021-05-27

Contract Duration: 1,517 days

Daily Burn Rate: $107.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: U-2 SUPPORT AND SUSTAINMENT; PROGRAMMED DEPOT MAINTENANCE

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93599

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $163.5 million to LOCKHEED MARTIN CORPORATION for work described as: U-2 SUPPORT AND SUSTAINMENT; PROGRAMMED DEPOT MAINTENANCE Key points: 1. Contract awarded to incumbent for critical U-2 aircraft sustainment. 2. Sole-source award raises questions about price discovery and potential for overpayment. 3. Long contract duration (over 4 years) suggests a need for ongoing, specialized support. 4. Lack of competition may limit opportunities for innovation and cost reduction from alternative providers. 5. Performance context is crucial given the strategic importance of the U-2 fleet. 6. Sector positioning: This contract falls within the defense aerospace sustainment market.

Value Assessment

Rating: questionable

The contract's value of $163.5 million over approximately four years for U-2 support and depot maintenance is substantial. Without a competitive bidding process, it is difficult to benchmark this against market rates or similar contracts. The cost-plus-fixed-fee (CPFF) structure, while common for complex sustainment, can incentivize cost overruns if not rigorously managed. A comparison to sustainment costs for other legacy aircraft platforms would be necessary to assess 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 solicited. This typically occurs when a specific capability or proprietary technology is required, or when the incumbent is the only viable source. The lack of competition means that taxpayers did not benefit from potential price reductions that could arise from multiple companies vying for the contract. This limits the government's ability to ensure it is receiving the best possible price.

Taxpayer Impact: The absence of competition means taxpayers may have paid a premium for these services, as there was no market pressure to drive down costs. This highlights the importance of robust justification for sole-source awards.

Public Impact

The U-2 Dragon Lady aircraft, providing critical intelligence, surveillance, and reconnaissance (ISR) capabilities. Sustainment and depot maintenance services ensuring the operational readiness of a vital national asset. Support for the U.S. Air Force's strategic reconnaissance fleet. Potential impact on the specialized aerospace maintenance workforce employed by Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Cost-plus-fixed-fee contract structure requires diligent oversight to control costs.
Long-term sustainment contracts can become entrenched, making future competition difficult.

Positive Signals

Award to incumbent ensures continuity of essential support for a unique platform.
Lockheed Martin possesses deep institutional knowledge of the U-2 system.
Contract addresses critical operational needs for national security.

Sector Analysis

The defense aerospace sustainment market is characterized by long-term relationships between prime contractors and the government, often involving specialized, high-value components and complex maintenance. Companies like Lockheed Martin dominate this space due to their original equipment manufacturer (OEM) status and deep technical expertise. Benchmarking this contract's value would require comparing it to sustainment contracts for other legacy platforms like the B-52 or C-130, considering their respective operational tempos and component complexities.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information indicating significant subcontracting opportunities for small businesses. The nature of specialized aircraft depot maintenance often involves large, prime contractors performing the bulk of the work. Further investigation would be needed to determine if any small businesses are involved in the supply chain or specialized support roles.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to monitor expenditures and prevent cost overruns. Transparency is generally maintained through contract reporting requirements, but the sole-source nature limits public visibility into the negotiation process. Inspector General involvement would be triggered by specific allegations of fraud, waste, or abuse.

Related Government Programs

U-2 Aircraft Operations and Maintenance
ISR Platform Sustainment
Defense Depot Maintenance Programs
Aerospace Component Manufacturing and Repair

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Critical defense asset sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $163.5 million to LOCKHEED MARTIN CORPORATION. U-2 SUPPORT AND SUSTAINMENT; PROGRAMMED DEPOT MAINTENANCE

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $163.5 million.

What is the period of performance?

Start: 2017-04-01. End: 2021-05-27.

What is Lockheed Martin's track record with U-2 sustainment contracts prior to this award?

Lockheed Martin Corporation has been the prime contractor for the U-2 program since its inception, including sustainment and upgrade efforts. Their long-standing relationship with the U-2 platform provides them with extensive institutional knowledge and specialized expertise. Historical performance data, often found in contract performance reports (e.g., CPARS), would detail their success in meeting delivery schedules, quality standards, and cost targets on previous U-2 related contracts. Given their sole provider status, assessing their track record is crucial for understanding the basis of the sole-source justification and ensuring continued reliable support for this critical asset.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar defense sustainment services?

The Cost-Plus-Fixed-Fee (CPFF) contract type is frequently used in defense sustainment when the scope of work is not precisely defined or involves significant uncertainties, such as long-term maintenance of aging aircraft. Unlike fixed-price contracts, CPFF reimburses the contractor for allowable costs plus a predetermined fixed fee, representing profit. This structure shifts some cost risk to the government but provides flexibility. Compared to other types like Firm-Fixed-Price (FFP), which offers greater cost certainty but less flexibility, or Cost-Plus-Incentive-Fee (CPIF), which incentivizes cost savings, CPFF is chosen when the primary goal is to ensure the service is performed with maximum flexibility, even if it means potentially higher costs if not managed tightly. Robust government oversight is paramount with CPFF to control the 'cost' aspect.

What are the primary risks associated with a sole-source award for critical defense platform sustainment?

The primary risks associated with a sole-source award for critical defense platform sustainment include a lack of price competition, potentially leading to higher costs for taxpayers. Without competing bids, there is less incentive for the contractor to optimize efficiency or innovate cost-saving measures. Furthermore, it can create a vendor lock-in situation, making it difficult and expensive to transition to alternative providers or technologies in the future. There's also a risk of complacency from the incumbent contractor, assuming continued awards regardless of performance. Robust contract management, performance metrics, and regular reviews are essential to mitigate these risks when sole-source awards are necessary.

What is the strategic importance of the U-2 program and how does this contract support it?

The U-2 Dragon Lady remains a strategically vital platform for the U.S. Air Force, providing persistent intelligence, surveillance, and reconnaissance (ISR) capabilities in complex environments where other assets may not be suitable or survivable. Its high-altitude, long-endurance flight profile allows it to gather critical data over vast areas. This contract directly supports the U-2 program by ensuring the aircraft are maintained, repaired, and kept operational through programmed depot maintenance and ongoing sustainment. Without this contract, the readiness and operational availability of the U-2 fleet would be severely jeopardized, impacting national security decision-making and intelligence gathering capabilities.

What has been the historical spending trend for U-2 support and sustainment over the past five years?

Historical spending data for U-2 support and sustainment prior to this specific $163.5 million award would need to be aggregated from various contract vehicles and fiscal years. Typically, sustainment costs for legacy platforms like the U-2 are significant and relatively stable, fluctuating based on operational tempo, modernization efforts, and component life cycles. Analyzing past obligations for U-2 sustainment would reveal trends in annual spending, identify major maintenance events, and provide a baseline against which the current contract's value can be assessed. A consistent, high level of spending would underscore the ongoing need for these services and the importance of efficient contract management.

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 COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1011 LOCKHEED WAY, PALMDALE, CA, 93599

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $357,223,665

Exercised Options: $357,223,665

Current Obligation: $163,493,369

Actual Outlays: $1,715,860

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $27,018

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: FA852814D0015

IDV Type: IDC

Timeline