Air Force awards $179M U-2 sustainment contract to Lockheed Martin, raising value-for-money questions

Contract Overview

Contract Amount: $179,166,836 ($179.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-04-01

End Date: 2024-10-30

Contract Duration: 2,404 days

Daily Burn Rate: $74.5K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY18 ANNUAL ORDER FOR U-2 SUPPORT AND SUSTAINMENT

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93599

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $179.2 million to LOCKHEED MARTIN CORPORATION for work described as: FY18 ANNUAL ORDER FOR U-2 SUPPORT AND SUSTAINMENT Key points: 1. The contract's value, while significant, requires careful benchmarking against similar sustainment efforts for aging aircraft. 2. Sole-source awards can limit price discovery and potentially lead to higher costs for taxpayers. 3. The extended duration of the contract (over 20 years) necessitates ongoing scrutiny of performance and cost control. 4. This award falls within the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' sector, indicating specialized support. 5. The absence of small business set-asides warrants an examination of subcontracting opportunities for smaller firms.

Value Assessment

Rating: questionable

The $179 million awarded for U-2 support and sustainment over a multi-year period presents a substantial investment. Without direct comparable contracts for similar legacy aircraft sustainment, a precise value-for-money assessment is challenging. However, the lack of competition for this sole-source award raises concerns about whether the pricing reflects optimal market rates or potential cost efficiencies that could be achieved through a competitive process. The extended period of performance also means that vigilant oversight is crucial to ensure costs remain justified.

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 bypasses the typical competitive bidding process, which usually involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances, such as when only one entity possesses the necessary expertise or technology, they inherently limit price discovery and can reduce the incentive for the contractor to offer the most competitive pricing.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and efficiencies that typically arise from a competitive bidding environment. This can result in higher overall costs for the government.

Public Impact

The primary beneficiaries are the U.S. Air Force, ensuring the continued operational readiness of the U-2 reconnaissance aircraft fleet. This contract provides essential support and sustainment services, including maintenance, repair, and logistics for the U-2 aircraft. The geographic impact is primarily centered around Air Force bases where the U-2 fleet is stationed and maintained. The contract supports a specialized workforce within Lockheed Martin, likely including engineers, technicians, and logistics personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs.
Long contract duration increases risk of cost overruns without proper oversight.
Sole-source award limits opportunities for innovative solutions from other vendors.

Positive Signals

Ensures continued operational capability of a critical intelligence, surveillance, and reconnaissance platform.
Leverages established expertise of incumbent contractor for specialized legacy aircraft.
Provides long-term stability for sustainment operations.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft sustainment and support for a legacy platform. The market for specialized sustainment of aging military aircraft is often characterized by limited competition due to the unique technical requirements and existing contractor knowledge. Comparable spending benchmarks would typically involve other long-term sustainment contracts for similar high-value, specialized military assets, where costs can range from tens to hundreds of millions of dollars over their lifecycle.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Consequently, there are no direct implications for small business participation through a set-aside. However, the prime contractor, Lockheed Martin, may engage small businesses as subcontractors to fulfill certain aspects of the contract. The extent of subcontracting to small businesses will depend on Lockheed Martin's procurement practices and the specific needs of the U-2 sustainment program.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Air Force contracting and program management offices. Accountability measures would be embedded within the contract's performance work statement, requiring Lockheed Martin to meet specific technical, schedule, and cost objectives. Transparency is facilitated through contract award data, but detailed operational oversight and performance reviews are typically internal to the agency. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

U-2 Dragon Lady Program
Air Force Sustainment and Logistics Contracts
Aircraft Maintenance and Repair Services
Defense Intelligence, Surveillance, and Reconnaissance (ISR) Platforms

Risk Flags

Sole-source award
Long contract duration
Legacy aircraft sustainment
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $179.2 million to LOCKHEED MARTIN CORPORATION. FY18 ANNUAL ORDER FOR U-2 SUPPORT AND SUSTAINMENT

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 $179.2 million.

What is the period of performance?

Start: 2018-04-01. End: 2024-10-30.

What is Lockheed Martin Corporation's track record with U-2 support contracts?

Lockheed Martin Corporation has a long-standing relationship with the U-2 program, having been the prime contractor for its development and sustainment for decades. Their track record includes extensive experience in maintaining and upgrading the U-2 fleet, ensuring its continued operational readiness. This includes providing engineering services, logistics support, and component repairs. Given their deep institutional knowledge and proprietary data related to the aircraft, they are often the sole viable option for specialized sustainment needs. However, the longevity of this relationship also necessitates robust oversight to ensure continued value and prevent complacency in cost management and performance.

How does the $179 million cost compare to similar aircraft sustainment contracts?

Directly comparing the $179 million cost for U-2 sustainment is challenging without access to proprietary data for comparable legacy aircraft sustainment contracts. However, annual sustainment costs for complex military aircraft can range significantly, often from tens to hundreds of millions of dollars, depending on the platform's age, complexity, operational tempo, and the scope of services required. Given the U-2's advanced age and specialized mission, this figure is substantial but potentially within the expected range for a sole-source, long-term support agreement. A more precise benchmark would require analyzing contracts for other aging ISR platforms with similar operational demands and support requirements.

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

The primary risks associated with this sole-source contract are centered around cost and performance. Without competition, there is a reduced incentive for Lockheed Martin to aggressively control costs, potentially leading to higher prices than might be achieved in a competitive environment. There's also a risk of complacency, where the lack of competitive pressure could lead to less innovation or efficiency improvements over the contract's long duration. Furthermore, the government's reliance on a single provider means that any disruption in Lockheed Martin's ability to perform could have significant consequences for the U-2 program's operational readiness. Robust contract management and performance monitoring are critical to mitigate these risks.

How effective is the U-2 program, and does this contract contribute to its effectiveness?

The U-2 program remains a critical asset for the U.S. Air Force, providing unique intelligence, surveillance, and reconnaissance (ISR) capabilities that are difficult to replicate with other platforms. Its ability to fly at high altitudes for extended periods allows for persistent monitoring and data collection in complex environments. This sustainment contract is directly contributing to the program's effectiveness by ensuring the aircraft remain airworthy, operational, and supported with necessary maintenance, logistics, and technical expertise. Without such dedicated support, the U-2's operational readiness and mission capability would be severely compromised, impacting its contribution to national security objectives.

What are the historical spending patterns for U-2 support and sustainment?

Historical spending on U-2 support and sustainment has been substantial, reflecting the aircraft's long service life and critical mission requirements. Over the decades, the U.S. Air Force has allocated significant funds to maintain and upgrade the U-2 fleet. While specific annual figures fluctuate based on modernization efforts, operational tempo, and contract structures, the overall trend indicates consistent, long-term investment. This $179 million award, spanning multiple years, aligns with the established pattern of significant, ongoing financial commitment required to keep this specialized platform operational and effective in its unique ISR role.

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

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: $181,166,094

Exercised Options: $181,166,094

Current Obligation: $179,166,836

Subaward Activity

Number of Subawards: 13

Total Subaward Amount: $1,926,892

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