Lockheed Martin awarded $50.2M for U-2 sustainment, a sole-source contract with significant duration

Contract Overview

Contract Amount: $50,242,681 ($50.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-07-23

End Date: 2026-02-28

Contract Duration: 2,412 days

Daily Burn Rate: $20.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: U-2 PDM/SUSTAINMENT - INU PHASE II AND PHASE III

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93599

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $50.2 million to LOCKHEED MARTIN CORPORATION for work described as: U-2 PDM/SUSTAINMENT - INU PHASE II AND PHASE III Key points: 1. Contract awarded to a single, established prime contractor, limiting competitive pricing benefits. 2. Long contract duration suggests a need for sustained support, potentially indicating limited market alternatives. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring robust oversight. 4. Focus on sustainment and modernization points to ongoing operational requirements for critical defense assets. 5. The contract's value, while substantial, needs to be benchmarked against similar sustainment contracts for context. 6. Geographic concentration in California for sustainment operations.

Value Assessment

Rating: fair

The contract value of $50.2 million for U-2 sustainment over approximately 6.7 years (2412 days) averages to roughly $7.5 million per year. Benchmarking this against similar sustainment contracts for complex aircraft platforms is crucial. Given the sole-source nature, it's difficult to assess competitive pricing. The cost-plus-fixed-fee (CPFF) structure, while common for complex R&D or sustainment, carries inherent risk of cost overruns if not managed tightly. Without comparable sole-source sustainment data, a definitive value-for-money assessment is challenging, but the long duration and specialized nature suggest potential for higher costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Air Force did not conduct a competitive bidding process. This typically occurs when a single contractor possesses unique capabilities, proprietary technology, or when urgency and existing infrastructure make competition impractical. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. The government relies on negotiation and oversight to ensure fair pricing, which can be less effective than market-driven competition.

Public Impact

The U.S. Air Force benefits from the continued operational readiness and modernization of its U-2 reconnaissance aircraft fleet. This contract ensures the availability of critical intelligence, surveillance, and reconnaissance (ISR) capabilities for national security. The primary geographic impact is within California, where sustainment activities are likely concentrated. Workforce implications include the retention of specialized technical and engineering jobs related to aircraft maintenance and upgrades.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost growth if not rigorously managed.
Long contract duration (over 6 years) requires sustained oversight to ensure ongoing value.
Dependence on a single contractor for critical sustainment creates potential supply chain and performance risks.

Positive Signals

Contract ensures continued operational capability of a vital intelligence gathering platform.
Awardee is a highly experienced aerospace and defense contractor with a long history supporting military aircraft.
Focus on sustainment and modernization indicates a commitment to maintaining advanced ISR capabilities.
The fixed fee component of the CPFF contract provides some cost predictability for the contractor's profit.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Aircraft sustainment contracts, like this one for the U-2, are a substantial segment of this market, focusing on maintaining the operational readiness and extending the service life of complex military platforms. The market for specialized aircraft sustainment is often dominated by a few large, established prime contractors due to the technical expertise, infrastructure, and security clearances required. Spending in this area is driven by national defense priorities and the need to maintain aging fleets, with contracts often being long-term and sole-sourced due to the unique nature of the aircraft.

Small Business Impact

This contract does not appear to involve a small business set-aside, as the prime contractor is Lockheed Martin Corporation, a large aerospace company. There is no explicit information provided regarding subcontracting plans for small businesses. However, large defense contracts often include flow-down requirements for small business participation. The impact on the small business ecosystem would depend on whether Lockheed Martin actively seeks small business subcontractors for specialized services or components, which is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of costs, performance, and schedule is critical. Accountability measures would include regular performance reviews, audits, and adherence to contract milestones. Transparency is typically managed through contract reporting requirements. The Inspector General of the Department of Defense may also have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

U-2 Dragon Lady Program
Air Force ISR Platforms
Aircraft Sustainment Contracts
Defense Logistics Agency Support
Aerospace Manufacturing Services

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.2 million to LOCKHEED MARTIN CORPORATION. U-2 PDM/SUSTAINMENT - INU PHASE II AND PHASE III

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 $50.2 million.

What is the period of performance?

Start: 2019-07-23. End: 2026-02-28.

What is Lockheed Martin's track record with U-2 sustainment and similar complex aircraft programs?

Lockheed Martin has a long and extensive history with the U-2 program, having been the prime contractor for its development and sustainment for decades. Their track record includes managing complex sustainment, upgrades, and modernization efforts for various military aircraft platforms, including other high-value, long-endurance reconnaissance and combat aircraft. This deep institutional knowledge and established relationship with the U-2 platform suggest a high level of technical expertise and program familiarity. However, like any large defense contractor, they have faced scrutiny on specific contracts regarding cost performance and schedule adherence. For the U-2 specifically, their long-term involvement implies a critical role in maintaining the aircraft's operational readiness and adapting it to evolving intelligence requirements.

How does the $50.2 million contract value compare to historical spending on U-2 sustainment?

The provided data indicates a total contract value of $50.2 million for the period from July 23, 2019, to February 28, 2026 (approximately 2412 days). This averages to roughly $7.5 million per year. To provide historical context, one would need to examine prior U-2 sustainment contracts awarded to Lockheed Martin or other entities. Annual sustainment costs for complex military aircraft can vary significantly based on fleet size, operational tempo, modernization efforts, and specific support requirements. Without access to historical contract data for the U-2 program, it is difficult to definitively state whether $7.5 million annually represents an increase, decrease, or stable level of spending compared to previous periods. However, given the platform's age and ongoing modernization needs, annual sustainment costs are likely to remain substantial.

What are the primary risks associated with this sole-source, cost-plus-fixed-fee contract?

The primary risks associated with this sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to less favorable pricing for the government as there is no market benchmark established through bidding. This increases the risk of paying a premium for services. Secondly, the CPFF structure, while providing flexibility for evolving requirements, shifts the financial risk of cost overruns to the government. The contractor is reimbursed for allowable costs plus a fixed fee representing their profit. This can incentivize the contractor to incur higher costs, as their profit margin remains constant regardless of the actual costs incurred, necessitating stringent government oversight to control expenditures and ensure efficient performance.

How effective is the U-2 platform in fulfilling its ISR mission, and how does this contract support that effectiveness?

The U-2 Dragon Lady platform remains a highly effective, albeit aging, intelligence, surveillance, and reconnaissance (ISR) asset for the U.S. Air Force due to its unique capabilities, particularly its high-altitude, long-endurance flight profile and ability to carry a variety of sophisticated sensor payloads. It provides persistent ISR over denied or contested areas where other platforms may not be suitable or survivable. This contract directly supports the U-2's effectiveness by ensuring its continued sustainment, maintenance, and necessary modernization. By funding the upkeep, repair, and potential upgrades of the aircraft and its systems, the contract guarantees the platform's operational readiness, allowing it to continue performing critical intelligence gathering missions vital for national security decision-making.

What are the potential implications of the long contract duration (over 6 years) on technological relevance and cost control?

A contract duration exceeding six years for aircraft sustainment presents both opportunities and challenges. On the positive side, it allows for long-term planning, stable support, and potentially deeper integration between the contractor and the government program office, fostering efficiencies. It also provides the contractor with the certainty needed to invest in specialized tooling, training, and personnel. However, a long duration also carries risks. Technological advancements in ISR capabilities could outpace the U-2's modernization efforts funded under this contract, potentially diminishing its relative effectiveness over time. Furthermore, controlling costs over such an extended period requires robust mechanisms for contract modification review, performance-based incentives, and regular re-evaluation of pricing, especially under a CPFF structure, to prevent cost creep and ensure the government continues to receive good value.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft 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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $51,306,789

Exercised Options: $51,306,789

Current Obligation: $50,242,681

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $1,653,805

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA852819D0015

IDV Type: IDC

Timeline