DoD awards $161.6M to Lockheed Martin for U-2 support, raising questions about competition and value

Contract Overview

Contract Amount: $161,585,173 ($161.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-04-01

End Date: 2025-01-16

Contract Duration: 1,751 days

Daily Burn Rate: $92.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY20 U-2 SUPPORT AND SUSTAINMENT AND PROGRAMMED DEPOT MAINTENANCE

Place of Performance

Location: PALMDALE, LOS ANGELES County, CALIFORNIA, 93599

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $161.6 million to LOCKHEED MARTIN CORPORATION for work described as: FY20 U-2 SUPPORT AND SUSTAINMENT AND PROGRAMMED DEPOT MAINTENANCE Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long-term sustainment contract raises concerns about contractor lock-in and future pricing. 3. Lack of competition may indicate limited market options or strategic sourcing decisions. 4. Performance period extends over five years, suggesting a critical and ongoing need for services. 5. Focus on aircraft manufacturing and depot maintenance highlights the specialized nature of the support. 6. The contract's value, while substantial, needs benchmarking against similar sustainment contracts for a full value assessment.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without competitive bidding. As a sole-source award to Lockheed Martin, a primary manufacturer, it's presumed to reflect specialized knowledge and proprietary systems. However, the absence of competition prevents direct price comparison with market alternatives. Benchmarking against sustainment contracts for similar complex aircraft platforms would be necessary to determine if the pricing is fair and represents good value for taxpayer dollars. The cost-plus-fixed-fee structure also warrants scrutiny to ensure cost efficiencies are pursued.

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 approach is typically used when only one responsible source is available or when a compelling justification exists for not seeking competitive proposals. The lack of competition means there was no opportunity for other qualified companies to bid, potentially limiting price discovery and innovation. This raises concerns about whether the government secured the best possible price and terms.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the absence of competition removes the incentive for the contractor to offer the lowest possible price. It also limits the government's ability to explore alternative solutions or leverage market competition.

Public Impact

The U-2 program, critical for intelligence, surveillance, and reconnaissance (ISR) missions, benefits from this sustainment. The contract ensures the continued operational readiness of the U-2 fleet, supporting national security objectives. Services are delivered primarily in California, impacting the local aerospace workforce and supply chain. Specialized technical expertise from Lockheed Martin is leveraged to maintain complex aircraft systems. The contract supports high-skilled jobs in aircraft manufacturing and maintenance sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long-term nature of the contract could lead to contractor lock-in.
Cost-plus-fixed-fee contract type may reduce contractor incentive for cost control.
Lack of transparency in pricing due to sole-source nature.

Positive Signals

Ensures continued operational capability of a critical ISR asset.
Leverages specialized expertise of the original equipment manufacturer.
Provides long-term stability for a vital national security program.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, complex technological requirements, and significant government investment. Sustainment contracts for legacy platforms like the U-2 are crucial for maintaining operational readiness. This contract fits within the broader defense sustainment market, which is a substantial segment of the aerospace industry. Benchmarking against other long-term aircraft sustainment contracts, particularly for specialized platforms, would provide context for the awarded value and terms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The prime contractor is Lockheed Martin Corporation, a large aerospace company. While large prime contractors are often required to subcontract portions of their work to small businesses, the specific subcontracting plan and its impact on the small business ecosystem are not detailed in the provided data. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which falls under the Department of Defense. The cost-plus-fixed-fee (CPFF) contract type necessitates robust oversight to monitor costs, ensure compliance with contract terms, and verify the achievement of milestones. Transparency is generally maintained through contract reporting mechanisms, but specific details on public accessibility of performance metrics or cost breakdowns are not provided. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

U-2 Aircraft Operations and Support
ISR Aircraft Sustainment Programs
Defense Logistics and Maintenance Services
Aerospace Manufacturing Contracts
Department of Defense Aircraft Procurement

Risk Flags

Sole-source award
Lack of competitive benchmarking
Long-term sustainment contract
Cost-plus-fixed-fee pricing structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $161.6 million to LOCKHEED MARTIN CORPORATION. FY20 U-2 SUPPORT AND SUSTAINMENT AND 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 $161.6 million.

What is the period of performance?

Start: 2020-04-01. End: 2025-01-16.

What is the historical spending trend for U-2 support and sustainment contracts awarded to Lockheed Martin?

Analyzing historical spending for U-2 support and sustainment with Lockheed Martin requires access to historical contract databases. Typically, sustainment costs for legacy aircraft can fluctuate based on operational tempo, depot maintenance cycles, and component obsolescence. For a platform like the U-2, which has been in service for decades, sustainment spending would likely represent a consistent, albeit potentially increasing, expenditure over time as the fleet ages. Without specific historical data, it's difficult to provide precise figures, but such contracts often span multiple years and represent significant, ongoing investments to maintain readiness.

How does the pricing structure (Cost Plus Fixed Fee) for this contract compare to other aircraft sustainment contracts?

The Cost Plus Fixed Fee (CPFF) pricing structure is common for complex, long-term service contracts where the exact costs are difficult to predict upfront. In CPFF contracts, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers less cost certainty for the government but allows for flexibility in scope and performance. For aircraft sustainment, CPFF is often used due to the unpredictable nature of repairs, parts availability, and emergent requirements. However, it necessitates strong government oversight to manage costs effectively and prevent overruns, unlike firm-fixed-price contracts which place more cost risk on the contractor.

What are the key performance indicators (KPIs) used to measure the success of this U-2 support contract?

Key Performance Indicators (KPIs) for aircraft sustainment contracts typically focus on ensuring the operational readiness and availability of the aircraft. For the U-2 support contract, likely KPIs would include aircraft mission capable rates, on-time delivery of maintenance services, adherence to scheduled maintenance intervals, and turnaround times for repairs. Other potential KPIs could involve the cost-effectiveness of maintenance actions, supply chain performance for spare parts, and compliance with safety and quality standards. The effectiveness of the contractor in meeting these KPIs directly impacts the U-2 fleet's ability to perform its critical ISR missions.

What is the potential impact of the U-2's continued sustainment on the development or procurement of next-generation ISR platforms?

The continued sustainment of the U-2, a legacy platform, has implications for the development and procurement of next-generation ISR platforms. While the U-2 provides unique capabilities, ongoing investment in its sustainment might influence the phasing and funding priorities for newer systems. Decisions to extend the life of legacy platforms often reflect a balance between operational necessity, cost-effectiveness, and the pace of technological advancement. Significant funding allocated to sustaining older assets could potentially delay or reduce the budget available for acquiring and fielding advanced ISR technologies, though it also allows for a more measured transition.

Are there any known risks associated with the sole-source nature of this contract regarding contractor performance or future pricing?

The sole-source nature of this contract presents several risks. Regarding contractor performance, without competitive pressure, there's a reduced incentive for Lockheed Martin to proactively improve efficiency or innovate beyond contractual requirements. For future pricing, the lack of competition means the government is reliant on Lockheed Martin's proposed costs, which may not reflect market-driven efficiencies. This can lead to higher long-term sustainment costs for taxpayers. Furthermore, a sole-source award can create a dependency on the incumbent contractor, making it difficult and potentially more expensive to transition to a different provider or solution in the future.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA852819R0025

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: $183,396,171

Exercised Options: $183,396,171

Current Obligation: $161,585,173

Actual Outlays: $11,130,166

Subaward Activity

Number of Subawards: 89

Total Subaward Amount: $14,551,686

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