DoD's $3.9B aircraft manufacturing contract with Lockheed Martin shows limited competition and high cost

Contract Overview

Contract Amount: $3,910,474,399 ($3.9B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2005-02-18

End Date: 2013-01-31

Contract Duration: 2,904 days

Daily Burn Rate: $1.3M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76101, UNITED STATES OF AMERICA

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $3.91 billion to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's value suggests a significant investment in specialized aircraft manufacturing capabilities. 2. Limited competition raises concerns about potential overpayment and reduced innovation incentives. 3. The long duration of the contract (2005-2013) indicates a sustained need for these aircraft. 4. The firm-fixed-price structure aims to transfer some cost risk to the contractor. 5. The contract's focus on aircraft manufacturing places it within a critical defense sector. 6. The absence of small business set-asides suggests a focus on large prime contractors.

Value Assessment

Rating: questionable

Benchmarking the value of this $3.9 billion contract is challenging without specific aircraft details. However, the lack of competition and the long duration suggest potential for cost overruns or suboptimal pricing. Comparing it to similar sole-source or limited-competition aircraft manufacturing contracts would be necessary for a more precise value assessment. The firm-fixed-price type offers some cost control, but the overall value proposition is weakened by the procurement method.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was considered. This procurement strategy is typically employed when a unique capability or product is required, or when only one responsible source exists. The lack of competition means that the government did not benefit from a competitive bidding process, which could have led to lower prices and more innovative solutions. The government likely relied on negotiation to establish a fair price.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through competition, potentially leading to higher costs for taxpayers. It also reduces opportunities for other capable companies to secure government contracts.

Public Impact

The primary beneficiaries are the Department of Defense and potentially military personnel who utilize the specialized aircraft. The contract delivers critical aircraft manufacturing services, essential for national defense capabilities. The geographic impact is primarily tied to Lockheed Martin's manufacturing facilities, likely in Texas given the 'ST: TX' designation. The contract supports a highly skilled workforce in aerospace engineering and manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially inflates costs for taxpayers.
Long contract duration (8 years) increases exposure to potential cost escalations and technological obsolescence.
Lack of transparency in sole-source negotiations makes it difficult to assess true value for money.
Absence of small business participation may limit broader economic impact and innovation.

Positive Signals

Firm-fixed-price contract shifts some cost risk to the contractor.
Focus on aircraft manufacturing addresses a critical defense need.
Contract awarded to a major defense contractor with established capabilities.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, a significant segment of the industrial base. The market is characterized by high barriers to entry, extensive R&D, and long product development cycles. Spending in this sector is heavily influenced by government defense budgets and geopolitical factors. Comparable spending benchmarks would involve analyzing other large-scale aircraft procurement or manufacturing contracts within the DoD.

Small Business Impact

The 'SB: false' designation indicates that this contract was not set aside for small businesses. Given the nature of large-scale aircraft manufacturing, it is common for prime contracts to be awarded to large corporations. Subcontracting opportunities for small businesses may exist, but they are not explicitly mandated by this contract's set-aside status. This approach prioritizes established capabilities over fostering small business growth within this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures would include contract performance reviews, milestone tracking, and financial audits. Transparency is often limited in sole-source procurements, but contract award details are usually publicly available. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

F-35 Lightning II Program
C-130 Hercules Production
Defense Production Act Investments
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.91 billion to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

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 $3.91 billion.

What is the period of performance?

Start: 2005-02-18. End: 2013-01-31.

What specific type of aircraft was manufactured under this contract, and what were its intended roles?

The provided data does not specify the exact aircraft model manufactured under contract number DCA. However, the North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' indicates the general nature of the work. Given the contractor (Lockheed Martin) and the awarding agency (Department of the Air Force), it is plausible this contract was related to fighter jets, transport aircraft, or other specialized military aviation platforms. Further investigation into the contract details or associated program would be required to identify the specific aircraft and its mission profile.

How does the $3.9 billion cost compare to similar aircraft manufacturing contracts awarded during the 2005-2013 period?

Direct comparison of the $3.9 billion cost is difficult without knowing the specific aircraft type and quantity. However, during the 2005-2013 period, major defense programs like the F-35 Joint Strike Fighter (also a Lockheed Martin program) saw multi-billion dollar annual spending. If this contract was for a new platform or a significant upgrade, $3.9 billion over eight years might be considered within the expected range for complex military aircraft. Conversely, if it was for a more established or smaller fleet, the cost could be high. The sole-source nature, however, prevents a direct competitive benchmark.

What were the key performance metrics and milestones outlined in the contract, and were they met?

The provided data does not include specific performance metrics or milestones for contract DCA. Typically, such contracts would detail requirements for production rates, quality control, delivery schedules, and technical specifications. Meeting these would be assessed through program management reviews and acceptance testing. Without access to the contract's statement of work and performance reports, it's impossible to determine if all objectives were successfully met. The long duration suggests a sustained effort, but not necessarily flawless execution.

What was the rationale for awarding this contract on a sole-source basis instead of through full and open competition?

The rationale for a sole-source award, as indicated by 'CT: NOT COMPETED', usually stems from specific circumstances where competition is deemed impractical or not in the government's best interest. This could include situations where Lockheed Martin possessed unique intellectual property, specialized manufacturing capabilities essential for the aircraft, or was the only source capable of meeting urgent national security requirements. The government would have had to justify this decision through a Justification and Approval (J&A) document, outlining why full and open competition was not feasible.

What is Lockheed Martin's track record with similar large-scale, sole-source defense manufacturing contracts?

Lockheed Martin has a long history of executing large-scale defense manufacturing contracts, often on a sole-source or limited-competition basis due to the specialized nature of advanced military platforms. They are the prime contractor for the F-35 program, a massive, complex, and long-term undertaking. Their track record includes both successes in delivering advanced capabilities and criticisms regarding cost overruns and program delays on certain projects. For this specific contract (DCA), assessing their track record would require examining its performance history in detail, looking at on-time delivery, budget adherence, and quality outcomes.

How has spending on aircraft manufacturing by the Department of the Air Force evolved since this contract's completion in 2013?

Post-2013, the Department of the Air Force's spending on aircraft manufacturing has continued to be substantial, driven by modernization efforts, fleet recapitalization, and the development of next-generation platforms. Programs like the F-35, B-21 Raider, and upgrades to existing fleets (e.g., C-130, KC-46 tanker) represent significant investments. While specific figures fluctuate annually based on budget allocations and program needs, the overall trend indicates sustained, high-level spending in this critical area, often involving complex, long-term contracts with major aerospace manufacturers.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: LOCKHEED BLVD, FORT WORTH, TX, 76101

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

Contract Characteristics

Cost or Pricing Data: NO

Timeline