DoD's $8.8B Raptor sustainment contract to Lockheed Martin raises value and competition concerns

Contract Overview

Contract Amount: $8,827,745,541 ($8.8B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-01-01

End Date: 2023-12-31

Contract Duration: 5,843 days

Daily Burn Rate: $1.5M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: FOLLOW-ON AGILE SUSTAINMENT TO THE RAPTOR (FASTER)

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $8.83 billion to LOCKHEED MARTIN CORPORATION for work described as: FOLLOW-ON AGILE SUSTAINMENT TO THE RAPTOR (FASTER) Key points: 1. Significant long-term investment in a single contractor for critical aircraft sustainment. 2. Lack of competition suggests potential for suboptimal pricing and reduced innovation. 3. Extended contract duration may indicate a need for more frequent re-competition. 4. Performance context is crucial given the scale and duration of this award. 5. Sector positioning highlights reliance on established defense contractors for complex systems. 6. The contract's value represents a substantial portion of the agency's spending in this category.

Value Assessment

Rating: questionable

The $8.8 billion total value over its lifespan is substantial. Benchmarking this contract's value is challenging without detailed cost breakdowns and comparisons to similar sustainment contracts for advanced aircraft. The Cost Plus Award Fee (CPAF) structure allows for performance incentives but can also lead to cost overruns if not tightly managed. The lack of competition further complicates a direct value-for-money assessment, as market forces are absent.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This approach is often justified for highly specialized systems where only one contractor possesses the necessary knowledge, facilities, and intellectual property. However, it removes the pressure of competition, which typically drives down prices and encourages efficiency. The absence of multiple bidders means the government did not benefit from a competitive bidding process to secure the best possible terms.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive pressure. Without competing the requirement, there is a risk that the contractor's pricing is not as optimized as it could be, leading to higher overall program costs.

Public Impact

The primary beneficiaries are the U.S. Air Force and its Raptor fighter jet fleet, ensuring operational readiness. Services delivered include sustainment, maintenance, repair, and logistics support for a critical defense asset. Geographic impact is national, supporting air bases where the Raptor fleet is stationed. Workforce implications include continued employment for Lockheed Martin personnel and associated supply chain workers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Long contract duration without re-competition may reduce cost-saving opportunities.
Cost Plus Award Fee (CPAF) contracts require rigorous oversight to prevent cost escalation.

Positive Signals

Sustains a critical national defense asset, ensuring mission capability.
Lockheed Martin has extensive experience with the Raptor platform.
Award fee structure provides incentives for meeting performance targets.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft sustainment. The market for military aircraft sustainment is often dominated by original equipment manufacturers (OEMs) due to the specialized knowledge and proprietary data involved. Spending in this area is substantial, reflecting the high cost of maintaining advanced military platforms. Comparable spending benchmarks would involve analyzing sustainment contracts for other major fighter aircraft programs.

Small Business Impact

The data indicates this contract was not competed and does not specify small business set-asides or subcontracting goals. Given the sole-source nature and the prime contractor being Lockheed Martin, it is unlikely that small businesses were directly involved in the initial competition. However, Lockheed Martin, like other large defense contractors, is typically required to meet subcontracting goals with small businesses on its overall contract portfolio, which may indirectly benefit the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA) and the Department of Defense's program management offices. Accountability measures are embedded within the Cost Plus Award Fee (CPAF) structure, which ties a portion of the contractor's profit to performance metrics. Transparency is generally limited for sole-source defense contracts, though contract awards and modifications are publicly reported. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

F-22 Raptor Program
Air Force Weapon System Sustainment Contracts
Aerospace Defense Contractor Support Services
Major Defense Acquisition Programs

Risk Flags

Sole-source award
Long contract duration
Lack of competition
Potential for cost overruns (CPAF structure)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $8.83 billion to LOCKHEED MARTIN CORPORATION. FOLLOW-ON AGILE SUSTAINMENT TO THE RAPTOR (FASTER)

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 $8.83 billion.

What is the period of performance?

Start: 2008-01-01. End: 2023-12-31.

What is Lockheed Martin's track record with the F-22 Raptor program and similar sustainment contracts?

Lockheed Martin is the prime contractor and original manufacturer of the F-22 Raptor. Their track record with this specific platform is extensive, encompassing development, production, and sustainment. The company has a long history of managing complex aerospace programs for the U.S. military, including other fighter jet sustainment contracts. However, the long duration and sole-source nature of this particular contract warrant scrutiny to ensure continued performance and value, as historical success does not automatically guarantee future cost-effectiveness or innovation, especially in the absence of competitive pressure.

How does the $8.8 billion total contract value compare to industry benchmarks for similar aircraft sustainment?

Directly comparing the $8.8 billion total contract value to industry benchmarks for similar aircraft sustainment is challenging without detailed cost breakdowns and specific performance metrics. The F-22 is a highly advanced, fifth-generation fighter, making its sustainment costs inherently higher than older or less complex aircraft. Benchmarking would ideally involve comparing the per-flight-hour cost, maintenance turnaround times, and spare parts pricing against other advanced fighter sustainment programs (e.g., F-35, F-15, F-16). The sole-source nature of this contract further complicates a precise value-for-money assessment, as market-driven pricing is absent.

What are the primary risks associated with a sole-source, long-term sustainment contract of this magnitude?

The primary risks associated with a sole-source, long-term sustainment contract of this magnitude include potential for cost escalation without competitive pressure, reduced incentive for contractor innovation, and vendor lock-in. Without competition, Lockheed Martin may have less motivation to aggressively reduce costs or implement cutting-edge efficiencies. The long duration (nearly 16 years from start to end date) increases the risk of the contract becoming misaligned with evolving technological needs or market conditions. Furthermore, the government's reliance on a single provider for such a critical capability creates a significant dependency, potentially impacting negotiating leverage in the future.

How effective are Cost Plus Award Fee (CPAF) contracts in ensuring program effectiveness and value for taxpayer money?

Cost Plus Award Fee (CPAF) contracts aim to balance cost control with performance incentives. They allow the contractor to recover allowable costs plus a base fee, with the potential for an additional award fee based on meeting or exceeding performance objectives defined by the government. This structure can be effective in driving contractor focus on critical areas like readiness, reliability, and technical performance, especially for complex systems where outcomes are hard to pre-define. However, the effectiveness hinges on the government's ability to establish clear, measurable, and relevant award criteria and to diligently administer the contract, ensuring that award fees are genuinely earned and not merely a cost pass-through. Without robust oversight, CPAF contracts can still lead to cost overruns.

What are the historical spending patterns for F-22 sustainment, and how does this contract fit within them?

Historical spending on F-22 sustainment has been significant, reflecting the aircraft's advanced technology and operational demands. Prior to this consolidated contract, sustainment efforts were likely managed through various contracts and task orders. This $8.8 billion contract appears to consolidate and extend those efforts over a long period. Analyzing historical annual spending figures would reveal trends in maintenance costs, parts replacement, and support services. This contract represents a substantial, long-term commitment that likely builds upon, and potentially rationalizes, previous spending patterns, aiming for greater efficiency through a single, extended agreement, albeit without competition.

What are the implications of the contract's end date (December 2023) given its start date (January 2008)?

The contract's end date of December 2023, with a start date of January 2008, indicates a contract duration of nearly 16 years. This extended period suggests a long-term strategy for sustaining the F-22 fleet. The implications are that the government has relied on Lockheed Martin for an extended period without re-competing the requirement. This raises questions about whether the contract terms remained optimal throughout its life and whether opportunities for cost savings or technological upgrades through competition were missed. It also highlights the significant investment made in maintaining this specific weapon system over more than a decade.

Industry Classification

NAICS: Transportation and Warehousing › Support Activities for Air Transportation › Other Support Activities for Air Transportation

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $10,618,308,725

Exercised Options: $9,258,300,780

Current Obligation: $8,827,745,541

Actual Outlays: $17,245,376

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline