DoD's $83.6M contract for navigation systems awarded to Lockheed Martin, raising questions about competition and value

Contract Overview

Contract Amount: $83,641,975 ($83.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-07-31

End Date: 2027-09-30

Contract Duration: 2,617 days

Daily Burn Rate: $32.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TEST

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $83.6 million to LOCKHEED MARTIN CORPORATION for work described as: TEST Key points: 1. The contract's value of $83.6 million over its period of performance warrants scrutiny for cost-effectiveness. 2. Awarded as a sole-source contract, the lack of competition may have limited price discovery and potentially inflated costs. 3. The 'cost plus fixed fee' contract type introduces inherent risks of cost overruns, requiring robust oversight. 4. Performance context is limited without specific details on deliverables and success metrics for the navigation systems. 5. Lockheed Martin's position as a major defense contractor suggests significant experience, but doesn't negate the need for competitive pricing. 6. The contract's duration of over 7 years necessitates careful monitoring of performance and evolving needs.

Value Assessment

Rating: questionable

Benchmarking the value of this $83.6 million contract is challenging without specific details on the navigation systems procured and their intended use. However, the 'cost plus fixed fee' (CPFF) contract type, while common in complex defense procurements, carries a higher risk of cost escalation compared to fixed-price contracts. The absence of a competitive bidding process further complicates a direct value-for-money assessment, as there's no market-driven price comparison. Without comparable sole-source contracts for similar systems, it's difficult to definitively state if the pricing is fair, but the lack of competition is a red flag for potential overpayment.

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 justified when only one responsible source is available or when urgent and compelling circumstances exist. The lack of competition means there were no other companies vying for this contract, which limits the government's ability to negotiate the best possible price and terms. This situation can lead to higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there's less incentive for the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the Department of the Air Force, which will receive advanced navigation systems. The contract supports the development and delivery of critical Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing capabilities. The contract is geographically focused in Florida (ST, SN), suggesting a concentration of work and potential economic impact in that state. This contract likely supports a specialized workforce within Lockheed Martin and its subcontractors, requiring expertise in advanced systems manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost-plus-fixed-fee contract type carries inherent risk of cost overruns.
Lack of transparency in the sole-source justification process.
Long contract duration (over 7 years) increases risk of scope creep or obsolescence.
Limited public information on specific performance metrics and success criteria.

Positive Signals

Awarded to a major defense contractor with a track record in complex systems.
Contract aims to fulfill critical navigation system needs for the Air Force.
Clear end dates for contract performance provide a defined timeline.
The contract is for a specific, defined need within the defense sector.

Sector Analysis

The contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a specialized area within the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Major players like Lockheed Martin dominate, often securing contracts through sole-source or limited competition due to unique capabilities and existing relationships. Comparable spending in this niche can vary widely based on system complexity and quantity, but large-scale navigation system procurements for military applications typically represent substantial investments.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor, Lockheed Martin Corporation, is a large prime contractor. While large prime contractors are often required to subcontract a portion 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. Without this information, it's difficult to assess the extent to which this contract will benefit or impact small businesses in the supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. As a 'cost plus fixed fee' contract, rigorous financial oversight is crucial to monitor expenditures and ensure costs remain within reasonable bounds. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract. Specific accountability measures would be detailed in the contract's terms and conditions, including performance standards and reporting requirements.

Related Government Programs

Defense Procurement
Aerospace Manufacturing
Navigation Systems
Air Force Systems Command
Sole Source Contracts
Cost Plus Fixed Fee Contracts

Risk Flags

Sole Source Award
Cost Plus Fixed Fee Contract Type
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.6 million to LOCKHEED MARTIN CORPORATION. TEST

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 $83.6 million.

What is the period of performance?

Start: 2020-07-31. End: 2027-09-30.

What is Lockheed Martin Corporation's track record with similar sole-source navigation system contracts awarded by the Department of Defense?

Lockheed Martin Corporation, as a major defense contractor, has a long history of securing large, complex contracts, including those for navigation and guidance systems. While specific data on their sole-source navigation system contracts isn't provided here, their extensive experience suggests a pattern of being awarded such contracts due to specialized capabilities and existing relationships within the defense industrial base. Publicly available contract databases often show Lockheed Martin as a recipient of numerous sole-source awards across various defense platforms. A deeper analysis would involve reviewing historical contract awards for similar system types and assessing performance outcomes and pricing on those past sole-source engagements to identify any recurring trends or potential concerns.

How does the 'cost plus fixed fee' (CPFF) contract type compare to other contract types in terms of cost efficiency for the government in defense procurements?

The 'cost plus fixed fee' (CPFF) contract type is often used for research and development or complex projects where the scope is not well-defined, making it difficult to estimate costs accurately upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While this structure incentivizes the contractor to control costs to some extent (as the fee is fixed), it carries a higher risk of cost overruns for the government compared to fixed-price contracts. Fixed-price contracts, such as Firm-Fixed-Price (FFP), offer greater cost certainty for the government as the price is set upfront. However, FFP contracts may require more detailed initial scope definition and can lead to higher initial bids to account for contractor risk. For procurements where requirements are stable and well-defined, fixed-price contracts are generally considered more cost-efficient for the government. The CPFF structure here, combined with a sole-source award, increases the potential for the government to pay more than necessary if not managed with stringent oversight.

What are the primary risks associated with awarding a contract of this magnitude ($83.6M) on a sole-source basis?

The primary risks associated with awarding a contract of this magnitude on a sole-source basis are significant. Firstly, the lack of competition means the government forfeits the opportunity to benefit from price reductions that typically arise from competitive bidding. This can lead to inflated costs and a less efficient use of taxpayer funds. Secondly, without competing proposals, it's harder to assess whether the chosen contractor's proposed price is fair and reasonable compared to market alternatives. Thirdly, sole-source awards can create a perception of favoritism or a lack of transparency, potentially undermining public trust. Lastly, it can stifle innovation and market entry for other capable companies who are excluded from the opportunity, potentially limiting future competition for similar needs.

Given the contract duration of over 7 years (2617 days), what are the potential implications for technological obsolescence and program effectiveness?

A contract duration exceeding seven years for navigation systems presents a notable risk of technological obsolescence. The pace of technological advancement, particularly in areas like sensors, processing, and software, can be rapid. By the time the contract concludes, the delivered systems might be based on technology that is no longer cutting-edge or could be surpassed by newer, more capable alternatives. This could impact the long-term effectiveness and operational advantage of the systems procured. Furthermore, a long duration increases the likelihood of evolving mission requirements or unforeseen operational challenges, which may not be adequately addressed by the initially defined scope. Effective program management, including provisions for technology refresh or adaptation, would be crucial to mitigate these risks and ensure sustained program effectiveness throughout the contract's lifecycle.

What is the typical market size and competitive landscape for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' within the US defense sector?

The market for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' within the US defense sector is substantial, though highly specialized. It's dominated by a few large, established defense contractors like Lockheed Martin, Northrop Grumman, Raytheon, and Boeing, who possess the advanced technological capabilities, security clearances, and manufacturing infrastructure required. The competitive landscape is often characterized by limited direct competition for specific, high-technology systems due to the complexity, proprietary nature of certain technologies, and the long-standing relationships between these primes and government agencies. While there are numerous smaller companies and suppliers involved in component manufacturing or specialized subsystems, the prime contract awards for integrated systems are typically concentrated among the major players. Market size figures can fluctuate based on defense spending priorities and specific program needs, but it represents billions of dollars annually.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument 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: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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: $89,306,207

Exercised Options: $89,306,207

Current Obligation: $83,641,975

Actual Outlays: $52,727

Subaward Activity

Number of Subawards: 35

Total Subaward Amount: $5,042,278

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline