DoD awards $390M+ to Lockheed Martin for aircraft parts, with limited competition and long duration

Contract Overview

Contract Amount: $390,563,812 ($390.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2006-05-23

End Date: 2018-06-30

Contract Duration: 4,421 days

Daily Burn Rate: $88.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $390.6 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. The contract's extended duration of over 12 years suggests a long-term need for these aircraft parts. 3. Fixed-price contract type may offer cost certainty but could limit flexibility for evolving requirements. 4. Awarded by the Department of Defense, indicating a focus on national security and defense readiness. 5. The specific North American Industry Classification System (NAICS) code points to specialized aircraft parts manufacturing. 6. Lack of small business participation noted, potentially limiting opportunities for smaller firms in this sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without more specific details on the aircraft parts and their criticality. However, the significant dollar amount awarded to a single entity over a long period warrants scrutiny. Comparing this to similar sole-source or limited-competition contracts for specialized defense components would be necessary to assess if the pricing is reasonable. The firm-fixed-price structure, while providing cost certainty, could lead to overpayment if market prices for components decrease or if the contractor's costs are significantly lower than anticipated.

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 solicited. This typically occurs when a specific capability or product is only available from a single source, or for reasons of national security. The lack of competition means that the government did not benefit from a bidding process that could drive down prices through market forces. This raises concerns about whether the government secured the best possible price and value.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to achieve lower prices, potentially resulting in higher costs for taxpayers. Without competitive pressure, there is a risk that the awarded price may not reflect the most economical option available.

Public Impact

The primary beneficiaries are the Department of Defense and its operational readiness, ensuring aircraft are maintained with necessary parts. Services delivered include the manufacturing and supply of specialized aircraft parts, crucial for maintaining airworthiness. The geographic impact is primarily within Florida, where the contractor is located, suggesting potential local economic benefits. Workforce implications include sustained employment for skilled labor in aircraft parts manufacturing at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Long contract duration (over 12 years) may not adapt well to potential technological advancements or price fluctuations.
Lack of transparency in the justification for sole-source award.
No indication of small business subcontracting goals or participation.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award to a major defense contractor suggests reliability and established manufacturing capabilities.
Contract supports critical defense needs for aircraft maintenance and operation.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for aircraft parts are a substantial segment within this industry, often involving complex manufacturing processes and stringent quality control. Spending in this area is driven by military modernization programs and sustainment efforts. Comparable spending benchmarks would typically involve analyzing other sole-source or limited-competition contracts for similar high-value, specialized defense components.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'sb' field being false. Furthermore, the 'ss' field is also false, suggesting no specific small business set-aside was applied. The sole-source nature of the award further limits opportunities for small businesses to participate either as prime contractors or potentially as subcontractors, unless specifically included by the prime. This could mean missed opportunities for the small business industrial base to contribute to defense supply chains.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, along with the Defense Contract Management Agency (DCMA) for contract administration. The Inspector General of the Department of Defense would have jurisdiction for audits and investigations into potential fraud, waste, or abuse. Transparency is limited due to the sole-source nature, but contract award data is publicly available through federal procurement databases.

Related Government Programs

Department of Defense Aircraft Procurement
Defense Logistics Agency Supply Chain Management
Aerospace Manufacturing Contracts
Sole-Source Defense Contracts
Long-Term Defense Sustainment Contracts

Risk Flags

Sole-source award
Long contract duration
Lack of competition
Potential for price inflation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $390.6 million 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 (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $390.6 million.

What is the period of performance?

Start: 2006-05-23. End: 2018-06-30.

What specific aircraft parts are being procured under this contract, and what is their criticality to DoD operations?

The provided data indicates the contract is associated with NAICS code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing.' This suggests the procurement involves components beyond engines, propellers, and airframes, potentially including avionics, landing gear, hydraulic systems, or other specialized equipment. The criticality to DoD operations would depend on the specific aircraft platforms these parts support. Without further details, it's presumed these are essential for maintaining the airworthiness and operational readiness of key military aircraft fleets. The long duration and significant value suggest these are not routine consumables but rather critical, long-lead-time components or systems integral to major defense platforms.

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

The data explicitly states the contract type as 'NOT COMPETED,' which typically implies a sole-source or limited-source justification. Common reasons for sole-source awards in defense contracting include unique capabilities possessed by only one contractor, urgent and compelling needs where competition is impractical, or national security concerns that necessitate using a specific, trusted supplier. For a contract of this magnitude and duration, it is likely that Lockheed Martin possesses proprietary technology, unique manufacturing processes, or holds the sole license for the required parts, making competition infeasible. A formal Justification for Other Than Full and Open Competition (JOFOC) would typically be required and documented internally by the agency.

How does the contract's firm-fixed-price (FFP) structure impact potential cost savings or overruns for the government?

A firm-fixed-price (FFP) contract establishes a price that is not subject to adjustment based on the contractor's cost experience. This structure provides the government with maximum cost certainty, as the total price is known upfront. For the contractor, it shifts the risk of cost overruns to them. However, in sole-source situations, the initial FFP may be negotiated based on estimates that could be higher than necessary if true market competition were present. If the contractor's actual costs are significantly lower than the negotiated price, the government may have overpaid. Conversely, if costs escalate unexpectedly for the contractor, they bear the loss, which could incentivize them to cut corners on quality if not rigorously overseen.

What is the historical spending pattern with Lockheed Martin for similar aircraft parts, and does this contract represent an increase or decrease?

The provided data only details this specific contract award (ID: 336413, value ~$390M, duration ~12 years). To assess historical spending patterns, one would need to query federal procurement databases (like USASpending.gov or FPDS) for other contracts awarded to Lockheed Martin, particularly under the same or similar NAICS codes (336413) and PSC codes related to aircraft parts. This analysis would reveal if this contract is part of a larger, ongoing relationship or a new, significant investment. Without that broader context, it's impossible to determine if this represents an increase or decrease in spending trends for these types of parts.

What are the potential risks associated with a sole-source contract of this length for specialized aircraft parts?

Several risks are associated with long-term, sole-source contracts for specialized parts. Firstly, the lack of competition can lead to inflated prices and reduced value for money. Secondly, the extended duration (over 12 years) might mean the government is locked into potentially outdated technology or specifications if the market evolves rapidly. Thirdly, dependence on a single supplier can create supply chain vulnerabilities; if the contractor faces production issues, financial instability, or decides to discontinue the product line, the DoD could face significant operational disruptions. Finally, without competitive pressure, there might be less incentive for the contractor to innovate or improve efficiency.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: TRAINING AIDS AND DEVICES

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

Address: 100 GLOBAL INNOVATION CIR, ORLANDO, FL, 32825

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

Financial Breakdown

Contract Ceiling: $390,527,674

Exercised Options: $390,527,674

Current Obligation: $390,563,812

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline