DoD awards $557M for C-130J MATS NEW PROCUREMENT to Lockheed Martin, a sole-source contract

Contract Overview

Contract Amount: $557,462,383 ($557.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-08-08

End Date: 2021-09-30

Contract Duration: 3,706 days

Daily Burn Rate: $150.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: C-130J MATS NEW PROCUREMENT

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $557.5 million to LOCKHEED MARTIN CORPORATION for work described as: C-130J MATS NEW PROCUREMENT Key points: 1. Contract awarded to a single supplier raises concerns about potential overpricing and lack of competitive pressure. 2. The firm-fixed-price contract type suggests cost certainty for the government, but the absence of competition limits price discovery. 3. Long contract duration of 3706 days (over 10 years) indicates a significant, long-term commitment. 4. The procurement falls under 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' a specialized sector. 5. No small business set-aside was included, potentially limiting opportunities for smaller enterprises in this large contract. 6. The contract's value is substantial, representing a significant investment in aircraft sustainment or new procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without comparable sole-source procurements for similar C-130J components or services. The firm-fixed-price structure provides some cost predictability, but the lack of competition means there's no direct market comparison to assess if the pricing is optimal. Given the sole-source nature, it's difficult to ascertain if the government received the best possible value for the funds expended.

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 a unique capability or product is required, and competition is not feasible or practical. The limited competition significantly reduces the government's ability to leverage market forces to drive down prices or improve terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and innovation that typically arise from competitive bidding processes. This can lead to higher overall costs for the government.

Public Impact

The primary beneficiary is the Department of Defense, ensuring the continued operation and potential expansion of C-130J aircraft fleets. Services delivered likely include the manufacturing, integration, or sustainment of new C-130J aircraft or critical components. The geographic impact is primarily within Florida, where Lockheed Martin's facility is located, potentially supporting local jobs and the regional economy. Workforce implications include the employment of skilled labor at Lockheed Martin, particularly in aerospace manufacturing and engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Long contract duration may lock the government into potentially suboptimal terms if market conditions change.
Lack of small business participation means missed opportunities to foster growth in the small business aerospace sector.
Absence of clear competition makes it difficult to independently verify the fairness of the pricing.
Reliance on a single supplier can create long-term dependency and potential supply chain risks.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government, mitigating risks of cost overruns.
Award to a known incumbent contractor (Lockheed Martin) likely ensures continuity and leverages existing expertise with the C-130J platform.
The contract supports a critical military airlift capability, ensuring national security readiness.
The specific nature of C-130J MATS procurement suggests a specialized requirement that may justify a sole-source approach in certain circumstances.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. Contracts for major aircraft platforms like the C-130J represent substantial portions of defense spending. Lockheed Martin is a dominant player in this market. Comparable spending benchmarks for new aircraft procurements or major sustainment programs can range from tens of millions to billions of dollars, depending on the scope and scale.

Small Business Impact

This contract does not appear to include a small business set-aside. The sole-source nature further limits the possibility of subcontracting opportunities for small businesses unless explicitly mandated or pursued by the prime contractor. This represents a missed opportunity to engage the small business industrial base in a significant defense procurement, potentially impacting the growth and development of small businesses in the aerospace supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the firm-fixed-price contract terms, requiring delivery of specified goods or services. Transparency is limited due to the sole-source nature, but contract award data is publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-130J Super Hercules Aircraft
Military Airlift Command Systems
Aerospace Parts Manufacturing
Defense Logistics Agency Procurement

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $557.5 million to LOCKHEED MARTIN CORPORATION. C-130J MATS NEW PROCUREMENT

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 $557.5 million.

What is the period of performance?

Start: 2011-08-08. End: 2021-09-30.

What is Lockheed Martin Corporation's track record with C-130J related contracts?

Lockheed Martin Corporation is the original equipment manufacturer (OEM) of the C-130J Super Hercules aircraft. Their track record with C-130J related contracts is extensive, encompassing initial production, upgrades, sustainment, and spare parts provisioning for numerous domestic and international operators. They have consistently been the primary, and often sole, source for major C-130J components and integrated systems due to their proprietary knowledge and manufacturing capabilities. Historical data indicates a long-standing relationship with the Department of Defense for this platform, characterized by numerous sole-source and limited-competition awards for specialized requirements.

How does the $557 million award compare to other C-130J procurements or sustainment contracts?

Comparing this $557 million award requires context regarding the specific scope of 'MATS NEW PROCUREMENT.' If this represents the acquisition of new aircraft or a significant block of new components, the value is within the expected range for such large defense platforms. However, if it pertains to sustainment or parts, it would be considered a substantial investment. Without detailed breakdowns of what 'MATS NEW PROCUREMENT' entails, direct comparison to other C-130J contracts (e.g., engine overhauls, avionics upgrades, or fleet-wide sustainment) is difficult. Sole-source awards for such large sums warrant scrutiny to ensure value for money is achieved.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of this magnitude include potential price inflation due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a long-term dependency on a single supplier. Taxpayers may end up paying more than they would in a competitive environment. Furthermore, if the sole-source contractor faces production issues or financial instability, it could significantly disrupt the supply chain for critical military assets like the C-130J. There's also a risk of scope creep or contract modifications that could further increase costs without competitive validation.

How effective is the firm-fixed-price contract type in managing costs for this specific procurement?

The firm-fixed-price (FFP) contract type is generally effective in managing costs by shifting the risk of cost overruns to the contractor. For this C-130J MATS NEW PROCUREMENT, the FFP structure provides the Department of Defense with a predictable ceiling cost. However, the effectiveness is somewhat diminished by the sole-source nature. While the government knows the total price, the absence of competition means there's no market benchmark to ensure this fixed price represents the best possible value. The contractor has less incentive to reduce costs below the agreed-upon price if they know there are no competitors vying for the contract.

What are the historical spending patterns for C-130J related procurements by the Department of Defense?

Historical spending patterns for C-130J related procurements by the Department of Defense show consistent, significant investment over many years. The DoD has procured numerous C-130J aircraft and associated support, sustainment, and upgrade packages. Spending often occurs through multi-year contracts, sole-source awards for unique modifications or parts, and competitive bids for broader sustainment services. The total lifecycle cost for C-130J fleets runs into billions of dollars, reflecting the aircraft's critical role. The $557 million figure for 'MATS NEW PROCUREMENT' fits within this pattern of substantial, ongoing investment in the C-130J program.

What oversight mechanisms are in place to ensure performance and prevent waste on this sole-source contract?

Oversight for this sole-source contract is primarily managed by the Defense Contract Management Agency (DCMA), which monitors contractor performance, quality control, and adherence to contract terms. The firm-fixed-price nature provides a baseline for performance expectations. Accountability is enforced through contractual clauses requiring delivery of specified materiel or services by the agreed-upon deadlines and quality standards. While transparency is limited due to the sole-source nature, the DoD's internal audit functions and the Government Accountability Office (GAO) can review contract actions. The Inspector General's office also provides oversight for potential fraud, waste, or abuse.

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

Financial Breakdown

Contract Ceiling: $564,310,005

Exercised Options: $558,446,379

Current Obligation: $557,462,383

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline