DoD's $7.26B aircraft manufacturing contract with Lockheed Martin shows long-term commitment, raising value-for-money questions

Contract Overview

Contract Amount: $7,261,932,654 ($7.3B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2006-02-28

End Date: 2018-09-20

Contract Duration: 4,587 days

Daily Burn Rate: $1.6M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Defense

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $7.26 billion to LOCKHEED MARTIN CORP for work described as: Key points: 1. Significant long-term commitment to a single contractor for aircraft manufacturing. 2. Sole-source nature limits competitive pressure, potentially impacting price efficiency. 3. Contract duration and value suggest a critical, ongoing need for these aircraft. 4. Performance context is essential to understand if the value delivered matches the substantial investment. 5. This contract represents a major component of the Defense Department's aircraft procurement strategy. 6. The absence of competition warrants close scrutiny of pricing and cost controls.

Value Assessment

Rating: questionable

Benchmarking the value of this $7.26 billion contract is challenging without specific performance metrics and comparable sole-source agreements. However, the sheer scale and duration suggest a significant investment. The 'Aircraft Manufacturing' (NAICS 336411) sector can have high barriers to entry, but the lack of competition for such a large award raises concerns about whether the government secured the best possible pricing and terms. Without competitive bids, it's difficult to definitively assess if the price paid reflects fair market value or if cost efficiencies were forgone.

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 among multiple potential bidders. This approach is typically used when only one source is capable of meeting the requirement, often due to proprietary technology, unique capabilities, or national security considerations. The lack of competition means that price discovery through market forces was absent, and the government relied on negotiation to establish terms.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as competitive pressures that drive down prices are removed. This necessitates robust negotiation and oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical aircraft, and Lockheed Martin, the sole contractor. The services delivered are the manufacturing and likely sustainment of specific aircraft platforms essential for national defense. The geographic impact is primarily national, supporting defense readiness, with potential ripple effects on the contractor's workforce and supply chain. Workforce implications include sustained employment for thousands at Lockheed Martin and its subcontractors, particularly in specialized aerospace manufacturing roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially leading to higher costs for taxpayers.
Long contract duration without clear performance benchmarks could obscure value-for-money assessments.
Lack of competition may reduce incentives for the contractor to innovate or improve efficiency.
High dollar value concentrated with one provider increases risk if performance issues arise.

Positive Signals

Indicates a long-term strategic need for specific aircraft capabilities by the DoD.
Suggests a high level of trust and established relationship between the DoD and Lockheed Martin.
Potential for streamlined production and sustainment due to a single, dedicated provider.

Sector Analysis

The aircraft manufacturing sector (NAICS 336411) is characterized by high capital investment, complex supply chains, and significant technological innovation. Major players like Lockheed Martin dominate, often securing large, long-term government contracts due to the specialized nature of defense platforms. Comparable spending benchmarks would involve analyzing other large sole-source or competitively awarded contracts for major defense aircraft systems, which often run into billions of dollars over their lifecycle.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the prime contractor being Lockheed Martin, a large aerospace company, the primary focus is on the prime award. Subcontracting opportunities for small businesses would depend on Lockheed Martin's internal procurement policies and the specific needs of the aircraft manufacturing process, but they are not mandated by the contract structure itself.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and acquisition oversight bodies, potentially including the Defense Contract Management Agency (DCMA) given the 'sa' field. Accountability measures would be defined in the contract terms, focusing on delivery schedules, quality standards, and cost reporting. Transparency is often limited in sole-source defense contracts, but reporting requirements on cost and performance are typically mandated.

Related Government Programs

F-35 Lightning II Program
B-2 Spirit Program
C-130 Hercules Program
Defense Production Act Purchases
Major Defense Acquisition Programs

Risk Flags

Sole-source award
Long contract duration
Time and Materials pricing
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $7.26 billion to LOCKHEED MARTIN CORP. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $7.26 billion.

What is the period of performance?

Start: 2006-02-28. End: 2018-09-20.

What specific aircraft platforms are covered under this $7.26 billion contract, and what is their strategic importance to the Department of Defense?

The provided data does not specify the exact aircraft platforms covered by this $7.26 billion contract awarded to Lockheed Martin Corp. However, given Lockheed Martin's portfolio and the 'Aircraft Manufacturing' NAICS code (336411), it likely pertains to advanced military aircraft. These could range from fighter jets to transport or specialized reconnaissance aircraft. The strategic importance would depend on the platform; for instance, fighter jets are crucial for air superiority and power projection, while transport aircraft are vital for logistics and troop deployment. The long duration (2006-2018) suggests these aircraft are foundational to current and near-future defense operations, potentially involving platforms like the F-35, F-16, or C-130 variants, which are critical for maintaining military readiness and global presence.

How does the 'Time and Materials' contract type (PT) potentially impact cost control and value for money compared to fixed-price contracts?

The 'Time and Materials' (T&M) contract type, indicated by 'PT', allows the government to pay the contractor for the actual cost of direct labor (at specified hourly rates) and indirect costs, plus a fee representing profit. This contrasts with fixed-price contracts, where the price is set regardless of the contractor's actual costs. For a large, long-term contract like this ($7.26 billion), a T&M structure inherently carries higher risk for the government regarding cost control. It provides less incentive for the contractor to manage costs efficiently, as labor and material costs are passed through. Value for money is harder to guarantee, as the final cost is not predetermined. Robust oversight, detailed cost tracking, and strong negotiation of labor rates are crucial to mitigate the risks associated with T&M contracts and ensure fair pricing.

What are the implications of a sole-source award spanning over 12 years for technological innovation and future-proofing of defense capabilities?

A sole-source award spanning over 12 years (2006-2018) for aircraft manufacturing can have mixed implications for technological innovation and future-proofing. On one hand, it provides a stable, long-term demand signal, allowing the contractor (Lockheed Martin) to invest heavily in specialized production facilities and R&D for the specific platforms. This can lead to incremental improvements and sustainment of existing technologies. However, the absence of competition removes a key driver for disruptive innovation. Competitors are less incentivized to develop alternative, potentially superior technologies if they know they cannot compete for the existing large contract. This can lead to a technological plateau or reliance on legacy systems, potentially making it harder to adapt to rapidly evolving threats or adopt next-generation capabilities without significant future re-competition or new program starts.

Given the 'Aircraft Manufacturing' NAICS code and the prime contractor, what is the likely scale of the supply chain and potential subcontracting opportunities?

The 'Aircraft Manufacturing' NAICS code (336411) and a prime contractor like Lockheed Martin indicate a vast and complex supply chain. Aircraft manufacturing involves thousands of specialized components, raw materials, and sub-assemblies, requiring a wide network of suppliers. While this specific contract was sole-source to Lockheed Martin, the company relies heavily on subcontractors for various parts, systems (avionics, engines, structures), and specialized services. Potential subcontracting opportunities would be extensive, covering everything from raw material suppliers and component manufacturers to software developers and testing services. The scale could involve thousands of small and medium-sized businesses, although the prime contract itself doesn't mandate specific set-asides, relying instead on Lockheed Martin's own procurement practices and federal subcontracting regulations.

How does the contract's duration (nearly 13 years) and substantial value ($7.26B) compare to typical defense acquisition cycles and spending patterns for major aircraft programs?

A contract duration of nearly 13 years (February 2006 to September 2018) and a value of $7.26 billion are substantial, even within the context of major defense acquisition programs. Defense acquisition cycles are notoriously long, often spanning decades from concept to fielding and sustainment. Major aircraft programs frequently involve multi-year contracts to ensure production stability and manage complex manufacturing processes. The value aligns with the procurement of significant quantities of advanced military aircraft. For comparison, programs like the F-35 Joint Strike Fighter involve contracts worth hundreds of billions over their lifetime. This $7.26 billion contract likely represents a significant portion of a specific aircraft program's production or sustainment phase, fitting within typical, albeit large-scale, defense spending patterns for critical platforms.

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: TIME AND MATERIALS (Y)

Evaluated Preference: NONE

Contractor Details

Address: 86 SOUTH COBB DR, MARIETTA, GA, 30063

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $13,944,515,608

Exercised Options: $13,910,310,512

Current Obligation: $7,261,932,654

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline