DoD's $193M aircraft manufacturing contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $193,268,218 ($193.3M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2017-11-09

End Date: 2026-02-27

Contract Duration: 3,032 days

Daily Burn Rate: $63.7K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: ACQUISITION CATEGORY II: COMBINED BLOCK UPGRADE 7.0/8.1 LOW-RATE INITIAL PRODUCTION LOT 1

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $193.3 million to LOCKHEED MARTIN CORP for work described as: ACQUISITION CATEGORY II: COMBINED BLOCK UPGRADE 7.0/8.1 LOW-RATE INITIAL PRODUCTION LOT 1 Key points: 1. Contract awarded on a fixed-price incentive basis, aiming to control costs while allowing for adjustments. 2. The contract spans over 8 years, indicating a long-term commitment to the specified aircraft program. 3. No small business set-aside was utilized, suggesting potential missed opportunities for smaller enterprises. 4. The acquisition category is 'Combined Block Upgrade 7.0/8.1', pointing to significant technological advancements or modifications. 5. The contract is a delivery order under a larger agreement, implying a phased approach to acquisition. 6. The primary NAICS code is 336411 (Aircraft Manufacturing), placing it within a specialized industrial sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific technological focus. Without competitive bids, it's difficult to ascertain if the $193 million represents a fair market price. The fixed-price incentive structure suggests an attempt to manage costs, but the lack of comparative pricing from other vendors makes a definitive value assessment difficult. Further analysis would require understanding the specific technological upgrades and their market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating it was awarded directly to Lockheed Martin Corporation. Sole-source awards typically occur when only one vendor can provide the required goods or services, often due to proprietary technology, unique capabilities, or national security considerations. The lack of competition means there was no opportunity for other manufacturers to bid, potentially limiting price discovery and innovation.

Taxpayer Impact: Taxpayers may not benefit from the cost savings that typically arise from a competitive bidding process. Without multiple offers, the government may not have secured the lowest possible price for these aircraft upgrades.

Public Impact

The primary beneficiaries are the Department of Defense and the U.S. Air Force, receiving advanced aircraft capabilities. The contract supports the production and delivery of upgraded aircraft, enhancing national defense readiness. The contract is associated with Georgia (st: GA, sn: GEORGIA), suggesting potential economic impact and job creation in that state. The workforce implications include highly skilled jobs in aircraft manufacturing, engineering, and related technical fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer dollars.
Sole-source awards can limit opportunities for small businesses to participate in major defense contracts.
The long duration of the contract (over 8 years) could lead to cost overruns if not managed effectively.
The specific nature of 'Block Upgrades' might indicate a reliance on a single supplier for critical technological advancements.

Positive Signals

The fixed-price incentive contract type aims to provide cost control while allowing for necessary adjustments.
Awarding to Lockheed Martin, a major defense contractor, suggests access to established expertise and production capabilities.
The contract supports critical national defense needs, ensuring the modernization of Air Force assets.
The delivery order structure allows for phased acquisition, potentially managing cash flow and program risk.

Sector Analysis

The aircraft manufacturing sector is a highly specialized and capital-intensive industry, dominated by a few large prime contractors. This contract falls within the defense sub-sector, characterized by long procurement cycles, complex technological requirements, and significant government investment. Comparable spending benchmarks are difficult to establish without knowing the specific aircraft and upgrade details, but major defense platforms often involve multi-billion dollar life-cycle costs. This contract represents a significant investment in maintaining and upgrading a key component of the Air Force's fleet.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned in the provided data. The absence of small business participation in this direct award means that opportunities for smaller enterprises to contribute to this specific acquisition are limited. This could represent a missed opportunity to leverage the innovation and agility of the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Specific oversight mechanisms would include contract performance reviews, financial audits, and potentially the involvement of the Defense Contract Audit Agency (DCAA) and the Inspector General's office. Transparency is facilitated through contract databases, but the sole-source nature limits public insight into the negotiation process.

Related Government Programs

F-35 Lightning II Program
F-16 Fighting Falcon Sustainment
Advanced Fighter Aircraft Development
Air Force Aircraft Modernization Programs
Defense Production Act Investments

Risk Flags

Sole-source award may limit price competition.
Lack of small business participation.
Long contract duration increases risk of cost escalation.
Potential for vendor lock-in due to specialized upgrades.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $193.3 million to LOCKHEED MARTIN CORP. ACQUISITION CATEGORY II: COMBINED BLOCK UPGRADE 7.0/8.1 LOW-RATE INITIAL PRODUCTION LOT 1

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

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 $193.3 million.

What is the period of performance?

Start: 2017-11-09. End: 2026-02-27.

What is the specific aircraft model and the nature of the 'Combined Block Upgrade 7.0/8.1'?

The provided data does not specify the exact aircraft model or the technical details of the 'Combined Block Upgrade 7.0/8.1'. However, 'Block Upgrades' in military aviation typically refer to significant modifications or enhancements to an aircraft's systems, software, hardware, or capabilities. These upgrades are often implemented in phases or 'blocks' to incorporate new technologies, improve performance, enhance survivability, or meet evolving mission requirements. Given the $193 million value and the sole-source award to Lockheed Martin, it is likely related to a major fighter or advanced aircraft platform where Lockheed Martin is the prime contractor, such as variants of the F-16, F-22, or F-35, or potentially a different specialized aircraft. Further investigation into Air Force procurement documents would be needed to identify the specific platform and the scope of these upgrades.

How does the fixed-price incentive (FPI) contract type aim to balance cost and performance in this context?

A Fixed-Price Incentive (FPI) contract is designed to share the risks and rewards between the government and the contractor. It establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both parties share in the savings according to a pre-negotiated formula. Conversely, if the final cost exceeds the target cost but remains below the ceiling, the contractor absorbs a larger portion of the overrun. If the final cost reaches the ceiling, the contractor bears all costs above that point. For this $193 million contract, the FPI structure incentivizes Lockheed Martin to control costs while meeting the performance specifications for the aircraft upgrades. It provides a degree of cost certainty for the government compared to cost-plus contracts, while still allowing for flexibility if unforeseen technical challenges arise during the upgrade process.

What are the potential implications of awarding this contract without competition for future aircraft development or upgrades?

Awarding a significant contract like this without competition can have several implications. Firstly, it removes the pressure of competitive bidding, which often drives down prices and encourages innovation. Without competing offers, the government may not be achieving the best possible value for its investment. Secondly, it can create a dependency on a single supplier for critical technologies and upgrades, potentially limiting future options or increasing long-term costs if that supplier's pricing or capabilities change unfavorably. While sole-source awards are sometimes necessary due to unique capabilities or national security concerns, a pattern of non-competed contracts can stifle broader industry competition and potentially lead to higher overall defense spending in the long run.

What is the historical spending trend for similar aircraft manufacturing or upgrade contracts by the Department of Defense?

Historical spending on aircraft manufacturing and upgrades by the Department of Defense is substantial, often running into billions of dollars annually. Major programs like the F-35, F-15EX, and various bomber and trainer aircraft sustainment and modernization efforts represent significant portions of the defense budget. Contracts for upgrades, particularly those involving advanced avionics, weapons integration, or structural enhancements, can range from tens of millions to several billion dollars, depending on the scope and the number of aircraft involved. The $193 million for this specific block upgrade is a considerable sum, indicative of a substantial modernization effort for a key platform. Analyzing past spending on similar upgrade blocks for comparable aircraft types would provide context for whether this contract's value is within expected ranges, though the sole-source nature complicates direct comparison.

Are there any specific performance metrics or Key Performance Indicators (KPIs) associated with this contract that are publicly available?

The provided data does not include specific performance metrics or Key Performance Indicators (KPIs) for this contract. Typically, such details are outlined in the contract's statement of work (SOW) and are not always fully disclosed in public contract award summaries. For an FPI contract like this, KPIs would likely relate to meeting upgrade specifications, delivery schedules, quality standards, and potentially cost targets. The success of the 'Combined Block Upgrade 7.0/8.1' would be measured against these defined metrics. Without access to the full contract documentation, it's impossible to detail the specific KPIs, but they would be crucial for the Air Force to ensure they are receiving the intended enhancements and value.

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

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

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

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: $193,268,218

Exercised Options: $193,268,218

Current Obligation: $193,268,218

Actual Outlays: $26,496,743

Subaward Activity

Number of Subawards: 90

Total Subaward Amount: $29,319,529

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862516D6458

IDV Type: IDC

Timeline