DoD's $136.7M C-130J acquisition from Lockheed Martin, a sole-source award, raises value and competition concerns

Contract Overview

Contract Amount: $136,681,057 ($136.7M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2018-02-01

End Date: 2020-10-31

Contract Duration: 1,003 days

Daily Burn Rate: $136.3K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ACAT 1, C-130J, FYOC 2 AIR NATIONAL GUARD AIRCRAFT BUY

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $136.7 million to LOCKHEED MARTIN CORP for work described as: ACAT 1, C-130J, FYOC 2 AIR NATIONAL GUARD AIRCRAFT BUY Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. Benchmarking against similar aircraft procurements is crucial to assess value for money. 3. The absence of competition presents a risk indicator for cost control. 4. Performance context is limited without comparative data on aircraft delivery and operational readiness. 5. This contract positions Lockheed Martin as a key supplier for a critical military aircraft platform. 6. The firm-fixed-price structure offers some cost certainty but doesn't guarantee optimal pricing without competition.

Value Assessment

Rating: questionable

The total award of $136.7 million for C-130J aircraft requires careful benchmarking against historical sole-source procurements of similar platforms. Without competitive bids, it is difficult to ascertain if the pricing reflects fair market value. The firm-fixed-price contract type provides cost certainty for the government, but the lack of competition means the government may not be benefiting from the most economical pricing achievable through a competitive process. Further analysis of unit costs compared to previous C-130J buys or comparable aircraft would be necessary to definitively assess value.

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 is required or when only one responsible source can fulfill the requirement. The lack of competition means there was no opportunity for multiple companies to bid, which can limit price negotiation leverage and potentially lead to higher costs for the government. The absence of a competitive process prevents a robust comparison of different offerings and pricing structures.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, the government has less leverage to negotiate the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Air National Guard and other Department of Defense components requiring C-130J aircraft for airlift and support missions. The contract delivers critical air mobility capabilities essential for national defense, including troop and cargo transport, humanitarian aid, and disaster relief. The geographic impact is national, supporting military operations and readiness across various bases and deployment locations. Workforce implications include continued employment at Lockheed Martin facilities involved in aircraft manufacturing and support, as well as the personnel who will operate and maintain these aircraft within the military.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Lack of competition hinders objective assessment of value for money.
Dependence on a single supplier for critical aircraft can create long-term strategic risks.
Limited transparency in pricing mechanisms due to non-competitive nature.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Acquisition of a proven and capable military transport aircraft.
Supports ongoing readiness and operational capabilities of the Air National Guard.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Aircraft manufacturing, particularly for military platforms like the C-130J, is dominated by a few large, established prime contractors. This contract represents a significant portion of spending within the military aircraft manufacturing sub-sector. Comparable spending benchmarks would involve analyzing other sole-source or limited-competition awards for similar large military aircraft, as well as the overall annual budget allocated to tactical airlift modernization and sustainment.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as indicated by 'sb': false. Lockheed Martin, as the prime contractor, is a large business. While large prime contractors are often required to subcontract portions of their work to small businesses, the absence of a direct set-aside means that opportunities for small businesses are not guaranteed or specifically targeted through this particular award mechanism. The extent of small business participation would depend on Lockheed Martin's subcontracting strategy and compliance with broader federal small business utilization goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, specifically within the Department of the Air Force. Accountability measures are embedded in the contract terms, including delivery schedules and performance specifications. Transparency is limited due to the sole-source nature, but contract awards and modifications are typically reported in federal procurement databases. The Inspector General of the Department of Defense may conduct audits or investigations into the procurement process and contract execution if specific concerns arise.

Related Government Programs

C-130 Hercules Program
Tactical Airlift Modernization Programs
Air Force Aircraft Procurement
Lockheed Martin Defense Contracts
Sole-Source Defense Acquisitions

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited value-for-money assessment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $136.7 million to LOCKHEED MARTIN CORP. ACAT 1, C-130J, FYOC 2 AIR NATIONAL GUARD AIRCRAFT BUY

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 $136.7 million.

What is the period of performance?

Start: 2018-02-01. End: 2020-10-31.

What is the historical spending trend for C-130J aircraft acquisitions by the Department of Defense?

Historical spending on C-130J aircraft acquisitions by the Department of Defense has been substantial, reflecting the platform's critical role in tactical airlift. Over the years, the Air Force and other branches have procured numerous C-130J variants to modernize their fleets. Data from federal procurement records indicates multiple awards to Lockheed Martin for C-130J aircraft, engines, and associated support services. For instance, prior to this specific award, there were significant multi-year procurements and individual aircraft buys. Analyzing these past expenditures, including the number of aircraft procured in each fiscal year and the associated costs, provides context for the $136.7 million award. It's important to note that costs can vary significantly based on the specific variant, configuration, quantity ordered, and economic conditions at the time of purchase. The trend generally shows a consistent investment in maintaining and expanding the C-130J fleet, often through sole-source or limited-competition contracts due to the specialized nature of the aircraft and its manufacturer.

How does the unit cost of the C-130J in this award compare to previous C-130J procurements?

Determining the precise unit cost comparison for the C-130J in this $136.7 million award is challenging without knowing the exact number of aircraft procured under this specific contract. The data provided indicates a total award amount but not the quantity of aircraft. However, historical data suggests that the unit cost for a C-130J Super Hercules can range significantly, often between $70 million to over $100 million, depending on the variant (e.g., C-130J-30, EC-130J) and included mission systems. If this award covered, for example, two aircraft, the unit cost would be around $68 million, which might be on the lower end of recent historical averages. If it covered only one aircraft, the unit cost would be exceptionally high. Without the quantity, a direct comparison is speculative. Generally, sole-source awards can lead to higher unit costs than competitive ones. Benchmarking against publicly available data for similar quantities and configurations from previous fiscal years would be necessary for a more accurate assessment.

What are the primary risks associated with sole-source defense contracts of this magnitude?

Sole-source defense contracts of this magnitude carry several primary risks. Firstly, the most significant risk is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has reduced leverage to negotiate the best possible price, potentially leading to less value for taxpayer money. Secondly, there's a risk of reduced innovation and efficiency, as the incumbent contractor may face less incentive to improve processes or offer cost-saving alternatives. Thirdly, sole-source awards can create vendor lock-in, making it difficult and costly to switch suppliers or adopt alternative technologies in the future. Fourthly, transparency in the procurement process and pricing can be diminished, making it harder for oversight bodies and the public to scrutinize the fairness and reasonableness of the cost. Finally, there's a strategic risk if the sole-source provider faces financial instability or production issues, as there are no immediate alternatives.

What is Lockheed Martin's track record with C-130J production and delivery?

Lockheed Martin has a long and established track record as the sole producer of the C-130J Super Hercules aircraft. The company has delivered hundreds of C-130J aircraft to the U.S. military and numerous international partners since the program's inception. Historically, the C-130J program has faced some challenges, including initial cost overruns and production delays in its early years. However, over time, Lockheed Martin has demonstrated a capability to produce and deliver the aircraft according to program requirements, albeit often through complex, multi-year contracts. The company has a deep understanding of the aircraft's systems and manufacturing processes. Performance metrics related to on-time delivery and adherence to specifications can vary across different contracts and fiscal years, but overall, Lockheed Martin is recognized as a capable and experienced manufacturer for this specific platform.

Are there alternative aircraft that could fulfill the C-130J's mission requirements, and why was this contract sole-source?

The C-130J Super Hercules is a highly specialized tactical airlifter with unique capabilities optimized for short-field operations, rugged terrain, and a wide range of mission profiles, including troop transport, cargo delivery, medical evacuation, and special operations support. While other aircraft exist in the broader airlift category (e.g., larger strategic airlifters like the C-17, or smaller utility transports), few directly match the C-130J's specific combination of payload, range, speed, and operational flexibility from austere bases. The 'NOT COMPETED' and 'sole-source' designation suggests that the Department of the Air Force determined that Lockheed Martin was the only responsible source capable of meeting the requirement, likely due to factors such as existing infrastructure, unique technical expertise, proprietary technology, or specific mission system integration that only Lockheed Martin could provide for this particular acquisition. Without the specific justification cited by the agency, it's presumed that a competitive environment was deemed impractical or impossible for this specific procurement action.

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: FIRM FIXED PRICE (J)

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: $136,681,057

Exercised Options: $136,681,057

Current Obligation: $136,681,057

Subaward Activity

Number of Subawards: 16

Total Subaward Amount: $1,543,051

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862516D6458

IDV Type: IDC

Timeline