Air Force awards $28.2M C-130J upgrade to Lockheed Martin, raising questions on competition and value

Contract Overview

Contract Amount: $28,171,779 ($28.2M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2019-06-20

End Date: 2021-09-30

Contract Duration: 833 days

Daily Burn Rate: $33.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: C-130J CAPABILITY MANAGEMENT UPGRADE 1C

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $28.2 million to LOCKHEED MARTIN CORP for work described as: C-130J CAPABILITY MANAGEMENT UPGRADE 1C Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value for a capability upgrade, requiring careful scrutiny of performance and pricing. 3. Lack of competition is a key risk indicator for potential overpayment or suboptimal service delivery. 4. The contract duration of over two years suggests a substantial scope of work. 5. Focus on aircraft manufacturing highlights the critical role of specialized defense contractors. 6. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not managed tightly.

Value Assessment

Rating: questionable

The contract's value of $28.2 million for a capability upgrade warrants close examination, especially given the lack of competitive bidding. Without benchmark data from competing proposals, it is difficult to definitively assess if the pricing is fair. The Cost Plus Fixed Fee (CPFF) contract type, while common for complex defense work, carries inherent risks of cost escalation if the contractor's spending is not rigorously monitored. Comparing this to similar upgrade contracts for legacy aircraft would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Lockheed Martin Corp., was solicited. This approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), the absence of competition here raises concerns about whether the government secured the best possible value and price.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium for this upgrade, as there was no market pressure to offer the lowest possible price. This also limits opportunities for other capable firms to compete for and win government contracts.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating the C-130J Super Hercules aircraft, which will receive enhanced capabilities. The services delivered include upgrades to the C-130J aircraft's systems, improving its operational effectiveness and longevity. The geographic impact is primarily within the Air Force's operational bases, though the upgrades support global mission readiness. Workforce implications include specialized technical roles within Lockheed Martin and potentially at Air Force maintenance depots involved in the integration and testing of the upgrades.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially leads to higher costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize cost overruns if not managed with stringent oversight.
Lack of transparency in the procurement process due to sole-source nature.
Potential for vendor lock-in with a single provider for critical aircraft upgrades.

Positive Signals

Award to a prime contractor with extensive experience in C-130J aircraft manufacturing and support.
Focus on capability upgrades aims to enhance the operational effectiveness of a critical military asset.
Contract duration suggests a comprehensive approach to the upgrade process.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product life cycles. Aircraft manufacturing, a sub-sector, is dominated by a few large, established players like Lockheed Martin. This contract for a C-130J capability upgrade fits within the broader defense industrial base, focusing on maintaining and enhancing the performance of a key tactical airlift platform. Spending on aircraft upgrades is a significant portion of the defense budget, aimed at extending the service life of existing fleets and incorporating new technologies.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information indicating significant subcontracting opportunities for small businesses. The award to Lockheed Martin, a large prime contractor, suggests that the primary focus is on the prime's capabilities. Further analysis would be needed to determine if subcontracting plans exist and how they might impact the small business ecosystem within the aerospace and defense sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. The Inspector General of the Department of Defense may also conduct audits or investigations into contract performance and spending, particularly given the sole-source nature and CPFF contract type. Transparency is limited by the lack of a competitive process, but contract performance reports and financial reviews are standard oversight mechanisms.

Related Government Programs

C-130J Super Hercules Sustainment
Tactical Airlift Modernization Programs
Aerospace Systems Manufacturing
Defense Logistics and Support Contracts

Risk Flags

Sole-source procurement
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.2 million to LOCKHEED MARTIN CORP. C-130J CAPABILITY MANAGEMENT UPGRADE 1C

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 $28.2 million.

What is the period of performance?

Start: 2019-06-20. End: 2021-09-30.

What is Lockheed Martin's track record with C-130J upgrades and similar aircraft modernization programs?

Lockheed Martin is the original manufacturer of the C-130J Super Hercules and has a long history of providing sustainment, upgrades, and modifications for this platform, as well as other military aircraft. Their track record includes numerous successful programs involving avionics upgrades, structural enhancements, and mission system integration. However, like many large defense contractors, they have also faced scrutiny over cost performance and schedule adherence on certain complex projects. Specific to C-130J upgrades, their deep institutional knowledge is an advantage, but it also underscores the importance of robust government oversight to ensure competitive pricing and effective execution, especially when sole-source awards are involved.

How does the $28.2 million cost compare to similar C-130J upgrade contracts or industry benchmarks?

Without access to specific details of the 'capability upgrade 1C' and comparable contract data, a precise benchmark is challenging. However, $28.2 million for a significant capability upgrade on a platform like the C-130J is substantial. Typically, upgrades involving avionics, structural reinforcement, or new mission systems can range from several million to tens of millions of dollars per aircraft, depending on complexity. The lack of competition for this specific award makes direct cost comparison difficult. Industry benchmarks for similar modernization efforts on tactical airlift aircraft often focus on cost per flying hour improvements or specific performance metric enhancements. A thorough value assessment would require comparing the scope of work and expected benefits against historical data for similar upgrades, ideally from competitive procurements.

What are the primary risks associated with a sole-source, Cost Plus Fixed Fee contract for aircraft upgrades?

The primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices and reduced incentive for the contractor to be efficient. The government relies heavily on the contractor's cost proposals and internal controls. Secondly, the CPFF structure means the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While the fee is fixed, the total cost is not. This can incentivize the contractor to incur more costs, as their reimbursement increases proportionally, unless stringent oversight and cost controls are in place. Risks include cost overruns, schedule delays, and potentially less innovation compared to a fixed-price, competitive contract.

How effective is the Air Force in managing sole-source contracts to ensure value for money?

The Air Force employs various mechanisms to manage sole-source contracts and ensure value for money, though effectiveness can vary. These include rigorous должны cost and technical analyses of contractor proposals, establishing independent government cost estimates, and implementing robust contract surveillance and oversight. For CPFF contracts, detailed auditing of incurred costs and performance monitoring are critical. However, the inherent limitations of sole-source procurements mean that the government starts from a less advantageous position regarding price discovery. Success often depends on the expertise of contracting officers, the quality of available market research, and the diligence of program managers in overseeing contractor performance and costs throughout the contract lifecycle.

What is the historical spending trend for C-130J sustainment and upgrades within the Department of Defense?

Historical spending on C-130J sustainment and upgrades within the Department of Defense has been substantial, reflecting the platform's critical role in tactical airlift operations. Over the years, the Air Force has allocated significant funds towards maintaining the C-130J fleet, including investments in modernization programs to address obsolescence, enhance capabilities, and extend service life. This includes spending on avionics upgrades, engine improvements, structural repairs, and new mission equipment. Annual spending can fluctuate based on specific program requirements, fleet readiness needs, and budget allocations. Analyzing multi-year trends reveals a consistent need for investment in this vital asset, often involving contracts with the original equipment manufacturer, Lockheed Martin, due to specialized knowledge.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

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: $28,171,779

Exercised Options: $28,171,779

Current Obligation: $28,171,779

Actual Outlays: $8,970

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862515D6591

IDV Type: IDC

Timeline