Air Force awards $41.3M for C-130J aircraft kits, citing sole-source provider

Contract Overview

Contract Amount: $41,268,537 ($41.3M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2019-06-21

End Date: 2022-12-29

Contract Duration: 1,287 days

Daily Burn Rate: $32.1K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: C-130J BLOCK 7.0/8.1 KIT INITIAL INSTALLATION

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $41.3 million to LOCKHEED MARTIN CORP for work described as: C-130J BLOCK 7.0/8.1 KIT INITIAL INSTALLATION Key points: 1. Contract awarded to Lockheed Martin Corp for initial installation of C-130J Block 7.0/8.1 kits. 2. The contract was not competed, raising questions about potential price discovery. 3. Delivery order issued under a larger contract, indicating a phased approach to procurement. 4. The firm-fixed-price contract type aims to control costs for the government. 5. The duration of the contract is over 1000 days, suggesting a significant integration effort. 6. The aircraft manufacturing sector is characterized by high barriers to entry and limited competition for specialized upgrades.

Value Assessment

Rating: fair

The total award of $41.3 million for initial installation of C-130J kits appears to be a significant investment. Without comparable sole-source awards for similar block upgrades, a precise value-for-money assessment is challenging. The firm-fixed-price structure is a positive indicator for cost control, but the lack of competition limits the ability to benchmark pricing against market alternatives. Further analysis would require understanding the specific technical requirements and the sole-source justification.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Lockheed Martin Corp. This suggests that Lockheed Martin is likely the only entity capable of providing these specific C-130J Block 7.0/8.1 kits and their initial installation due to proprietary technology, intellectual property, or existing platform integration. The absence of competition means that the government did not benefit from a bidding process to potentially drive down prices or explore alternative solutions.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the most economical price. This necessitates strong government oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Air Force, which will receive upgraded C-130J aircraft with enhanced capabilities. The services delivered include the initial installation of critical software and hardware upgrades for the C-130J fleet. The geographic impact is likely concentrated at Air Force bases where C-130J aircraft are operated and maintained. Workforce implications may include specialized technicians and engineers required for the installation and integration process.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition for a significant upgrade could result in suboptimal pricing.
Sole-source nature requires robust government negotiation and oversight to ensure fair value.
Dependence on a single contractor for critical upgrades poses a long-term supply chain risk.

Positive Signals

Firm-fixed-price contract provides cost certainty for this phase of the upgrade.
Award to Lockheed Martin, the original equipment manufacturer, ensures compatibility and expertise.
The upgrade addresses specific block requirements (7.0/8.1), indicating a planned modernization effort.

Sector Analysis

The aircraft manufacturing sector is highly specialized, with significant R&D investment and long product lifecycles. Major defense contractors like Lockheed Martin dominate the market for complex military aircraft and their upgrades. This contract fits within the broader defense aerospace market, specifically focusing on sustainment and modernization of existing platforms. Comparable spending benchmarks would typically involve other major aircraft modification programs, which are often sole-sourced due to unique technical requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded directly to Lockheed Martin Corp. There is no explicit information regarding subcontracting plans for small businesses within this specific delivery order. The focus on a large prime contractor for a specialized aircraft upgrade suggests that opportunities for small businesses may be limited to lower-tier supply chain roles, if any.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Given the sole-source nature, rigorous review of technical specifications, cost proposals, and performance metrics is crucial. Transparency is facilitated through contract databases, but detailed justifications for sole-source awards and specific pricing breakdowns may be less publicly accessible. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-130J Super Hercules Sustainment
Air Force Aircraft Modernization Programs
Defense Logistics Agency (DLA) Aircraft Parts Procurement
Tactical Airlift Aircraft Programs

Risk Flags

Sole-source award lacks competitive pricing.
Potential for cost overruns if not managed tightly.
Long-term reliance on a single supplier.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.3 million to LOCKHEED MARTIN CORP. C-130J BLOCK 7.0/8.1 KIT INITIAL INSTALLATION

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 $41.3 million.

What is the period of performance?

Start: 2019-06-21. End: 2022-12-29.

What is the specific technical scope of the C-130J Block 7.0/8.1 kit initial installation, and why is it considered sole-source?

The C-130J Block 7.0/8.1 upgrade typically involves enhancements to the aircraft's mission systems, avionics, and potentially structural components to improve operational capabilities, maintainability, and compliance with future airspace requirements. The sole-source justification likely stems from Lockheed Martin's proprietary control over the C-130J's design, software, and intellectual property. As the original equipment manufacturer (OEM), they possess the unique knowledge, tooling, and certifications necessary for integrating these specific upgrades without requiring extensive reverse engineering or third-party development, which would be cost-prohibitive and time-consuming.

How does the firm-fixed-price contract type mitigate risk for the government in this sole-source scenario?

A firm-fixed-price (FFP) contract establishes a ceiling price that the contractor must not exceed, regardless of the actual costs incurred. In a sole-source situation, where competition is absent, the FFP structure shifts the cost risk to the contractor. This means Lockheed Martin is responsible for managing its expenses to stay within the agreed-upon price. While the government doesn't benefit from competitive bidding, the FFP contract provides a degree of cost certainty and incentivizes the contractor to perform efficiently to maximize their profit margin within the fixed price.

What are the potential long-term implications of relying on a sole-source provider for critical aircraft upgrades?

Relying on a sole-source provider for critical upgrades like the C-130J Block 7.0/8.1 kits can create long-term dependencies and potential risks. These include vulnerability to price increases in future contracts, limited flexibility in adopting alternative technologies, and potential supply chain disruptions if the sole provider faces financial or operational challenges. It also reduces the government's leverage in negotiations for future upgrades or sustainment, as the contractor knows they are the only viable option. This underscores the importance of robust long-term strategic planning and contract management by the procuring agency.

Can the government benchmark the pricing of this sole-source award against any comparable contracts or market data?

Benchmarking the pricing of this sole-source award is challenging due to the lack of competitive bids. The government may attempt to benchmark against historical pricing for similar C-130J upgrades, if available, or against pricing for upgrades on comparable military aircraft platforms. However, the unique nature of the Block 7.0/8.1 kits and the specific scope of 'initial installation' may limit the direct comparability of such data. Internal cost analyses and negotiation strategies based on contractor's cost structure might be employed, but external market validation is inherently difficult without competition.

What is Lockheed Martin's track record with C-130J upgrades and modifications?

Lockheed Martin has an extensive and well-established track record as the prime contractor and manufacturer of the C-130J Super Hercules aircraft. They have been responsible for the initial production, subsequent upgrades, and sustainment of the global C-130J fleet. Their experience encompasses a wide range of modifications, avionics updates, and performance enhancements across various C-130J variants. This deep institutional knowledge and direct involvement with the platform's evolution position them as the natural and often sole provider for complex, integrated upgrades like the Block 7.0/8.1 kits.

Industry Classification

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

Product/Service Code: INSTALLATION OF EQUIPMENT › INSTALLATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: FA862519R7033

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: $41,268,537

Exercised Options: $41,268,537

Current Obligation: $41,268,537

Actual Outlays: $1,899,133

Subaward Activity

Number of Subawards: 2

Total Subaward Amount: $31,260

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