DoD awards $127M sole-source contract for C-130J readiness spares, raising value-for-money questions

Contract Overview

Contract Amount: $126,966,179 ($127.0M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2023-07-31

End Date: 2028-07-31

Contract Duration: 1,827 days

Daily Burn Rate: $69.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: C-130J FIVE YEAR ORDERING CONTRACT FOR PEACETIME OPERATING STOCK AND READINESS SPARES PACKAGES

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $127.0 million to LOCKHEED MARTIN CORP for work described as: C-130J FIVE YEAR ORDERING CONTRACT FOR PEACETIME OPERATING STOCK AND READINESS SPARES PACKAGES Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Focus on peacetime operating stock and readiness spares suggests critical sustainment need. 3. Long-term ordering contract (5 years) provides predictable demand for the contractor. 4. Firm Fixed Price contract type shifts cost risk to the government. 5. No small business set-aside indicates potential exclusion of smaller suppliers. 6. High value suggests significant operational reliance on the C-130J fleet.

Value Assessment

Rating: questionable

The $127 million value over five years for C-130J spares is substantial. Without competitive bidding, it's difficult to benchmark the pricing against market rates or alternative suppliers. The firm-fixed-price structure, while common, means the government bears the risk of cost overruns if the contractor's internal costs increase. A sole-source award necessitates a strong justification for value, which is not immediately apparent from the provided data.

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 significantly limits competition and price discovery. The lack of a competitive process raises concerns about whether the government secured the best possible pricing and terms. Justification for sole-source awards typically involves unique capabilities or lack of alternatives, which would need further investigation.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as competition is absent, potentially resulting in less favorable pricing than could be achieved through an open bidding process.

Public Impact

The U.S. Air Force benefits from sustained readiness of its C-130J Super Hercules aircraft. Services delivered include the provision of critical spare parts for peacetime operations. Geographic impact is national, supporting Air Force bases and operations worldwide. Workforce implications include maintaining skilled personnel for C-130J maintenance and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Firm-fixed-price contract places cost overrun risk on the government.
Lack of small business participation may limit supply chain diversity.

Positive Signals

Long-term ordering contract provides supply chain stability for critical spares.
Focus on readiness spares directly supports operational capability.
Firm-fixed-price contract provides cost certainty if contractor's costs remain stable.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product lifecycles, and significant government procurement. Sustainment and readiness spares are a critical, ongoing component of defense spending. This contract fits within the broader category of aircraft manufacturing and support services, where original equipment manufacturers often hold dominant positions for specialized parts due to proprietary designs and technical expertise. Comparable spending benchmarks for aircraft spares can vary widely based on aircraft type and age.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there an indication of subcontracting goals for small businesses. This suggests that the primary awardee, Lockheed Martin Corp., will likely fulfill the requirements directly or through its existing supply chain, potentially excluding smaller businesses from direct participation in this specific contract. The impact on the small business ecosystem is neutral to negative if opportunities were foregone.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Air Force's contracting and program management offices. Accountability measures are typically embedded in the contract terms and conditions, including delivery schedules and quality standards. Transparency is limited due to the sole-source nature, but contract award data is publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

C-130J Super Hercules Aircraft Program
Air Force Logistics and Sustainment Contracts
Defense Readiness Spares Programs
Aircraft Parts Manufacturing Contracts

Risk Flags

Sole-source award
Lack of competition
Firm-fixed-price risk to government
Potential for uncompetitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $127.0 million to LOCKHEED MARTIN CORP. C-130J FIVE YEAR ORDERING CONTRACT FOR PEACETIME OPERATING STOCK AND READINESS SPARES PACKAGES

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 $127.0 million.

What is the period of performance?

Start: 2023-07-31. End: 2028-07-31.

What is the specific justification provided by the Department of the Air Force for awarding this contract on a sole-source basis to Lockheed Martin Corp.?

Sole-source awards are typically justified when only one responsible source is capable of providing the required supplies or services. For aircraft spares, this often stems from proprietary designs, unique manufacturing processes, or the original equipment manufacturer's exclusive rights to produce specific components. The Department of the Air Force would need to document that a full and open competition was not feasible or would not be in the best interest of the government. This justification is crucial for understanding why alternative suppliers or competitive pricing were not pursued, and it is usually available through sources like the Federal Business Opportunities (SAM.gov) notice for sole-source procurements, often citing specific FAR (Federal Acquisition Regulation) clauses.

How does the pricing structure of this firm-fixed-price contract compare to historical spending on C-130J spares or similar aircraft readiness programs?

Benchmarking the pricing of this firm-fixed-price contract requires access to historical spending data for C-130J spares and comparable aircraft readiness programs. Without specific unit costs or detailed line-item pricing, a direct comparison is challenging. However, the total value of $127 million over five years suggests a significant annual expenditure. If historical data indicates a trend of increasing prices for similar spares or if this contract's per-unit costs (once available) exceed previous benchmarks or industry averages for comparable aircraft, it could indicate a potential value-for-money concern, especially given the sole-source nature of the award. Analysis would involve comparing escalation rates and the scope of included parts against prior contracts.

What are the potential risks associated with a sole-source, firm-fixed-price contract for critical aircraft spares?

A sole-source, firm-fixed-price contract for critical aircraft spares presents several risks. Firstly, the lack of competition means the government may not achieve the lowest possible price, as the contractor faces no direct pressure from rivals. Secondly, the firm-fixed-price structure shifts the risk of cost increases to the government; if Lockheed Martin's manufacturing or material costs rise, the government pays the agreed-upon price without adjustment for those increases, potentially leading to higher overall expenditure than anticipated. Thirdly, reliance on a single supplier can create vulnerabilities in the supply chain, especially if the contractor experiences production issues or delays. Finally, without competitive pressure, there may be less incentive for the contractor to innovate or improve efficiency in delivering these critical spares.

What is the expected impact of this contract on the operational readiness and sustainment of the C-130J fleet?

This contract is specifically designed to ensure the operational readiness and sustainment of the C-130J Super Hercules fleet by providing a steady supply of peacetime operating stock and readiness spares. By establishing a five-year ordering contract, the Department of the Air Force aims to guarantee the availability of essential components needed for routine maintenance, unscheduled repairs, and overall fleet health. This proactive approach helps mitigate the risk of mission delays or cancellations due to parts shortages, thereby directly supporting the Air Force's ability to deploy and operate the C-130J aircraft effectively for its diverse global missions. The long-term nature of the contract suggests a commitment to maintaining the C-130J's operational capability throughout its service life.

Are there any performance metrics or oversight mechanisms in place to ensure the quality and timeliness of spare parts delivery under this contract?

While the provided data does not detail specific performance metrics, government contracts, especially for critical defense items like aircraft spares, typically include stringent performance requirements. These often involve clauses related to delivery schedules, quality assurance (e.g., adherence to specifications, defect rates), and contractor responsiveness. Oversight would likely be managed by contracting officers and technical representatives within the Air Force, who monitor contractor performance against contract terms. Mechanisms may include periodic reviews, acceptance testing of delivered parts, and potential penalties for non-performance or late deliveries. The firm-fixed-price nature implies that meeting delivery and quality standards is a condition of payment.

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: $126,966,179

Exercised Options: $126,966,179

Current Obligation: $126,966,179

Subaward Activity

Number of Subawards: 240

Total Subaward Amount: $83,320,143

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