DoD awards $263M to Lockheed Martin for C-130J aircraft retrofits, a sole-source contract

Contract Overview

Contract Amount: $262,962,904 ($263.0M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2019-11-25

End Date: 2026-07-15

Contract Duration: 2,424 days

Daily Burn Rate: $108.5K/day

Competition Type: NOT COMPETED

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: C-130J, BLOCK UPGRADE 7.0/8.1 RETROFIT LOTS 3,4,5

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $263.0 million to LOCKHEED MARTIN CORP for work described as: C-130J, BLOCK UPGRADE 7.0/8.1 RETROFIT LOTS 3,4,5 Key points: 1. Contract awarded to incumbent for critical aircraft upgrades. 2. Sole-source award raises questions about price competition. 3. Long-term contract duration suggests ongoing sustainment needs. 4. Fixed-price incentive contract aims to balance cost and performance. 5. Retrofit program addresses modernization of a key military transport aircraft. 6. Potential for cost overruns exists given the incentive structure.

Value Assessment

Rating: fair

The contract value of $263 million for C-130J Block Upgrade 7.0/8.1 retrofits appears substantial. Benchmarking against similar aircraft modernization programs is difficult without more specific details on the scope of work. However, given the sole-source nature, there is a risk that the pricing may not reflect competitive market rates. The fixed-price incentive (FPI) structure suggests an attempt to control costs, but the incentive element could also lead to higher final prices if performance targets are exceeded.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. Lockheed Martin, as the original equipment manufacturer and likely the sole entity with the necessary technical data and expertise for these specific upgrades, was the only viable option. This lack of competition limits the government's ability to solicit bids from multiple vendors and potentially secure a lower price through a competitive bidding process.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the best possible price for these critical aircraft retrofits. Without competing offers, the government has less leverage to negotiate favorable terms and ensure cost-effectiveness.

Public Impact

The U.S. Air Force benefits from modernized C-130J aircraft, enhancing their tactical airlift capabilities. Services delivered include retrofitting existing C-130J aircraft with Block Upgrade 7.0/8.1 software and hardware. The geographic impact is primarily on Air Force bases where C-130J aircraft are stationed. Workforce implications include skilled technicians and engineers at Lockheed Martin and potentially supporting subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (2019-2026) increases exposure to potential cost growth over time.
Fixed-price incentive contract can lead to higher final costs if performance targets are met or exceeded.

Positive Signals

Award to incumbent ensures continuity and leverages existing expertise for complex upgrades.
Retrofit program addresses critical modernization needs for a vital military asset.
Fixed-price incentive contract structure aims to align contractor and government interests on performance and cost.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft modification and sustainment. The C-130J Super Hercules is a key tactical airlifter for numerous global air forces. Spending on aircraft upgrades and retrofits is a significant component of defense budgets, aimed at extending the service life and enhancing the capabilities of aging fleets. Comparable spending benchmarks would involve other major aircraft modernization programs, which often run into hundreds of millions or billions of dollars.

Small Business Impact

The data indicates that small business participation was not a primary consideration for this specific contract, as the 'sb' field is false. There is no indication of a small business set-aside. Subcontracting opportunities for small businesses may exist within the broader scope of Lockheed Martin's operations, but this contract itself does not appear to be structured to directly benefit small businesses through set-asides.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Air Force's contracting and program management offices. Accountability measures are embedded in the fixed-price incentive contract type, which links payment to performance and cost targets. Transparency may be limited due to the sole-source nature of the award. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

C-130J Super Hercules Sustainment
Tactical Airlift Modernization Programs
Aircraft Systems Integration
Aerospace Manufacturing Contracts
Department of Defense Aircraft Procurement

Risk Flags

Sole-source award limits price competition.
Potential for cost growth due to FPI contract structure.
Long contract duration increases risk exposure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $263.0 million to LOCKHEED MARTIN CORP. C-130J, BLOCK UPGRADE 7.0/8.1 RETROFIT LOTS 3,4,5

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 $263.0 million.

What is the period of performance?

Start: 2019-11-25. End: 2026-07-15.

What is the specific scope of work included in the C-130J Block Upgrade 7.0/8.1 retrofits?

The Block Upgrade 7.0/8.1 retrofits for the C-130J Super Hercules involve significant software and hardware enhancements designed to modernize the aircraft's avionics, mission systems, and operational capabilities. While specific details are often proprietary, these upgrades typically include improvements to navigation systems, communication suites, electronic warfare capabilities, and potentially enhancements to the aircraft's performance and maintainability. The goal is to ensure the C-130J fleet remains operationally relevant and capable of meeting evolving mission requirements for years to come. The contract's fixed-price incentive structure suggests that the government is incentivizing the contractor to achieve specific performance milestones within defined cost parameters.

Why was this contract awarded on a sole-source basis instead of through full and open competition?

Sole-source awards are typically justified when only one responsible source is capable of providing the required supplies or services. In the case of complex aircraft systems like the C-130J, the original equipment manufacturer (OEM), Lockheed Martin, often possesses unique technical data, intellectual property, and specialized knowledge essential for modifications and upgrades. For the Block Upgrade 7.0/8.1, it's likely that Lockheed Martin is the only entity with the necessary engineering expertise, proprietary software access, and approved modification processes. Competitively bidding such a specialized upgrade would be impractical or impossible, as other potential bidders would lack the foundational knowledge and access required to propose a viable solution.

How does the Fixed Price Incentive (FPI) contract type aim to manage costs and performance for this program?

A Fixed Price Incentive (FPI) contract establishes a target cost, a target profit, and a price ceiling. The final contract price is determined by the contractor's actual costs, with the government and contractor sharing the variances between the target cost and the final cost above or below the target, up to the price ceiling. For this C-130J retrofit program, the FPI structure incentivizes Lockheed Martin to control costs while achieving the specified upgrade performance objectives. If the contractor completes the retrofits under the target cost and meets performance targets, both parties benefit. However, if costs exceed the target, the contractor bears a larger share of the overrun until the price ceiling is reached, providing a mechanism to limit the government's financial exposure while encouraging efficient performance.

What are the potential risks associated with a sole-source contract of this magnitude?

The primary risk associated with a sole-source contract of this magnitude ($263 million) is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the most cost-effective solution. There's also a risk of complacency from the sole provider, potentially leading to less focus on efficiency or innovation compared to a competitive environment. Furthermore, the long duration of the contract increases the exposure to potential cost overruns or scope creep if not managed diligently. Dependence on a single supplier can also create supply chain risks if that supplier faces financial or operational difficulties.

What is the historical spending trend for C-130J upgrades or sustainment with Lockheed Martin?

Analyzing historical spending trends for C-130J upgrades and sustainment with Lockheed Martin requires access to detailed contract databases and historical procurement data. However, it is generally understood that major aircraft platforms like the C-130J require continuous investment in upgrades, modifications, and sustainment throughout their service life. These investments often span multiple years and can amount to hundreds of millions or even billions of dollars cumulatively. The current contract for Block Upgrade 7.0/8.1 retrofits represents a significant, but likely typical, investment in modernizing this specific capability. Past contracts would likely show similar patterns of sole-source or limited competition awards for unique modifications, reflecting the specialized nature of aerospace manufacturing and sustainment.

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: $639,667,095

Exercised Options: $262,962,907

Current Obligation: $262,962,904

Actual Outlays: $1,512,082

Subaward Activity

Number of Subawards: 314

Total Subaward Amount: $123,233,586

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