DoD's $50.5M contract for aircraft parts awarded to Lockheed Martin raises questions about competition and value

Contract Overview

Contract Amount: $50,539,720 ($50.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2004-04-14

End Date: 2012-12-31

Contract Duration: 3,183 days

Daily Burn Rate: $15.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: TIME AND MATERIALS

Sector: Defense

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $50.5 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's value of over $50 million for aircraft parts suggests a significant investment in defense logistics. 2. Awarded to a single, large defense contractor, the lack of competition may limit price discovery and potentially increase costs. 3. The 'Other Aircraft Parts' NAICS code indicates a broad category, making specific performance benchmarks challenging without further detail. 4. The contract duration of over 8 years (3183 days) suggests a long-term need for these parts, impacting sustained spending. 5. The use of a 'Time and Materials' contract type can introduce cost uncertainty if not closely managed. 6. The absence of small business involvement raises concerns about broader economic impact and set-aside utilization.

Value Assessment

Rating: questionable

Benchmarking the value of this $50.5 million contract is difficult without specific details on the aircraft parts procured and their market rates. However, the 'Time and Materials' pricing structure, coupled with a lack of competition, suggests a higher risk of inflated costs compared to fixed-price contracts or those with multiple bidders. The long duration of the contract also means that any inefficiencies or overpricing could accumulate significantly over time. Without comparable contract data for similar aircraft parts, it's hard to definitively assess value for money, but the conditions point towards potential overspending.

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. This approach is typically used when only one source is capable of meeting the requirement, often due to proprietary technology, unique capabilities, or urgent needs. The lack of multiple bidders means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This can lead to higher prices and potentially less favorable terms for the government.

Taxpayer Impact: Sole-source awards mean taxpayers may be paying a premium, as the absence of competition removes a key mechanism for driving down costs and ensuring the best possible price.

Public Impact

The primary beneficiaries are the Department of Defense and its aviation units, ensuring the availability of critical aircraft parts. The contract supports the maintenance and operational readiness of military aircraft fleets. The geographic impact is primarily within Florida, where the contractor is located, potentially supporting local jobs and the regional economy. The contract likely sustains employment within Lockheed Martin's facilities, particularly in specialized manufacturing and logistics roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Time and Materials contract type can lead to cost overruns if not managed tightly.
Long contract duration increases the risk of sustained overpricing.
Absence of small business participation limits economic opportunities for smaller firms.

Positive Signals

Ensures critical aircraft parts are supplied to the Department of Defense.
Awarded to a major defense contractor with a track record in aerospace.
Contract duration suggests a stable, long-term supply chain for essential components.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts. The market for defense aerospace components is characterized by high barriers to entry, significant R&D investment, and a concentrated customer base, primarily government agencies. Spending in this area is driven by military readiness requirements and modernization programs. Comparable spending benchmarks would typically involve other large-scale contracts for aircraft components awarded by the DoD or allied nations, often to major prime contractors.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor is a large corporation, suggesting limited direct subcontracting opportunities for small businesses unless specifically mandated or pursued by the prime. The absence of small business involvement in this significant contract means missed opportunities to foster growth and innovation within the small business defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would include performance reviews, audits, and compliance checks related to the 'Time and Materials' pricing structure. Transparency is often limited in sole-source defense contracts, but reporting requirements on expenditures and performance metrics should exist. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Aircraft Procurement
Defense Logistics Agency Support Contracts
Aerospace Component Manufacturing
Military Aircraft Maintenance and Repair

Risk Flags

Sole-source award
Time and Materials contract type
Lack of small business participation
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.5 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $50.5 million.

What is the period of performance?

Start: 2004-04-14. End: 2012-12-31.

What is Lockheed Martin's track record with similar 'Other Aircraft Parts' contracts awarded by the DoD?

Assessing Lockheed Martin's specific track record for 'Other Aircraft Parts' (NAICS 336413) requires a deep dive into historical contract data. Generally, Lockheed Martin is a major defense contractor with extensive experience in aircraft manufacturing and support. However, contracts under this broad NAICS code can vary widely in scope. Without specific contract numbers or descriptions, it's difficult to pinpoint comparable awards. It's important to review past performance evaluations, any incurred cost overruns, or disputes related to similar sole-source or time-and-materials contracts to gauge their reliability and cost-control effectiveness in this specific product category.

How does the $50.5 million value compare to industry benchmarks for similar aircraft parts?

Directly comparing the $50.5 million value to industry benchmarks for 'Other Aircraft Parts' is challenging due to the broadness of NAICS code 336413 and the sole-source nature of this award. Typical benchmarks are derived from competitive procurements where market forces establish pricing. For sole-source, time-and-materials contracts, the government relies heavily on cost analysis and negotiation. If comparable parts were procured competitively, one might expect prices to be lower. However, if these parts are highly specialized, proprietary, or critical for unique platforms, the cost could be justified. Further analysis would require detailed specifications of the parts and their intended use.

What are the primary risks associated with a sole-source, Time and Materials contract of this magnitude and duration?

The primary risks associated with this sole-source, Time and Materials (T&M) contract are significant. Sole-sourcing eliminates competitive pressure, potentially leading to higher prices and reduced incentive for the contractor to optimize costs. The T&M structure, while offering flexibility, carries inherent risks of cost escalation if labor hours and material costs are not rigorously monitored and controlled by the government. Given the contract's substantial value ($50.5M) and long duration (over 8 years), there's a considerable risk of cost overruns and 'scope creep.' Effective government oversight, detailed cost tracking, and strong negotiation skills are crucial to mitigate these risks and ensure value for taxpayer money.

What is the expected program effectiveness and impact on military readiness given this contract?

The expected program effectiveness hinges on the timely delivery of the correct aircraft parts to maintain and repair military aircraft. If the contract successfully ensures the availability of these components, it directly contributes to the operational readiness of the Air Force, Navy, or other branches relying on these parts. This supports sustained flight operations, training missions, and deployment capabilities. The effectiveness is directly tied to the contractor's performance in meeting delivery schedules and quality standards. A failure in supply could lead to aircraft downtime, impacting readiness and potentially mission success.

How does historical spending on 'Other Aircraft Parts' by the DoD compare to this contract's value?

Historical spending by the Department of Defense on 'Other Aircraft Parts' (NAICS 336413) is substantial, reflecting the vastness of the U.S. military's aviation inventory. Annual spending in this category often runs into billions of dollars across various contracts and contractors. A single contract of $50.5 million, while significant, represents a fraction of the total DoD expenditure in this sector. To provide a precise comparison, one would need to analyze aggregate spending data for NAICS 336413 over several fiscal years and identify the proportion awarded through sole-source, T&M contracts versus competitive, fixed-price awards to understand trends and potential outliers.

What are the implications of awarding this contract to Lockheed Martin, a major defense prime, versus a smaller, specialized supplier?

Awarding this contract to Lockheed Martin, a major defense prime, implies leveraging their established infrastructure, extensive experience, and existing relationship with the DoD. This can ensure reliability and potentially faster integration into existing supply chains. However, it also means foregoing opportunities to engage smaller, specialized suppliers who might offer more competitive pricing, niche expertise, or foster innovation within the broader defense industrial base. The decision reflects a strategic choice, likely prioritizing established capability and scale over potentially lower costs or broader economic impact from smaller firms.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: TIME AND MATERIALS (Y)

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 12506 LAKE UNDERHILL ROAD, ORLANDO, FL, 32825

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline