DoD's $36.7M Communications Modernization contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $36,669,187 ($36.7M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2022-03-11

End Date: 2026-04-30

Contract Duration: 1,511 days

Daily Burn Rate: $24.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: COMMUNICATIONS MODERNIZATION PHASE I

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $36.7 million to LOCKHEED MARTIN CORP for work described as: COMMUNICATIONS MODERNIZATION PHASE I Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, which can lead to cost overruns if not managed carefully. 2. Lack of competition raises concerns about potential overpayment and suboptimal pricing. 3. The contract duration of over 4 years suggests a significant, long-term investment in communications infrastructure. 4. Awarded by the Department of the Air Force, indicating a focus on enhancing military communication capabilities. 5. The North American Industry Classification System (NAICS) code 336411 points to aircraft manufacturing, which may be indirectly related to communications systems integration. 6. The contract's value, while substantial, needs to be benchmarked against similar modernization efforts to assess value for money.

Value Assessment

Rating: questionable

The contract's cost-plus-incentive-fee structure necessitates close monitoring to ensure costs remain reasonable and aligned with performance objectives. Without competitive benchmarking, it is difficult to definitively assess if the pricing reflects fair market value. The absence of competition means there's no direct market comparison to gauge efficiency. However, the significant duration and scope suggest a complex undertaking where cost control will be paramount.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities or when urgency dictates a direct award. The lack of competition limits the government's ability to leverage market forces to drive down costs and ensure the best possible value.

Taxpayer Impact: Taxpayers may be exposed to higher costs due to the absence of competitive pressure. Without bids from multiple companies, the government cannot be certain it is receiving the most cost-effective solution available.

Public Impact

The primary beneficiary is the Department of the Air Force, which will receive modernized communication systems. This contract aims to improve the reliability, security, and efficiency of military communications. The geographic impact is likely focused on Air Force installations and operational areas requiring advanced communication networks. Workforce implications may include specialized technical roles for installation, maintenance, and operation of the new systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs.
Cost-plus-incentive-fee contracts require rigorous oversight to prevent cost overruns.
The sole-source nature limits transparency in pricing and value assessment.
Potential for vendor lock-in due to specialized nature of modernized systems.

Positive Signals

Award to a major defense contractor (Lockheed Martin) suggests established capabilities.
Modernization of communications is critical for national security and operational effectiveness.
The incentive fee structure, if well-defined, can align contractor and government interests towards successful outcomes.

Sector Analysis

The defense sector is characterized by long-term, high-value contracts for complex systems. Communications modernization is a critical component of maintaining technological superiority and operational readiness. Spending in this area often involves significant R&D and integration efforts. Comparable spending benchmarks would typically involve other large-scale defense communication system upgrades, which are often sole-sourced or limited competition due to specialized requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information indicating subcontracting opportunities for small businesses. The award to a large prime contractor like Lockheed Martin suggests that the primary focus is on the prime's capabilities, potentially limiting direct opportunities for small businesses unless they are part of the prime's supply chain.

Oversight & Accountability

Oversight will be crucial given the cost-plus-incentive-fee structure and sole-source award. The Department of the Air Force will need robust program management and financial oversight to ensure costs are controlled and performance targets are met. Transparency will depend on the reporting requirements stipulated in the contract and the agency's commitment to making relevant information public. Inspector General involvement would be triggered by any allegations of fraud, waste, or abuse.

Related Government Programs

Air Force Command and Control Systems
Defense Communications Infrastructure
Military Network Modernization Programs
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Cost-plus-incentive-fee contract type
Lack of competitive benchmarking
Potential for cost overruns without strict oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.7 million to LOCKHEED MARTIN CORP. COMMUNICATIONS MODERNIZATION PHASE I

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 $36.7 million.

What is the period of performance?

Start: 2022-03-11. End: 2026-04-30.

What is Lockheed Martin's track record with similar sole-source communications modernization contracts for the Department of Defense?

Lockheed Martin has a long history of performing large-scale defense contracts, including those involving complex systems integration and modernization for various branches of the U.S. military. While specific data on sole-source communications modernization contracts is not readily available in this context, the company's extensive experience in areas like C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) suggests a strong capability. However, the success and value derived from sole-source awards are inherently harder to assess externally compared to competed contracts, as they lack direct market validation. A deeper dive into historical performance metrics, cost variances, and program delivery timelines for similar Lockheed Martin contracts would be necessary for a comprehensive assessment.

How does the $36.7 million contract value compare to similar communications modernization efforts within the DoD or other federal agencies?

Benchmarking this $36.7 million contract requires identifying comparable projects in terms of scope, technology, and duration. Communications modernization can range widely in cost depending on the specific systems being upgraded (e.g., satellite, terrestrial, tactical radios), the scale of deployment (e.g., global, regional, base-specific), and the level of technological advancement. Without more specific details on the 'COMMUNICATIONS MODERNIZATION PHASE I' objectives, direct comparisons are challenging. However, large-scale defense communication system upgrades often run into hundreds of millions or even billions of dollars. This $36.7 million figure might represent a specific phase or a more localized upgrade, making it appear moderate in the context of major defense programs. A thorough analysis would involve comparing it to other awarded phases of this program or similar modernization efforts by different services.

What are the primary risks associated with a sole-source, cost-plus-incentive-fee contract for communications modernization?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature means the government did not benefit from competitive bidding, potentially leading to a higher price than could have been achieved in a competed environment. There's a reduced incentive for the contractor to aggressively control costs if the government is obligated to cover them, plus a profit margin. Secondly, the cost-plus-incentive-fee (CPIF) structure, while designed to motivate performance, carries inherent risks. If the cost targets and incentive metrics are not meticulously defined and monitored, the contractor might prioritize achieving incentives over genuine cost efficiency, or the government could end up paying significantly more than initially anticipated. Robust oversight and clear performance metrics are essential to mitigate these risks.

What is the expected program effectiveness and impact on the Air Force's operational capabilities?

The expected effectiveness of this communications modernization program is to enhance the Department of the Air Force's operational capabilities through improved communication systems. This typically translates to increased reliability, enhanced security, greater bandwidth, and potentially reduced latency in data transmission. Modernized systems are crucial for effective command and control, intelligence sharing, and coordinating complex military operations across various domains. The specific impact will depend on the technologies implemented and how well they integrate with existing infrastructure and operational workflows. Successful modernization should lead to more resilient and responsive communication networks, ultimately supporting mission success in diverse operational environments.

How has federal spending on communications modernization for the Department of Defense evolved over the past five years, and where does this contract fit?

Federal spending on communications modernization within the Department of Defense (DoD) has been substantial and generally increasing over the past five years, driven by the need to counter evolving threats, adopt new technologies (like 5G, AI, and cloud computing), and replace aging infrastructure. The DoD consistently allocates significant portions of its budget to C4ISR and related modernization efforts. This $36.7 million contract, 'COMMUNICATIONS MODERNIZATION PHASE I,' represents a specific investment within this broader trend. While it may seem modest in the context of the DoD's overall IT and communications budget, it signifies a targeted effort likely focused on a particular capability or phase of a larger modernization initiative. Understanding its place requires examining the total lifecycle cost of the program it belongs to and comparing it to other concurrent modernization projects across the Air Force and other services.

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

Solicitation ID: FA862922R3051

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $38,418,869

Exercised Options: $38,418,869

Current Obligation: $36,669,187

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $3,912,046

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862520D3000

IDV Type: IDC

Timeline