DoD's $13.46M R&D contract with Lockheed Martin shows fair value, but limited competition raises concerns

Contract Overview

Contract Amount: $13,460,709 ($13.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2006-05-03

End Date: 2010-09-03

Contract Duration: 1,584 days

Daily Burn Rate: $8.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: CHERRY HILL, CAMDEN County, NEW JERSEY, 08002

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $13.5 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract value appears reasonable given the R&D nature and contractor's expertise. 2. Full and open competition was utilized, but only 5 bids were received, suggesting potential for improved price discovery. 3. Risk indicators are moderate, with a focus on R&D which inherently carries uncertainty. 4. Performance context is within the defense sector, a high-spending area with complex requirements. 5. This contract fits within the broader defense R&D spending landscape.

Value Assessment

Rating: good

The contract's value of $13.46 million for research and development appears to be within a reasonable range for specialized defense projects. Benchmarking against similar R&D contracts is challenging due to the unique nature of such work, but the fixed-fee structure provides some cost control. The contractor, Lockheed Martin, is a major defense entity with a proven track record, suggesting a level of expected performance and value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is a positive sign for taxpayer value. However, receiving only 5 bids suggests that the market for this specific R&D requirement may be limited or that the barriers to entry were high. While competition was present, the relatively low number of bidders could indicate that the government did not achieve the broadest possible price discovery.

Taxpayer Impact: While full and open competition is ideal, the limited number of bidders means taxpayers may not have benefited from the most aggressive pricing possible. Further competition could have potentially driven down costs.

Public Impact

The primary beneficiaries are the Department of Defense, which receives advanced research and development capabilities. The services delivered are likely related to technological advancements in defense systems. The geographic impact is primarily within New Jersey, where the contractor is located. Workforce implications include employment for highly skilled engineers and scientists at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited number of bidders may indicate a less competitive market for this specific R&D niche.
Cost Plus Fixed Fee contracts can sometimes incentivize cost overruns if not closely monitored.

Positive Signals

Awarded under full and open competition, maximizing potential bidder pool.
Contractor is a reputable and experienced defense industry leader.
Contract duration of over 4 years suggests a significant and potentially valuable R&D effort.

Sector Analysis

The defense sector is characterized by significant government investment in research and development to maintain technological superiority. This contract falls within the R&D sub-sector, which often involves high-risk, high-reward projects. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of defense R&D, but the overall defense R&D budget runs into billions annually.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. The primary contractor is a large corporation, indicating that the focus of this award was on specialized capabilities rather than small business participation.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and performance standards. Accountability measures are embedded in the Cost Plus Fixed Fee structure, requiring justification for costs incurred. Transparency is generally limited for defense R&D contracts due to national security considerations.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Lockheed Martin Defense Contracts

Risk Flags

Limited competition despite full and open award.
Potential for cost overruns in CPFF R&D contracts.
Contractor's market dominance in defense R&D.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.5 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 $13.5 million.

What is the period of performance?

Start: 2006-05-03. End: 2010-09-03.

What is Lockheed Martin's track record with similar Cost Plus Fixed Fee R&D contracts with the Department of Defense?

Lockheed Martin has a long and extensive history of performing Cost Plus Fixed Fee (CPFF) Research and Development (R&D) contracts with the Department of Defense. As one of the largest defense contractors globally, they are a primary recipient of such awards across various defense platforms and technologies. Their track record generally indicates a capacity to manage complex R&D projects, though like any large contractor, specific contract performance can vary. CPFF contracts require rigorous oversight to ensure costs are reasonable and allocable to the contract, and the government's ability to manage these aspects effectively is crucial for value. Historical data would need to be analyzed on a contract-by-contract basis to assess specific performance metrics, cost variances, and adherence to schedule for Lockheed Martin's CPFF R&D portfolio.

How does the $13.46 million contract value compare to other R&D contracts of similar scope and duration?

Comparing the $13.46 million value of this contract to other R&D contracts requires careful consideration of several factors, including the specific technological domain, the duration of the research, the complexity of the objectives, and the contractor's overhead rates. This contract, awarded in 2006 and ending in 2010, spanned approximately four years. For R&D of this nature within the defense sector, a value of roughly $3-4 million per year is not uncommon, especially for specialized research requiring highly skilled personnel and advanced facilities. However, without knowing the precise nature of the R&D (e.g., fundamental research vs. applied research, specific system development), a definitive benchmark is difficult. Broader defense R&D spending often involves much larger sums for major system development, but smaller, focused R&D efforts can fall within this range.

What are the primary risks associated with this Cost Plus Fixed Fee contract type for R&D?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract, particularly for Research and Development (R&D), revolve around cost control and contractor incentives. For the government, the risk is that the contractor may not be sufficiently incentivized to control costs, as the government ultimately reimburses allowable costs. This can lead to cost overruns if not managed diligently. The 'fixed fee' component is intended to provide the contractor with a profit incentive, but it's fixed regardless of the final cost, meaning the contractor's profit margin shrinks as costs increase. For R&D, which is inherently uncertain, estimating costs accurately is challenging. This can lead to disputes over allowable costs or pressure to complete the research within budget, potentially compromising the scope or quality of the R&D outcomes. Effective government oversight is critical to mitigate these risks.

What does the limited number of bidders (5) for a full and open competition suggest about the market for this specific R&D requirement?

A limited number of bidders (5) responding to a 'full and open' competition for a specialized R&D requirement suggests several possibilities about the market. Firstly, it could indicate that the specific technical expertise or facilities required are possessed by only a few entities, making the market inherently concentrated. Secondly, the barriers to entry for this particular R&D might be high, involving significant upfront investment in technology, personnel, or security clearances. Thirdly, the contract's scope or specifications might have been narrowly defined, inadvertently excluding potential competitors. Lastly, it's possible that the perceived profitability or risk profile of the contract did not attract a wider range of bidders. Regardless of the reason, a lower number of bids generally implies less robust price competition and potentially less opportunity for the government to secure the best possible value.

How has federal spending in the 'Research and Development in the Physical, Engineering, and Life Sciences' (NAICS 541710) sector evolved since this contract was awarded?

Federal spending in the 'Research and Development in the Physical, Engineering, and Life Sciences' sector (NAICS 541710) has generally seen an upward trend since this contract was awarded in 2006, although with fluctuations. The Department of Defense is consistently one of the largest federal funders of R&D within this category. Factors influencing spending include national security priorities, technological advancements, and overall economic conditions. For instance, periods of increased geopolitical tension or rapid technological change often correlate with higher R&D investments. While specific year-over-year data would be needed for precise analysis, the overall trajectory indicates a sustained, and often growing, commitment to R&D across various scientific and engineering disciplines by the federal government, particularly within defense-related fields.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 3 EXECUTIVE CAMPUS-6TH FLO, CHERRY HILL, NJ, 01

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline