DoD's $1.3B ARRW Development contract awarded to Lockheed Martin for R&D in Florida

Contract Overview

Contract Amount: $1,316,629,676 ($1.3B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-08-13

End Date: 2026-08-31

Contract Duration: 2,940 days

Daily Burn Rate: $447.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: ARRW DEVELOPMENT

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $1.32 billion to LOCKHEED MARTIN CORPORATION for work described as: ARRW DEVELOPMENT Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Significant investment in research and development for advanced aerospace technologies. 3. Long contract duration of 2940 days suggests a complex, multi-phase project. 4. The contract's cost-plus-fixed-fee structure may incentivize cost overruns. 5. Focus on physical, engineering, and life sciences R&D aligns with strategic defense needs. 6. Geographic concentration in Florida may have localized economic impacts.

Value Assessment

Rating: questionable

Benchmarking the value of this $1.3 billion, sole-source R&D contract is challenging due to its specialized nature and lack of competition. The cost-plus-fixed-fee (CPFF) pricing structure, while common for R&D, carries inherent risks of cost escalation. Without comparable sole-source contracts for similar advanced weapon system development, it's difficult to definitively assess if the fixed fee represents fair value for the contractor's effort. The significant total award amount suggests a high level of investment, but the absence of competitive bidding prevents a direct comparison of pricing efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of Defense did not conduct a competitive bidding process. This approach is typically used when only one responsible source is available or when a compelling justification exists for avoiding full and open competition. The lack of competition means that potential alternative solutions and pricing from other qualified contractors were not explored, which can limit the government's ability to secure the most advantageous terms.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the government does not benefit from the price reductions typically driven by competitive market forces.

Public Impact

The primary beneficiary is the Department of Defense, which will receive advanced research and development services for a new weapon system. The contract supports the development of cutting-edge aerospace technology, potentially enhancing national security capabilities. The geographic impact is concentrated in Florida, where the contractor will conduct research and development activities. This contract is likely to create or sustain high-skilled jobs in the aerospace and defense sector within Florida.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs.
Cost-plus-fixed-fee structure can incentivize cost overruns if not closely managed.
Long contract duration increases exposure to changing technological landscapes and program risks.
Lack of transparency inherent in sole-source procurements makes independent value assessment difficult.

Positive Signals

Award to a major defense contractor (Lockheed Martin) suggests access to significant technical expertise.
Focus on R&D aligns with the DoD's strategic modernization goals.
Contract award signifies commitment to developing advanced capabilities.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on Research and Development for advanced weapon systems. The market for such specialized R&D is often dominated by a few large, experienced contractors due to the high technical barriers to entry and significant capital investment required. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of advanced weapon system development, but the scale of this contract ($1.3 billion) indicates a major program initiative within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, Lockheed Martin, is a large aerospace and defense company. There is no explicit information provided regarding subcontracting plans for small businesses. Without specific subcontracting goals or set-asides, the direct impact on the small business ecosystem for this particular contract is likely minimal, though large prime contractors often engage small businesses for specialized support services.

Oversight & Accountability

Oversight for this contract will be managed by the Department of the Air Force, a component of the Department of Defense. As a Cost Plus Fixed Fee (CPFF) contract, rigorous financial oversight and auditing will be crucial to monitor expenditures and ensure the fixed fee remains appropriate. The contract's long duration necessitates ongoing performance monitoring and risk management. Transparency may be limited due to the sole-source nature, but standard DoD reporting and Inspector General oversight mechanisms would apply.

Related Government Programs

Advanced Weapon System Development
Aerospace Research and Development
Department of Defense Research Contracts
Lockheed Martin Contracts
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus-fixed-fee structure carries risk of cost escalation.
Long contract duration increases risk of obsolescence and changing priorities.
Limited public data on specific R&D outcomes due to nature of work.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.32 billion to LOCKHEED MARTIN CORPORATION. ARRW DEVELOPMENT

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

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 $1.32 billion.

What is the period of performance?

Start: 2018-08-13. End: 2026-08-31.

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

Lockheed Martin Corporation has a long and extensive history of securing sole-source contracts with the Department of Defense, particularly for complex research and development initiatives and major weapon system programs. Their track record includes numerous large-scale, multi-year contracts for areas such as aircraft, missile systems, and space technology. While specific details on past sole-source R&D contracts are often classified or proprietary, Lockheed Martin is generally recognized for its capability to execute highly technical and demanding projects. However, the history of sole-source awards, by their nature, means that direct comparisons of pricing and value against competitive bids are not publicly available for these specific instances. Oversight and performance metrics from previous similar contracts would be key to assessing current risk.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for R&D, and what are the associated risks?

The Cost Plus Fixed Fee (CPFF) contract type is common for research and development efforts where the scope of work is not fully defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. Compared to fixed-price contracts, CPFF offers greater flexibility for evolving R&D projects but carries a higher risk of cost overruns for the government, as the contractor is incentivized to incur costs to achieve the project milestones. The fixed fee, however, limits the contractor's profit potential, unlike cost-plus-incentive-fee structures. Effective oversight and robust cost controls are critical to mitigate the inherent risks of CPFF for the government.

What are the potential risks associated with the long duration (2940 days) of this contract?

A contract duration of 2940 days (approximately 8 years) for an R&D project presents several potential risks. Firstly, technological obsolescence is a significant concern; the technologies being researched and developed may be surpassed by advancements elsewhere before the project's completion. Secondly, program requirements or strategic priorities within the Department of Defense could shift over such a long period, potentially rendering the developed system less relevant or requiring costly modifications. Thirdly, managing a project over many years increases the complexity of oversight, contractor performance evaluation, and maintaining consistent program direction. Finally, long-term contracts can be more susceptible to economic fluctuations and changes in funding appropriations, impacting program stability.

Given the sole-source nature, how can the government ensure it is receiving fair market value for this $1.3 billion investment?

Ensuring fair market value in a sole-source R&D contract, especially one of this magnitude, relies heavily on robust internal government processes and oversight. The Department of Defense would typically conduct a thorough cost analysis, reviewing the contractor's proposed costs, labor rates, overhead, and the proposed fixed fee against established benchmarks and historical data for similar work, even if not directly competitive. Independent government cost estimators and technical experts play a crucial role in validating the reasonableness of proposed costs. Furthermore, the government would scrutinize the contractor's technical approach and management plan to ensure efficiency and effectiveness. While direct price competition is absent, the government can leverage its negotiation expertise and access to market intelligence to achieve the best possible value.

What is the significance of the NAICS code 541715 (Research and Development in the Physical, Engineering, and Life Sciences) in the context of this contract?

The North American Industry Classification System (NAICS) code 541715 signifies that this contract is for research and development activities within the physical sciences (e.g., physics, chemistry, materials science), engineering disciplines (e.g., mechanical, electrical, aerospace engineering), and life sciences (excluding nanotechnology and biotechnology, which have separate codes). For this $1.3 billion contract awarded to Lockheed Martin by the Department of Defense, this NAICS code indicates a focus on fundamental and applied research aimed at advancing scientific knowledge and developing new technologies relevant to defense applications. This classification helps categorize the contract within the broader federal spending landscape and signals the type of expertise and innovation the government is procuring.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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: $1,344,972,313

Exercised Options: $1,344,972,313

Current Obligation: $1,316,629,676

Actual Outlays: $60,565,983

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline