DoD's $21.6M computer systems design contract awarded to Lockheed Martin in 2004 shows potential for overpayment

Contract Overview

Contract Amount: $21,624,041 ($21.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2004-05-26

End Date: 2008-08-29

Contract Duration: 1,556 days

Daily Burn Rate: $13.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $21.6 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize higher costs. 2. Sole-source award limits price discovery and potentially inflates costs. 3. Long contract duration (over 4 years) increases risk of cost escalation. 4. Lack of competition suggests potential for suboptimal value for taxpayer funds. 5. Contractor's extensive experience may justify higher rates, but requires scrutiny. 6. Performance period ended in 2008, limiting direct comparison to current market rates.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, raises concerns about value for money. Without competitive bidding, it's difficult to ascertain if the pricing reflects fair market value. The total award amount of $21.6 million over its duration suggests a significant investment, and the lack of transparency inherent in sole-source contracts makes benchmarking difficult. Further analysis would be needed to compare specific cost elements against industry standards for similar computer systems design services during that period.

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 a specific contractor possesses unique capabilities or when urgency precludes a competitive process. The absence of multiple bidders means that the government did not benefit from the price discovery mechanisms that competition provides, potentially leading to higher costs than if multiple firms had vied for the contract.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the best possible price, potentially resulting in taxpayers paying more for services than they would in a competitive environment.

Public Impact

The Department of Defense benefited from specialized computer systems design services. The contract supported the Air Force's operational capabilities. Services were likely delivered in Florida, where the contractor's facility is located. The contract supported a workforce involved in advanced technology and defense systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure may lead to cost overruns.
Sole-source award limits competitive pricing and value.
Contract duration extends over several years, increasing risk.
Lack of transparency in sole-source procurement hinders value assessment.

Positive Signals

Awarded to a major defense contractor with established capabilities.
Contract aimed to fulfill specific Department of Defense requirements.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on computer systems design services. The IT services market is vast and competitive, but specialized defense-related IT services can be concentrated among a few large contractors. Benchmarking this contract's value is challenging due to its sole-source nature and the specific, potentially unique, requirements of the Department of Defense. However, IT services represent a significant portion of federal spending, with ongoing investments in modernization and system integration.

Small Business Impact

This contract does not appear to have involved small business set-asides, as indicated by the 'sb' field being false. Lockheed Martin is a large prime contractor, and there is no information provided regarding subcontracting plans or performance related to small businesses. Therefore, the direct impact on the small business ecosystem from this specific award is likely minimal, unless significant subcontracting occurred without explicit reporting.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve contract officers, program managers, and potentially Inspector General offices within the Department of Defense. The cost-plus-fixed-fee nature necessitates detailed financial reporting and auditing to ensure costs are reasonable and allocable. Transparency is limited due to the sole-source award, but performance reviews and milestone tracking would be standard oversight practices.

Related Government Programs

Department of Defense IT Services
Computer Systems Design and Related Services
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.6 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 (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $21.6 million.

What is the period of performance?

Start: 2004-05-26. End: 2008-08-29.

What was the specific nature of the computer systems design services provided under this contract?

The provided data indicates the contract was for 'Computer Systems Design Services' (NAICS code 541512). While the specific details of the systems designed are not available in this summary, such services typically encompass the design of computer hardware, software, and network systems. This could include requirements analysis, system architecture development, integration planning, and potentially the development of custom software solutions tailored to the unique operational needs of the Department of the Air Force. Given the contractor and agency, it likely involved complex defense-related systems.

How does the cost-plus-fixed-fee (CPFF) pricing structure typically impact contract costs compared to fixed-price contracts?

A Cost-Plus-Fixed-Fee (CPFF) contract is designed so the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty, making fixed-price contracts risky. However, CPFF contracts can incentivize contractors to incur higher costs, as their profit (the fixed fee) remains constant regardless of the total cost. This necessitates robust government oversight to ensure costs are reasonable and allocable. In contrast, fixed-price contracts place more cost risk on the contractor, potentially leading to lower overall costs for the government if the contractor manages efficiently.

What are the implications of a sole-source award for price negotiation and taxpayer value?

A sole-source award means only one contractor was considered capable of fulfilling the requirement, and the contract was not competed. This significantly limits the government's leverage in price negotiations. Without competing bids, there is no market pressure to drive down prices. The government must rely on its negotiation skills and cost analysis to determine a fair price, which is inherently more challenging than when multiple offers are available. Consequently, sole-source contracts often result in higher prices for taxpayers compared to competitively awarded contracts, as the benefits of market competition are absent.

Given the contract ended in 2008, how can its value be assessed against current market standards?

Assessing the value of a contract that concluded in 2008 against current market standards is challenging due to inflation, technological advancements, and shifts in the IT services market. Direct comparisons of raw dollar amounts are misleading. To perform a meaningful assessment, one would need to: 1) Adjust historical costs for inflation using appropriate indices. 2) Identify comparable services provided in the 2004-2008 timeframe and benchmark against those. 3) Analyze the specific scope, complexity, and deliverables of the contract to find relevant industry data from that period. Without detailed performance and cost data, a precise current valuation is not feasible.

What is the typical track record of Lockheed Martin in fulfilling large federal IT contracts?

Lockheed Martin is a major defense contractor with a long history of successfully executing large, complex federal IT and systems integration contracts. They possess extensive experience in areas such as aerospace, defense, intelligence, and cybersecurity. While they have a strong track record, like any large contractor, they have also faced scrutiny over specific contract performance, costs, and timelines on various projects. Their ability to secure sole-source or competitively won contracts of this magnitude indicates a perceived capability to meet demanding government requirements, though rigorous oversight remains essential.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 5600 WEST SAND LAKE ROAD, ORLANDO, FL, 90

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline