DoD's $29.1M Lockheed Martin contract for aircraft navigation systems shows fair value despite limited competition

Contract Overview

Contract Amount: $29,132,734 ($29.1M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2011-05-09

End Date: 2016-12-31

Contract Duration: 2,063 days

Daily Burn Rate: $14.1K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LETTER CONTRACT (UCA) FMS IRAQ LRR2

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $29.1 million to LOCKHEED MARTIN CORP for work described as: LETTER CONTRACT (UCA) FMS IRAQ LRR2 Key points: 1. Contract awarded to a single, established provider suggests potential for premium pricing. 2. Limited competition may have reduced opportunities for innovative solutions or cost savings. 3. Long contract duration (2063 days) indicates a sustained need for these specialized systems. 4. Firm Fixed Price contract type shifts cost risk to the contractor. 5. Contractor's established presence in the sector likely influenced award. 6. Performance context is tied to critical aircraft navigation and guidance systems.

Value Assessment

Rating: fair

The contract's value of $29.1 million for aircraft navigation systems appears reasonable given the specialized nature of the equipment and the sole-source award. Benchmarking against similar sole-source contracts for advanced aerospace components is challenging due to proprietary technology and limited market visibility. However, the firm fixed-price structure suggests that the contractor bears the risk of cost overruns, which can be a positive indicator of value if the price was set appropriately.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This approach is typically used when only one contractor possesses the necessary capabilities, technology, or security clearances. The lack of competition means that price discovery through market forces was absent, and the government relied on negotiation to establish a fair price.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as competitive pressures are removed. While justified in cases of unique capabilities, it necessitates rigorous negotiation and oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Air Force and potentially other Department of Defense branches relying on advanced navigation systems for their aircraft. Services delivered include the provision and potential maintenance of critical search, detection, and navigation instruments for aeronautical and nautical systems. The geographic impact is likely concentrated around Air Force bases and operational theaters where these aircraft are deployed. Workforce implications may include specialized engineering, manufacturing, and technical support roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially reduces innovation.
Lack of transparency in sole-source justification can obscure true value.
Long-term contract duration may not reflect evolving technological needs.
Dependence on a single supplier creates potential supply chain risks.

Positive Signals

Firm Fixed Price contract protects the government from cost overruns.
Award to a major defense contractor suggests established reliability and capability.
Specialized nature of the equipment may justify a sole-source approach.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation, guidance, and control systems. The market for such specialized components is often dominated by a few large, established players due to high research and development costs, stringent quality requirements, and long product lifecycles. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of these systems, but overall defense spending on avionics and related systems runs into billions annually.

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 corporation. While large prime contractors are often required to subcontract portions of their work to small businesses, the specific subcontracting plan for this contract is not detailed in the provided data. The absence of a direct set-aside means small businesses would likely participate as subcontractors rather than direct awardees.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures would include performance reviews, milestone tracking, and adherence to the firm fixed-price terms. Transparency is limited due to the sole-source nature, but contract modifications and payment data are usually available through federal procurement databases. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Aircraft Component Manufacturing
Avionics Systems
Defense Navigation and Guidance Systems
Lockheed Martin Defense Contracts
Air Force Procurement

Risk Flags

Sole Source Award
Lack of Competition
Potential for Overpricing
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.1 million to LOCKHEED MARTIN CORP. LETTER CONTRACT (UCA) FMS IRAQ LRR2

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 $29.1 million.

What is the period of performance?

Start: 2011-05-09. End: 2016-12-31.

What is Lockheed Martin's track record with similar sole-source contracts for navigation systems?

Lockheed Martin has a long history of securing sole-source and limited-competition contracts for complex defense systems, including navigation and guidance technologies. Their extensive experience and established relationships within the Department of Defense often position them favorably for such awards. Analyzing their past performance on similar contracts would involve reviewing contract histories for on-time delivery, adherence to specifications, and any reported issues or disputes. While specific data for this contract isn't provided, their general profile suggests a capacity to deliver on complex requirements, though the lack of competition inherently limits external validation of their pricing and efficiency compared to a competitive bid.

How does the $29.1 million value compare to market rates for comparable navigation systems?

Directly comparing the $29.1 million value to 'market rates' for comparable systems is challenging due to the proprietary nature of advanced military navigation technology and the sole-source award. Unlike commercial off-the-shelf products, these systems are often custom-developed or highly specialized, limiting direct price comparisons. The government likely relied on cost analysis, historical pricing data for similar components, and negotiation with Lockheed Martin to determine a fair and reasonable price. Without access to the detailed cost breakdown or data on alternative solutions, a precise market benchmark is unavailable. However, the firm fixed-price nature suggests the government sought to cap its expenditure.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract include potential overpricing due to the absence of competitive bidding, reduced incentive for innovation from the contractor, and a lack of transparency in the pricing structure. There's also a risk of vendor lock-in, where the government becomes dependent on Lockheed Martin for future upgrades, maintenance, and replacements, potentially at non-competitive prices. Furthermore, if Lockheed Martin faces production issues or supply chain disruptions, the government has limited alternative sources, potentially impacting operational readiness. The long duration also increases the risk of technological obsolescence if not managed proactively.

How effective are sole-source awards in ensuring the delivery of critical defense capabilities?

Sole-source awards can be effective in ensuring the delivery of critical defense capabilities when a unique technology, specialized expertise, or urgent operational need exists that cannot be met through competition. For highly complex systems like advanced aircraft navigation, where a single contractor may possess the intellectual property, manufacturing infrastructure, and security clearances, a sole-source award might be the only viable path to acquisition. However, effectiveness is contingent on robust government negotiation, oversight, and justification to mitigate the inherent risks of non-competition. When properly managed, they ensure access to essential capabilities; when poorly managed, they can lead to inflated costs and suboptimal outcomes.

What has been the historical spending trend for similar navigation systems within the Department of Defense?

Historical spending on aircraft navigation and guidance systems within the Department of Defense has been substantial, often running into billions of dollars annually across various platforms and programs. Contracts for these systems are frequently awarded to major defense contractors like Lockheed Martin, Boeing, and Raytheon, often through sole-source or limited-competition vehicles due to the specialized nature of the technology. Spending trends are influenced by modernization programs, fleet readiness requirements, and geopolitical factors. While the specific $29.1 million figure for this contract is a single data point, it represents a segment of a much larger, ongoing investment in maintaining and upgrading the technological capabilities of military aviation.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 3333 PILOT KNOB RD, EAGAN, MN, 55121

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: $29,156,435

Exercised Options: $29,156,434

Current Obligation: $29,132,734

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline