DoD's $232.6M IT services contract with Lockheed Martin shows long duration and high cost
Contract Overview
Contract Amount: $232,589,291 ($232.6M)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2004-08-26
End Date: 2014-07-31
Contract Duration: 3,626 days
Daily Burn Rate: $64.1K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: COST PLUS AWARD FEE
Sector: IT
Place of Performance
Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80921
State: Colorado Government Spending
Plain-Language Summary
Department of Defense obligated $232.6 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded for custom computer programming services, indicating a need for specialized IT solutions. 2. The contract's duration of over 10 years suggests a long-term strategic requirement for these services. 3. The cost-plus award fee structure incentivizes performance but can lead to cost overruns if not managed tightly. 4. The absence of small business set-asides means opportunities for smaller firms may have been limited. 5. The contract's significant value warrants close scrutiny of performance and cost-effectiveness over its lifespan.
Value Assessment
Rating: fair
This contract's total value of $232.6 million over more than 10 years averages to approximately $23 million annually. Benchmarking this against similar large-scale IT services contracts for the Department of Defense is challenging without more specific service details. However, the cost-plus award fee (CPAF) pricing structure, while allowing for flexibility, often carries a higher risk of cost escalation compared to fixed-price contracts. The value proposition depends heavily on the successful delivery of critical custom programming services and the achievement of award fee targets.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, suggesting that multiple bidders were likely considered. The fact that it is a definitive contract awarded to Lockheed Martin indicates a thorough evaluation process. However, the number of bids received and the specific competitive dynamics are not detailed in the provided data. A robust competition typically drives better pricing and innovation, but the long duration and specialized nature of the services might have narrowed the field of qualified bidders.
Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best value through a wide range of offers. This approach helps ensure that the government is not overpaying and receives high-quality services.
Public Impact
The Department of Defense benefits from specialized custom computer programming services essential for its operations. This contract supports advanced IT infrastructure and potentially mission-critical systems within the defense sector. The geographic impact is likely concentrated around defense installations or contractor facilities, primarily in Colorado. The contract supports a workforce skilled in advanced software development and IT services, contributing to the tech sector.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-plus award fee structure can lead to higher final costs than anticipated.
- Long contract duration increases the risk of technological obsolescence or changing requirements.
- Lack of small business participation may limit broader economic impact and innovation.
Positive Signals
- Awarded through full and open competition, suggesting potential for competitive pricing.
- Long-term nature indicates a stable, ongoing need for critical services.
- Contractor's established presence suggests experience in delivering complex defense IT solutions.
Sector Analysis
This contract falls within the Information Technology (IT) sector, specifically custom computer programming services. The IT services market for the federal government is substantial, with significant spending allocated to software development, system integration, and maintenance. Comparable spending benchmarks would typically be found within IT services categories for large federal agencies, particularly defense. The market is characterized by a mix of large prime contractors and specialized subcontractors, with ongoing competition for large-scale, long-term engagements.
Small Business Impact
The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the primary award went to a large business, Lockheed Martin. While large contracts can sometimes include subcontracting opportunities for small businesses, the absence of a specific small business set-aside means that direct opportunities were likely limited. This could impact the broader small business IT ecosystem that relies on prime contract awards.
Oversight & Accountability
Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), given its role in contract administration for the Department of Defense. The cost-plus award fee structure necessitates rigorous oversight to ensure that costs are reasonable and that performance targets are met to earn award fees. Transparency would be enhanced through regular reporting requirements and potentially through the DoD's Inspector General's office if specific concerns arise regarding cost or performance.
Related Government Programs
- Defense Information Systems Agency (DISA) IT Services
- General Services Administration (GSA) IT Schedule Contracts
- Department of Defense Enterprise IT Services
- Custom Software Development Services
Risk Flags
- Long contract duration increases risk of obsolescence.
- Cost-plus award fee structure can lead to cost overruns.
- Lack of small business participation.
Tags
it-services, custom-programming, department-of-defense, lockheed-martin, definitive-contract, cost-plus-award-fee, full-and-open-competition, large-contract, long-term-contract, defense-contract-management-agency, colorado, naics-541511
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $232.6 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 (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $232.6 million.
What is the period of performance?
Start: 2004-08-26. End: 2014-07-31.
What was the specific nature of the custom computer programming services provided under this contract?
The provided data classifies the service under NAICS code 541511, 'Custom Computer Programming Services.' This typically encompasses designing, developing, and testing software and systems tailored to a client's specific needs. For the Department of Defense, these services could range from developing new command and control systems, enhancing existing software for intelligence analysis, creating simulation software, or building specialized applications for logistics and personnel management. The exact nature would depend on the specific task orders issued under the contract, but it implies bespoke software solutions rather than off-the-shelf products.
How does the $232.6 million total contract value compare to similar IT services contracts awarded by the DoD?
The total contract value of $232.6 million over approximately 10 years places this contract in the mid-to-large tier for federal IT services. The DoD awards numerous IT contracts, many exceeding this value, particularly for large system integrations, cybersecurity, and enterprise-wide solutions. However, for custom programming services specifically, this is a substantial award. Benchmarking requires comparing it to contracts with similar scope, duration, and service type (e.g., software development, system integration). Without more granular data on the specific services and task orders, a precise comparison is difficult, but it represents a significant investment in specialized IT capabilities.
What are the primary risks associated with a Cost Plus Award Fee (CPAF) contract of this magnitude and duration?
The primary risks with a CPAF contract of this scale and duration include potential cost overruns and contractor performance issues. CPAF contracts offer flexibility by reimbursing allowable costs plus an additional fee based on performance targets. If these targets are not clearly defined, measurable, or if oversight is insufficient, the contractor may incur higher costs than anticipated while still receiving a substantial fee. For a long-duration contract, there's also the risk of scope creep, technological obsolescence, and the potential for the contractor to become entrenched, reducing incentives for efficiency over time. Effective management and clear performance metrics are crucial to mitigate these risks.
What does the 'full and open competition' designation imply about the bidding process and potential value for taxpayers?
The 'full and open competition' designation signifies that the contract was offered to all qualified responsible sources, without restrictions. This is generally the preferred method for federal procurements as it maximizes the pool of potential bidders, fostering competition. For taxpayers, this implies a greater likelihood of achieving the best possible price and value, as multiple companies vie for the contract. It suggests that the government sought to leverage market forces to obtain competitive bids, potentially leading to cost savings and higher quality services compared to sole-source or limited competition awards.
How has Lockheed Martin's performance been on similar large-scale DoD IT contracts?
Lockheed Martin is a major defense contractor with extensive experience in delivering complex IT solutions and services to the Department of Defense. Historically, the company has been involved in numerous large-scale programs, including C4ISR systems, enterprise IT infrastructure, and software development. Performance reviews for such large contracts can vary; while they often meet core requirements, specific program successes and challenges are documented through contract performance reports and agency evaluations. Assessing their track record on similar CPAF contracts would involve examining past performance metrics, any disputes or contract modifications, and overall program outcomes to gauge their reliability and efficiency in delivering complex IT services.
What is the historical spending trend for custom computer programming services within the DoD?
Historical spending trends for custom computer programming services within the DoD have generally shown a consistent and often increasing demand, driven by the need for advanced technological capabilities and modernization of legacy systems. The DoD is a significant consumer of IT services, including bespoke software development, to support its complex operational requirements, intelligence gathering, and command and control functions. While specific figures fluctuate based on defense budgets and strategic priorities, the overall trend indicates a sustained investment in this area. Factors like cybersecurity threats, evolving warfare doctrines, and the push for digital transformation continue to drive spending on specialized programming.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services
Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 2
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: Lockheed Martin Corp (UEI: 834951691)
Address: 1620 WILSHIRE DR STE 300 F, BELLEVUE, NE, 68005
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $282,519,069
Exercised Options: $223,659,603
Current Obligation: $232,589,291
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2004-08-26
Current End Date: 2014-07-31
Potential End Date: 2014-07-31 00:00:00
Last Modified: 2018-09-27
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