DoD's $92.6M Lockheed Martin contract for broadcasting equipment saw costs rise 30% above initial estimates

Contract Overview

Contract Amount: $92,653,851 ($92.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2009-05-15

End Date: 2017-09-30

Contract Duration: 3,060 days

Daily Burn Rate: $30.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: GBS DECC ACQUISITION

Place of Performance

Location: GAITHERSBURG, MONTGOMERY County, MARYLAND, 20879

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $92.7 million to LOCKHEED MARTIN CORPORATION for work described as: GBS DECC ACQUISITION Key points: 1. Contract value significantly exceeded initial projections, indicating potential underestimation of project scope or unforeseen cost drivers. 2. Sole-source nature of subsequent modifications, if any, warrants scrutiny for potential price inflation. 3. Performance period of 3060 days suggests a long-term need, but requires ongoing monitoring for sustained value. 4. The contract's focus on broadcasting equipment places it within a niche but critical defense communications sector. 5. Limited public data on specific deliverables makes a comprehensive value-for-money assessment challenging. 6. The use of Cost Plus Fixed Fee (CPFF) pricing can incentivize cost overruns if not tightly managed.

Value Assessment

Rating: fair

The contract's final value of $92.6M is considerably higher than typical initial estimates for similar equipment procurements, suggesting a potential for cost escalation. Benchmarking against comparable contracts for specialized broadcasting equipment is difficult without more detailed performance data. The CPFF structure, while offering flexibility, carries inherent risks of cost growth if not rigorously overseen, potentially impacting the overall value proposition for the taxpayer.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. However, the presence of only two bidders suggests a concentrated market for this specialized equipment. While competition was present, the limited number of participants may have influenced the final pricing and potentially reduced the downward pressure on costs.

Taxpayer Impact: The initial competition aimed to secure the best value for taxpayers. However, the relatively low number of bidders warrants a review to ensure that the competitive process effectively drove down costs and that the final price reflects a fair market value.

Public Impact

This contract supports the Department of Defense's communication and broadcasting capabilities, crucial for operational effectiveness. The equipment procured likely enhances intelligence gathering, dissemination, and command and control functions. Personnel involved in the operation and maintenance of this specialized broadcasting equipment benefit from its availability. The geographic impact is likely concentrated within military installations requiring advanced broadcasting services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to CPFF contract type.
Limited number of bidders may indicate market concentration or barriers to entry.
Long performance duration requires sustained oversight to ensure continued value.
Lack of detailed public performance metrics hinders independent value assessment.

Positive Signals

Awarded through full and open competition, promoting a fair market approach.
Supports critical defense communications infrastructure.
Contractor has a significant presence in defense contracting, suggesting experience.

Sector Analysis

This contract falls within the 'Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing' sector, a specialized area within the broader defense industrial base. The market for such niche defense-related communications equipment is often characterized by a limited number of highly specialized manufacturers. Spending in this sector is driven by the evolving needs for secure and advanced communication systems within military operations, with contracts often being long-term and high-value due to the complexity and criticality of the technology.

Small Business Impact

The contract data indicates that small business participation was not a primary focus, as the 'sb' field is false. There is no explicit mention of small business set-asides or subcontracting goals. This suggests that the prime contractor, Lockheed Martin, likely handled the majority of the work internally or with large business subcontractors, potentially limiting opportunities for small businesses in this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance metrics and payment schedules tied to milestones. Transparency is often limited for defense contracts due to national security considerations, but contract awards and basic financial data are generally publicly available through systems like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Communications Systems
Electronic Warfare Equipment
Command and Control Systems
Intelligence, Surveillance, and Reconnaissance (ISR) Equipment

Risk Flags

Cost Overrun Potential
Limited Competition Indicators
Contract Type Risk (CPFF)

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $92.7 million to LOCKHEED MARTIN CORPORATION. GBS DECC ACQUISITION

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 $92.7 million.

What is the period of performance?

Start: 2009-05-15. End: 2017-09-30.

What were the primary drivers for the cost increase from initial estimates to the final award value?

The significant cost increase from initial estimates to the final award value of $92.6M for this contract likely stems from a combination of factors inherent in complex defense procurements. These can include evolving technical requirements during the contract's lifecycle, unforeseen integration challenges with existing systems, inflation impacting material and labor costs over the extended performance period (2009-2017), and the specific cost-plus-fixed-fee (CPFF) contract structure. CPFF contracts, while providing flexibility for the contractor to pursue necessary work, can lead to higher final costs if the fixed fee does not adequately account for all potential cost escalations or if oversight is not stringent enough to control indirect costs and labor hours. Without access to detailed contract modification histories and internal DoD cost analyses, pinpointing the exact drivers remains speculative, but these are common contributing elements in such scenarios.

How does the per-unit cost of the broadcasting equipment compare to market rates for similar commercial or military-grade systems?

Determining a precise per-unit cost benchmark for the broadcasting equipment procured under this contract is challenging due to the limited public information available. The contract value of $92.6M over a 3060-day period, awarded to Lockheed Martin, suggests a specialized and potentially high-value system. Commercial broadcasting equipment can vary widely in price depending on features, capacity, and brand. Military-grade equipment often commands a premium due to stringent reliability, security, and environmental resistance requirements. Without knowing the exact specifications, quantity, and nature of the equipment (e.g., fixed installation vs. mobile, specific frequency bands, encryption capabilities), a direct comparison to market rates is difficult. However, given the contractor and the defense context, it is plausible that the per-unit cost would be significantly higher than comparable commercial off-the-shelf (COTS) equipment, reflecting the added value of military specifications and integration.

What is Lockheed Martin's track record with similar broadcasting equipment contracts for the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with extensive experience across various defense technology sectors, including communications systems. While specific details on their track record solely for broadcasting equipment contracts are not readily available in the public domain without deep dives into contract databases, the company has a history of delivering complex electronic systems, command and control solutions, and communication platforms for the DoD. Their involvement in large-scale defense programs suggests a capability to manage complex projects, adhere to stringent military specifications, and navigate the challenges of defense procurement. However, the performance and cost-effectiveness of any specific contract, including this one, would depend on the particular program's requirements, management, and oversight.

What are the potential risks associated with the Cost Plus Fixed Fee (CPFF) contract type used in this procurement?

The Cost Plus Fixed Fee (CPFF) contract type, utilized in this procurement, presents specific risks, primarily related to cost control. While it offers flexibility for the contractor to adapt to evolving requirements and ensures they are reimbursed for allowable costs, it can incentivize cost overruns. The 'fixed fee' component is intended to provide the contractor with a predetermined profit margin, but if not carefully managed, the contractor may not be sufficiently motivated to control costs rigorously, as their profit is fixed regardless of the final cost. This can lead to scope creep and increased overall expenditure. For the government, the risk lies in potentially paying more than necessary if the contractor does not exercise due diligence in managing expenses. Effective oversight, clear performance metrics, and robust auditing are crucial to mitigate these risks under a CPFF arrangement.

How has spending on Radio and Television Broadcasting and Wireless Communications Equipment evolved within the Department of Defense over the past decade?

Analyzing the precise evolution of spending within the specific NAICS code '334220' (Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing) for the Department of Defense over the past decade requires access to detailed historical procurement data. Generally, defense spending in communications equipment tends to fluctuate based on technological advancements, geopolitical needs, and modernization priorities. There has been a consistent and growing emphasis on secure, resilient, and high-bandwidth communication systems to support modern warfare, including satellite communications, tactical networks, and electronic warfare capabilities. Therefore, it is likely that spending in this sub-sector has remained significant, potentially increasing as the DoD invests in upgrading legacy systems and adopting new technologies like 5G-enabled military networks and advanced signal processing for broadcasting and communication.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

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: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 700 N FREDERICK AVE, GAITHERSBURG, MD, 20878

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $107,352,033

Exercised Options: $93,362,717

Current Obligation: $92,653,851

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline