DoD awards $729M R&D contract to Lockheed Martin for advanced technology development

Contract Overview

Contract Amount: $729,016,239 ($729.0M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2004-01-22

End Date: 2011-09-01

Contract Duration: 2,779 days

Daily Burn Rate: $262.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $729.0 million to LOCKHEED MARTIN CORP for work described as: Key points: 1. Contract value represents significant investment in future defense capabilities. 2. Sole-source nature raises questions about competitive pricing and innovation. 3. Long duration suggests a complex, multi-year development effort. 4. Focus on R&D indicates potential for technological breakthroughs. 5. Contract awarded by the Department of the Air Force, aligning with aviation and space priorities. 6. California-based contractor suggests regional economic impact and specialized workforce utilization.

Value Assessment

Rating: questionable

The contract's value of $729 million over nearly 8 years is substantial, but without a competitive benchmark, assessing value for money is difficult. The Cost Plus Fixed Fee (CPFF) structure can incentivize cost overruns, especially in R&D where scope can be fluid. Comparing this to similar R&D efforts for advanced aerospace technologies would be necessary to determine if the pricing is reasonable. The lack of competition further complicates a value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was considered. This approach is typically justified when a specific contractor possesses unique capabilities or intellectual property essential for the project. However, it limits price discovery and may not yield the most cost-effective solution for the government. The absence of multiple bids means potential savings from competition were not realized.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government lacks the leverage of competitive bidding to drive down prices. This can result in less efficient use of public funds for research and development.

Public Impact

Benefits the Department of Defense by advancing critical research and development for national security. Services delivered include advanced technological research and development, potentially leading to new defense systems. Geographic impact is concentrated in California, where Lockheed Martin's facilities are located, supporting local employment and the aerospace ecosystem. Workforce implications include the employment of highly skilled scientists, engineers, and technicians in specialized R&D roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and potentially increases costs.
CPFF contract type can lead to cost overruns if not managed tightly.
Long contract duration increases exposure to changing technological landscapes and program risks.

Positive Signals

Award to a prime contractor with extensive experience in defense R&D.
Focus on advanced technology development aligns with strategic defense modernization goals.
Contract supports innovation and potential future technological superiority.

Sector Analysis

This contract falls within the Aerospace and Defense sector, a significant segment of the US economy characterized by high R&D investment and complex technological development. The market is dominated by a few large prime contractors, including Lockheed Martin. Spending in this area is critical for maintaining technological advantage and national security. Comparable spending benchmarks would involve analyzing other large-scale, sole-source R&D contracts for advanced defense systems.

Small Business Impact

As a sole-source award to a large prime contractor, this contract does not appear to include specific small business set-asides. There is potential for subcontracting opportunities for small businesses with specialized capabilities, but the primary award mechanism does not prioritize small business participation. The overall impact on the small business ecosystem is likely indirect, depending on Lockheed Martin's subcontracting strategy.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Air Force contracting and program management offices. Accountability measures would be embedded in the CPFF contract terms, requiring detailed reporting and milestone achievement. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of R&D. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Advanced Technology Development Programs
Aerospace Research and Development
Department of Defense Research Contracts
Lockheed Martin Defense Contracts

Risk Flags

Sole Source Justification
Cost Plus Fixed Fee Contract Risk
Long Duration R&D Project Uncertainty

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $729.0 million to LOCKHEED MARTIN CORP. See the official description on USAspending.

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 $729.0 million.

What is the period of performance?

Start: 2004-01-22. End: 2011-09-01.

What is Lockheed Martin's track record with similar Cost Plus Fixed Fee R&D contracts with the Department of Defense?

Lockheed Martin has a long and extensive history of performing Cost Plus Fixed Fee (CPFF) Research and Development (R&D) contracts with the Department of Defense (DoD). As one of the largest defense contractors globally, they are frequently awarded complex, high-value R&D programs. Their track record generally indicates a capacity to manage large-scale, technically challenging projects. However, CPFF contracts inherently carry risks of cost growth, and the government's oversight and management of these contracts are critical to ensuring value. Specific performance metrics, past performance reviews, and any incurred cost overruns or disputes on prior similar contracts would provide a more granular assessment of their track record for this specific type of award.

How does the $729 million contract value compare to other R&D investments in advanced aerospace technologies?

The $729 million contract value is substantial and indicative of a significant investment in advanced aerospace technologies. To benchmark this, one would need to compare it against other large-scale R&D contracts awarded by the DoD or other federal agencies for similar technological advancements, such as next-generation aircraft, missile systems, or space-based platforms. The average value of R&D contracts in the aerospace sector can vary widely depending on the specific technology and development phase. Given the sole-source nature and the duration (nearly 8 years), this figure suggests a deep-dive, foundational research effort rather than incremental improvements. Without access to a comprehensive database of comparable sole-source R&D awards, a precise comparison is challenging, but the amount places it among significant strategic investments.

What are the primary risks associated with a sole-source, CPFF contract for advanced R&D?

The primary risks associated with a sole-source, Cost Plus Fixed Fee (CPFF) contract for advanced Research and Development (R&D) are multifaceted. From a cost perspective, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than if multiple bidders were involved. The CPFF structure, while allowing for flexibility in R&D where requirements may evolve, carries the inherent risk of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize spending to increase the cost base, although the fee itself is fixed. For R&D, the technical risks are also significant; the outcome of research is uncertain, and the project may not yield the desired technological advancements, leading to sunk costs without a tangible return. Effective government oversight is crucial to mitigate these risks by scrutinizing costs, ensuring progress, and managing scope.

What is the expected program effectiveness and potential impact on future defense capabilities?

The expected program effectiveness hinges on the successful execution of the R&D outlined in the contract. If Lockheed Martin achieves the technological objectives, the impact on future defense capabilities could be transformative. This could range from enhanced platform performance (e.g., speed, stealth, maneuverability), development of new weapon systems, improved intelligence, surveillance, and reconnaissance (ISR) capabilities, or advancements in electronic warfare. The effectiveness will be measured by the successful transition of developed technologies into operational systems or prototypes. The long-term impact is intended to maintain or enhance the United States' technological superiority in critical defense domains, deterring potential adversaries and ensuring mission success in future conflicts.

How does this contract fit into the broader historical spending patterns for defense R&D?

This $729 million contract fits within the broader historical pattern of significant and sustained federal investment in defense Research and Development (R&D). The Department of Defense consistently allocates substantial portions of its budget to R&D to maintain a technological edge. Historically, large R&D contracts have been awarded to major defense contractors like Lockheed Martin for developing next-generation platforms and systems. While the specific dollar amount is large, it is not unprecedented within the context of major defense acquisition programs. This contract likely represents a component of a larger strategic initiative aimed at modernizing military capabilities, reflecting a long-standing commitment to innovation in defense technology.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences

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

Address: 1111 LOCKHEED MARTIN WAY, SUNNYVALE, CA, 17

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

Financial Breakdown

Contract Ceiling: $546,981,678

Exercised Options: $546,981,678

Current Obligation: $729,016,239

Contract Characteristics

Cost or Pricing Data: YES

Timeline