DoD's $493M Telecommunications Contract Awarded to Lockheed Martin Under Sole-Source Basis

Contract Overview

Contract Amount: $492,850,226 ($492.9M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2009-12-01

End Date: 2016-09-30

Contract Duration: 2,495 days

Daily Burn Rate: $197.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: MULTI-CAR

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $492.9 million to LOCKHEED MARTIN CORP for work described as: MULTI-CAR Key points: 1. Significant investment in telecommunications infrastructure by the Department of Defense. 2. Sole-source award to Lockheed Martin suggests limited market alternatives or specific capabilities. 3. Contract duration of nearly 7 years indicates a long-term need for these services. 4. The 'All Other Telecommunications' classification points to a broad scope of services. 5. Cost-plus-fixed-fee contract type may lead to cost overruns if not managed carefully. 6. The absence of small business set-aside raises questions about broader economic impact.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and broad telecommunications scope. The cost-plus-fixed-fee structure, while allowing flexibility, can be prone to cost escalation if not rigorously overseen. Without comparable sole-source awards or detailed cost breakdowns, assessing true value-for-money is difficult. The total award amount of over $492 million over its lifespan suggests substantial investment, but the efficiency of this spending requires deeper analysis of performance metrics and cost drivers.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when a single contractor possesses unique capabilities, proprietary technology, or when urgent needs preclude a competitive process. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed contract. It also raises questions about whether alternative solutions were adequately explored.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price for the services rendered.

Public Impact

The Department of Defense benefits from specialized telecommunications services essential for its operations. This contract supports critical communication infrastructure, likely impacting military readiness and national security. The geographic impact is likely widespread, given the nature of telecommunications, potentially supporting bases and operations nationwide. While not explicitly detailed, such a large contract could imply significant workforce engagement within Lockheed Martin and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost-plus-fixed-fee structure carries inherent risk of cost overruns without stringent oversight.
Lack of transparency in the justification for sole-sourcing requires further investigation.
The broad 'All Other Telecommunications' category could mask inefficiencies or scope creep.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests a focus on established capabilities and reliability.
The long contract duration indicates a stable, long-term need being met.
The substantial funding allocated suggests a high priority placed on these telecommunications services.

Sector Analysis

The telecommunications sector is a critical enabler for all government functions, particularly defense. This contract falls within a broad segment of the IT and communications industry, supporting the vast network infrastructure required by the Department of Defense. Comparable spending benchmarks are difficult to establish due to the sole-source nature and specific defense application, but the overall IT and telecommunications market is vast, with significant government investment across various agencies.

Small Business Impact

The contract data indicates that this was not a small business set-aside, nor does it explicitly mention subcontracting goals for small businesses. This suggests that the primary award went to a large prime contractor, and the direct impact on the small business ecosystem may be limited unless Lockheed Martin actively engages small businesses as subcontractors. Further investigation into subcontracting plans would be needed to assess the full impact.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. As a cost-plus-fixed-fee contract, rigorous financial oversight and performance monitoring are crucial to ensure costs remain reasonable and deliverables are met. Transparency regarding the justification for the sole-source award and ongoing performance reports would be key accountability measures. The Inspector General's office for the DoD would likely have jurisdiction for audits and investigations.

Related Government Programs

DoD Telecommunications Services
Defense Information Systems Network (DISN)
Military Satellite Communications
Command and Control Systems
Federal Information Technology Acquisition Reform Act (FITARA) related spending

Risk Flags

Sole-source award lacks competitive justification.
Cost-plus-fixed-fee contract type increases financial risk.
Broad service category ('All Other Telecommunications') lacks specificity.
Potential for cost overruns due to contract type and duration.
Limited transparency on specific services and performance metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $492.9 million to LOCKHEED MARTIN CORP. MULTI-CAR

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 $492.9 million.

What is the period of performance?

Start: 2009-12-01. End: 2016-09-30.

What specific telecommunications services are covered under this 'All Other Telecommunications' contract?

The classification 'All Other Telecommunications' is very broad and typically encompasses a wide range of services not fitting into more specific categories like wireless, satellite, or fiber optic networks. This could include managed network services, secure voice and data transmission, network infrastructure maintenance, specialized communication equipment integration, and potentially cybersecurity services related to telecommunications. Without more granular data or the contract's statement of work, the precise services remain undefined. This ambiguity can make it difficult to assess if the services procured align precisely with current and future defense needs or if there's potential for scope creep.

What was the justification for awarding this contract on a sole-source basis to Lockheed Martin?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. For a large defense contractor like Lockheed Martin, this could stem from unique technological capabilities, proprietary systems essential for national security, existing infrastructure integration, or urgent requirements where a competitive process would cause unacceptable delays. The specific justification would be documented in a Justification and Approval (J&A) document, which is often publicly available through contract databases. Understanding this justification is key to assessing whether the government truly had no viable alternatives.

How does the cost-plus-fixed-fee (CPFF) structure impact the government's financial risk on this contract?

The Cost-Plus-Fixed-Fee (CPFF) contract type means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure shifts much of the cost risk to the government, as the final price is not fixed upfront. While it allows for flexibility in scope and encourages contractor effort on complex projects, it necessitates robust government oversight to control costs and prevent overruns. The 'fixed fee' component provides some incentive for the contractor to manage costs efficiently, as their profit is capped, but the government bears the risk of escalating allowable costs.

What is Lockheed Martin's track record with similar large-scale telecommunications contracts for the DoD?

Lockheed Martin is a major defense contractor with extensive experience in complex systems integration, including telecommunications and C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) systems for the DoD. They have historically managed large, multi-year contracts involving secure communication networks, satellite systems, and global infrastructure support. Assessing their specific track record on similar sole-source telecommunications contracts would involve reviewing past performance evaluations, any documented issues with cost control or delivery schedules, and their overall reputation for fulfilling large-scale government requirements within budget and on time.

How does this $493 million contract compare to other federal spending on telecommunications services?

This $493 million contract represents a significant investment within the federal telecommunications spending landscape. While substantial, it needs to be viewed in the context of the overall federal IT and telecommunications budget, which runs into the tens of billions annually. Agencies like the General Services Administration (GSA) manage large telecommunications vehicles (e.g., Enterprise Infrastructure Solutions - EIS) that aggregate spending across the government. This specific contract's value is considerable for a single award, particularly a sole-source one, highlighting the critical nature of these specific DoD communication needs compared to broader, competed telecommunications procurements.

What are the potential performance risks associated with this contract, given its duration and sole-source nature?

Performance risks on this contract could include technological obsolescence over its nearly seven-year duration, potential degradation of service quality due to lack of competitive pressure, and challenges in adapting to evolving military requirements. The sole-source nature might reduce the contractor's incentive to innovate or proactively address emerging threats or opportunities. Furthermore, the CPFF structure, if not managed with stringent performance metrics and oversight, could lead to a focus on cost recovery rather than optimal performance or efficiency. Ensuring clear performance standards, regular reviews, and contingency planning are vital to mitigate these risks.

Industry Classification

NAICS: Information › Other Telecommunications › All Other Telecommunications

Product/Service Code: OPERATION OF GOVT OWNED FACILITY › OPERATE GOVT OWNED BUILDINGS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1111 LOCKHEED MARTIN WAY BLDG 157, SUNNYVALE, CA, 94089

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

Financial Breakdown

Contract Ceiling: $814,161,003

Exercised Options: $549,517,792

Current Obligation: $492,850,226

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline