DoD awards $143.5M for SBIRS GEO 5-6 NRE, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $143,484,211 ($143.5M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2012-09-10

End Date: 2017-04-26

Contract Duration: 1,689 days

Daily Burn Rate: $85.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SBIRS GEO 5-6 INITIAL NRE

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $143.5 million to LOCKHEED MARTIN CORP for work described as: SBIRS GEO 5-6 INITIAL NRE Key points: 1. This contract represents a significant investment in critical space-based infrared surveillance capabilities. 2. The sole-source nature raises questions about potential price inflation and limited market engagement. 3. Performance risk is moderate, given the complexity of space systems and Lockheed Martin's experience. 4. The contract duration of nearly 5 years suggests a long-term commitment to this program phase. 5. This falls within the defense sector's focus on advanced intelligence, surveillance, and reconnaissance (ISR) assets. 6. The absence of small business participation warrants further investigation into subcontracting opportunities.

Value Assessment

Rating: fair

The $143.5 million awarded for initial non-recurring engineering (NRE) for SBIRS GEO 5-6 appears to be a substantial investment. Without direct comparable contracts for similar NRE phases of advanced satellite programs, it is difficult to benchmark the value definitively. However, the cost-plus incentive fee (CPIF) structure suggests an attempt to control costs, but the sole-source award limits the ability to assess competitive pricing and ensure optimal value for taxpayers.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corp., was solicited. This approach is typically justified for highly specialized or follow-on work where only one contractor possesses the necessary expertise or proprietary knowledge. However, the lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: The sole-source award means taxpayers did not benefit from competitive pressures that could have driven down the price. This increases the risk of overpayment and necessitates robust oversight to ensure costs are reasonable.

Public Impact

The primary beneficiaries are the U.S. Department of Defense and national security agencies, who will receive enhanced missile warning and tracking capabilities. The services delivered include the initial design, development, and engineering work for the next generation of SBIRS satellites. The geographic impact is national, supporting global defense operations and intelligence gathering. Workforce implications include highly skilled engineering and technical jobs within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Cost-plus incentive fee contracts can sometimes lead to cost overruns if not managed tightly.
Lack of explicit small business set-aside raises concerns about broader economic participation.

Positive Signals

Award is for critical national security infrastructure, addressing a vital defense need.
Lockheed Martin has extensive experience with the SBIRS program, suggesting technical proficiency.
The contract is for initial NRE, a necessary phase for complex system development.

Sector Analysis

The Space-Based Infrared System (SBIRS) program is a cornerstone of U.S. missile warning capabilities. This contract for the initial non-recurring engineering (NRE) for SBIRS GEO 5-6 falls within the highly specialized defense and aerospace sector, specifically focusing on satellite manufacturing and advanced sensor technology. The market for such sophisticated systems is limited to a few prime contractors with the requisite security clearances and technical expertise. Comparable spending benchmarks are difficult to ascertain due to the unique nature of these programs, but investments in next-generation ISR satellites typically run into billions of dollars over their lifecycle.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the prime contractor is Lockheed Martin Corp., it is crucial to understand their subcontracting plan to ensure small businesses have opportunities to participate in this significant defense program. The absence of a direct set-aside means that the flow-down of work to small businesses will depend on Lockheed Martin's procurement practices and any mandated subcontracting goals.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms and conditions. The cost-plus incentive fee structure necessitates close monitoring of costs and performance to ensure the government receives value. Transparency regarding the specific cost elements and performance metrics would be beneficial for public accountability, though such details are often sensitive for national security programs.

Related Government Programs

Space-Based Infrared System (SBIRS)
Defense Satellite Programs
Missile Warning Systems
Intelligence, Surveillance, and Reconnaissance (ISR) Satellites

Risk Flags

Sole-source award
Potential for cost overruns
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $143.5 million to LOCKHEED MARTIN CORP. SBIRS GEO 5-6 INITIAL NRE

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $143.5 million.

What is the period of performance?

Start: 2012-09-10. End: 2017-04-26.

What is Lockheed Martin Corp.'s track record with the SBIRS program?

Lockheed Martin Corp. has been the prime contractor for the Space-Based Infrared System (SBIRS) program since its inception. They are responsible for the design, development, production, and sustainment of the SBIRS satellites and ground systems. Their extensive experience includes the successful launch and operation of previous SBIRS GEO and HE0 satellites. This long-standing relationship provides a deep understanding of the program's technical requirements and challenges, contributing to their sole-source award for subsequent phases. However, this also means that the government has relied on a single provider for a critical national security capability for an extended period.

How does the value of this contract compare to similar satellite development contracts?

Direct comparisons for the initial Non-Recurring Engineering (NRE) phase of advanced missile warning satellites like SBIRS GEO 5-6 are challenging due to the highly specialized and classified nature of these programs. NRE costs typically encompass the initial design, prototyping, testing, and system integration before full-rate production begins. Given the complexity and cutting-edge technology involved in the SBIRS program, the $143.5 million awarded for this phase is likely within the expected range for such endeavors. However, without access to detailed cost breakdowns and comparable data from other nations or programs, a precise value-for-money assessment is difficult. The sole-source nature further complicates benchmarking against competitive bids.

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

The primary risks associated with this sole-source contract are related to cost and competition. Without competitive bidding, there is an inherent risk that the negotiated price may be higher than what could have been achieved in a competitive environment. This necessitates robust government oversight to scrutinize costs and ensure they are reasonable and allocable. Another risk is the potential for reduced innovation or efficiency, as the contractor may face less pressure to optimize processes or explore alternative solutions compared to a competitive scenario. Furthermore, reliance on a single source for critical technology can create supply chain vulnerabilities and limit future flexibility if the contractor's capabilities or strategic direction change.

How effective is the Cost Plus Incentive Fee (CPIF) contract type in managing costs for this program?

The Cost Plus Incentive Fee (CPIF) contract type aims to incentivize the contractor to control costs by sharing in any savings or overruns relative to a target cost. If the contractor achieves lower costs than targeted, both the contractor and the government share in the savings. Conversely, if costs exceed the target, both parties share the excess cost, up to certain limits. For complex programs like SBIRS, where technical uncertainties are high, CPIF can be effective in aligning contractor and government interests towards cost efficiency. However, its effectiveness hinges on the accuracy of the target cost, the sharing ratios, and the government's ability to closely monitor performance and costs throughout the contract duration.

What are the historical spending patterns for the SBIRS program?

The Space-Based Infrared System (SBIRS) program has historically represented a significant and sustained investment by the U.S. Department of Defense. Over its lifecycle, the program has incurred costs in the tens of billions of dollars, encompassing the development and procurement of multiple satellite payloads, sensor systems, and ground infrastructure. Spending has been characterized by large, multi-year appropriations for research, development, testing, and evaluation (RDT&E), followed by substantial procurement funding. The program has faced scrutiny over cost growth and schedule delays in the past, leading to program restructuring and increased oversight. This $143.5 million award for initial NRE for GEO 5-6 continues this pattern of substantial investment in the program's future capabilities.

What are the implications of the contract's duration (1689 days) for program execution?

The contract duration of approximately 1689 days (around 4.6 years) for the initial Non-Recurring Engineering (NRE) phase of SBIRS GEO 5-6 indicates a substantial commitment to this development period. This timeframe is typical for the complex design, integration, and testing required for advanced satellite systems. A longer duration allows for thorough development and risk mitigation, which is crucial for space-based assets where failures can be catastrophic and costly to rectify. It also suggests that the government anticipates a phased approach to development, with subsequent contracts likely to follow for production and deployment. However, extended durations can also increase the risk of technological obsolescence or shifts in strategic requirements during the development cycle.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: SPACE VEHICLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $147,097,250

Exercised Options: $147,097,250

Current Obligation: $143,484,211

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $-2,649,157

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline