DoD awards $2.49B for SBIRS GEO 5&6, a sole-source procurement for advanced missile warning capabilities

Contract Overview

Contract Amount: $2,491,233,025 ($2.5B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2013-02-19

End Date: 2023-02-28

Contract Duration: 3,661 days

Daily Burn Rate: $680.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SBIRS GEO 5&6 ADVANCED PROCUREMENT

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $2.49 billion to LOCKHEED MARTIN CORP for work described as: SBIRS GEO 5&6 ADVANCED PROCUREMENT Key points: 1. This contract represents a significant investment in national security infrastructure, specifically for early warning of missile threats. 2. The sole-source nature of this award warrants scrutiny regarding price justification and the absence of competitive pressure. 3. Performance is managed by the Defense Contract Management Agency, indicating a focus on ensuring delivery and quality. 4. The contract type, Fixed Price Incentive, aims to balance cost control with contractor motivation for performance. 5. This procurement falls within the advanced space and missile defense sector, a critical area for national security. 6. The duration of the contract suggests a long-term commitment to maintaining and enhancing these vital systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and highly specialized defense application. Without competitive bids, it's difficult to definitively assess if the $2.49 billion represents optimal value for money. The Fixed Price Incentive (FPI) contract type suggests an attempt to control costs while incentivizing performance, but the ultimate cost-effectiveness hinges on the negotiation of target costs and profit margins. Comparisons to similar sole-source advanced satellite procurements would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This is common for highly specialized defense systems where only one or a limited number of contractors possess the necessary technology, expertise, and security clearances. The lack of competition means that price discovery through market forces was not a factor in this award. The justification for a sole-source award typically involves demonstrating that only one responsible source can provide the required supplies or services.

Taxpayer Impact: For taxpayers, sole-source contracts can lead to higher prices compared to competitive procurements, as the government lacks the leverage of multiple bidders vying for the contract. This necessitates rigorous oversight and negotiation to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. military and national security apparatus, receiving advanced missile warning capabilities. The services delivered are critical for early detection and tracking of ballistic and other missile threats. The geographic impact is global, as the SBIRS system provides worldwide coverage for missile defense. Workforce implications include highly skilled jobs in aerospace engineering, manufacturing, and program management, primarily within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source procurement limits competitive pressure, potentially impacting cost efficiency.
The complexity and long lifecycle of space-based systems introduce inherent program execution risks.
Reliance on a single contractor for critical national security assets raises concerns about long-term dependency.

Positive Signals

The contract is for advanced, critical missile warning capabilities essential for national defense.
The Fixed Price Incentive contract type aims to align contractor incentives with government cost and performance objectives.
The award is managed by the Defense Contract Management Agency, suggesting a structured oversight process.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on advanced satellite technology for intelligence, surveillance, and reconnaissance (ISR) and missile warning. The market for such highly specialized defense systems is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of delivering. Spending in this niche is driven by national security priorities and technological advancements in threat detection and response.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the nature of advanced satellite manufacturing, the prime contractor, Lockheed Martin, likely relies on a complex supply chain. While the prime contract itself is not set aside, there may be opportunities for small businesses to participate as subcontractors to Lockheed Martin, depending on the company's subcontracting plans and goals.

Oversight & Accountability

Oversight for this contract is provided by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, quality, and compliance. The contract type (Fixed Price Incentive) includes mechanisms for cost and performance targets. Transparency is generally limited for highly classified defense procurements, but reporting requirements and audits are standard oversight measures. The Inspector General's office within the Department of Defense would have jurisdiction over potential fraud, waste, or abuse.

Related Government Programs

Space-Based Infrared System (SBIRS) Program
Missile Warning Systems
Satellite Manufacturing
Advanced Technology Development
National Security Space

Risk Flags

Sole-source award
High dollar value
Critical national security system

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.49 billion to LOCKHEED MARTIN CORP. SBIRS GEO 5&6 ADVANCED PROCUREMENT

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 $2.49 billion.

What is the period of performance?

Start: 2013-02-19. End: 2023-02-28.

What is the track record of Lockheed Martin Corporation in delivering complex defense systems, particularly satellite programs?

Lockheed Martin Corporation is a major global security and aerospace company with extensive experience in developing and producing complex defense systems, including numerous satellite programs for military and civilian applications. They have a long history of delivering large-scale, technologically advanced projects for the U.S. government and international partners. Their portfolio includes a wide range of capabilities, from communication and navigation satellites to advanced missile systems and aircraft. While generally considered a reliable contractor for high-stakes programs, like any large defense contractor, they have faced challenges and scrutiny on specific projects related to cost overruns, schedule delays, and technical issues. However, their overall track record in delivering critical national security assets, including components of early warning systems, is substantial and forms the basis for their selection in sole-source procurements for highly specialized capabilities.

How does the Fixed Price Incentive (FPI) contract type aim to manage costs and performance for this advanced procurement?

The Fixed Price Incentive (FPI) contract type is designed to provide a middle ground between fixed-price and cost-reimbursement contracts, aiming to control costs while motivating contractor performance. In an FPI contract, the government and contractor agree on a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both parties share in the savings according to a pre-negotiated formula (sharing ratio). Conversely, if the final cost exceeds the target cost, the contractor absorbs a larger portion of the overrun up to the ceiling price. This structure incentivizes the contractor to manage costs effectively to achieve a higher profit margin, while the price ceiling protects the government from unlimited cost increases. For advanced procurements like SBIRS GEO 5&6, the FPI structure attempts to balance the need for cutting-edge technology with fiscal responsibility.

What are the primary risks associated with a sole-source procurement for critical national security assets like SBIRS?

Sole-source procurements for critical national security assets present several key risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, as the government lacks the leverage of multiple offers. This necessitates robust negotiation and oversight to ensure fair pricing. Secondly, there's a risk of contractor complacency or reduced innovation due to the lack of competitive pressure to improve efficiency or technology. Thirdly, reliance on a single provider creates a dependency that can be problematic if the contractor faces financial difficulties, operational issues, or if geopolitical factors affect the relationship. Finally, justifying the sole-source award requires rigorous documentation to ensure that no other responsible source could meet the requirement, which can be a complex and time-consuming process.

Can the value of this $2.49 billion contract be benchmarked against similar historical procurements for missile warning satellites?

Benchmarking the value of this $2.49 billion contract for SBIRS GEO 5&6 against similar historical procurements is challenging due to several factors. Firstly, the SBIRS program represents a highly advanced and unique capability, making direct comparisons difficult. Secondly, the nature of sole-source awards means there isn't a readily available set of competitive bids to establish a market price. Thirdly, the cost of space-based systems is heavily influenced by technological advancements, inflation over time, and specific program requirements. While historical data on previous SBIRS satellites or other national security space programs might exist, a precise apples-to-apples comparison is unlikely. A thorough value assessment would require detailed analysis of the specific capabilities delivered, the technological sophistication, and comparisons with other sole-source, high-value defense procurements, considering the specific risks and complexities involved.

What are the implications of the 'Guided Missile and Space Vehicle Manufacturing' North American Industry Classification System (NAICS) code for this contract?

The North American Industry Classification System (NAICS) code 336414, 'Guided Missile and Space Vehicle Manufacturing,' indicates that this contract is for the production of highly specialized and technologically advanced components or systems related to guided missiles and space vehicles. This classification signifies that the work involves complex engineering, precision manufacturing, and adherence to stringent quality and safety standards typical of the aerospace and defense industry. Companies operating under this NAICS code often possess unique expertise, proprietary technologies, and significant infrastructure required for such demanding production. For this SBIRS GEO 5&6 contract, it confirms the nature of the procurement as being focused on the manufacturing of critical space-based assets essential for national defense and missile warning capabilities.

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: FIXED PRICE INCENTIVE (L)

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: $2,926,749,820

Exercised Options: $2,512,542,398

Current Obligation: $2,491,233,025

Actual Outlays: $125,482,771

Subaward Activity

Number of Subawards: 554

Total Subaward Amount: $11,564,861,794

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline