Lockheed Martin awarded $334M for Ground Control Segment, a definitive contract with 3 bidders

Contract Overview

Contract Amount: $333,912,398 ($333.9M)

Contractor: Lockheed Martin Services, LLC

Awarding Agency: Department of Defense

Start Date: 2012-12-13

End Date: 2021-05-31

Contract Duration: 3,091 days

Daily Burn Rate: $108.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST NO FEE

Sector: IT

Official Description: IGF::OT::IGF GROUND CONTROL SEGMENT (GCS)

Place of Performance

Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80916

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $333.9 million to LOCKHEED MARTIN SERVICES, LLC for work described as: IGF::OT::IGF GROUND CONTROL SEGMENT (GCS) Key points: 1. The contract value of $334 million over nearly 8 years suggests a significant investment in critical defense infrastructure. 2. With 3 bidders, the competition level indicates a moderately contested market for this specialized service. 3. The 'Cost No Fee' contract type warrants scrutiny for potential cost overruns and contractor incentive alignment. 4. The contract's duration and value place it within a substantial spending category for telecommunications services. 5. The 'All Other Telecommunications' NAICS code suggests a broad scope of services, requiring detailed performance monitoring.

Value Assessment

Rating: fair

The total award of $333,912,397.6 over approximately 8 years averages to roughly $41.7 million per year. Benchmarking this against similar large-scale telecommunications and command and control system contracts is challenging without more specific service details. However, the 'Cost No Fee' (Cost-Plus-Fixed-Fee or Cost-Plus-Incentive-Fee are more common for performance incentives) contract type can sometimes lead to higher overall costs if not managed tightly, as the contractor is reimbursed for allowable costs and receives a negotiated fee. The lack of a fixed price or clear incentive structure for cost savings raises questions about optimal value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with three bidders participating. While three bidders suggest some level of competition, it is on the lower end for a contract of this magnitude and potential strategic importance. A higher number of bidders typically leads to more robust price discovery and potentially lower costs for the government. The specific details of the bidding process and the evaluation criteria would be crucial to fully assess the effectiveness of the competition.

Taxpayer Impact: The full and open competition, despite having only three bidders, aimed to secure the best value for taxpayers. However, a limited number of bidders could mean that taxpayers did not benefit from the most competitive pricing achievable in a broader market.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units relying on the Ground Control Segment for critical functions. The services delivered likely involve maintaining and operating telecommunications infrastructure essential for command and control. The geographic impact is likely national, supporting defense operations across various theaters. Workforce implications include specialized technical roles for operating and maintaining the GCS, potentially supporting a stable, long-term employment base for Lockheed Martin personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'Cost No Fee' contract type lacks strong incentives for the contractor to control costs, potentially leading to higher expenditures than necessary.
Limited competition (3 bidders) may have resulted in a higher price than if more firms had participated.
The long duration of the contract (over 8 years) increases the risk of scope creep or evolving technological needs not being optimally addressed.
Lack of specific performance metrics or fee structures in the 'Cost No Fee' designation makes it difficult to assess contractor performance against defined objectives.

Positive Signals

Awarded under full and open competition, indicating an effort to leverage the broadest possible market.
The contract is with a large, established defense contractor (Lockheed Martin), suggesting a high likelihood of technical capability and experience.
The contract duration implies a stable, long-term need for these services, potentially leading to efficiencies through sustained operations.
The contract is managed by the Defense Contract Management Agency, suggesting established oversight processes are in place.

Sector Analysis

The Ground Control Segment (GCS) contract falls within the broader telecommunications and defense IT services sector. This sector is characterized by high barriers to entry due to specialized knowledge, security requirements, and significant capital investment. The market size for defense-related telecommunications and command and control systems is substantial, driven by ongoing modernization efforts and global security needs. Comparable spending benchmarks would typically involve other large-scale command, control, communications, computers, and intelligence (C4I) system contracts, often running into hundreds of millions or billions of dollars over their lifecycle.

Small Business Impact

There is no indication from the provided data that this contract included small business set-asides or specific subcontracting goals. As a large definitive contract awarded to a major prime contractor, the primary focus is likely on the prime's capabilities. However, large prime contractors often utilize small businesses for specialized support services, so there may be indirect subcontracting opportunities. Further investigation into Lockheed Martin's subcontracting plan would be needed to assess the specific impact on the small business ecosystem.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which provides contract administration services to the Department of Defense. Oversight mechanisms would include DCMA's surveillance of contractor performance, cost monitoring (especially critical for 'Cost No Fee' contracts), and compliance with contract terms. Transparency is generally maintained through contract award databases like FPDS. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Communications Systems
Satellite Communications
Command and Control Systems
Information Technology Services
Telecommunications Infrastructure

Risk Flags

Cost Control Risk (Cost No Fee)
Limited Competition
Long Contract Duration
Potential for Technological Obsolescence

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $333.9 million to LOCKHEED MARTIN SERVICES, LLC. IGF::OT::IGF GROUND CONTROL SEGMENT (GCS)

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN SERVICES, LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $333.9 million.

What is the period of performance?

Start: 2012-12-13. End: 2021-05-31.

What is the specific nature of the services provided under the Ground Control Segment (GCS)?

The provided data indicates the contract is for the 'Ground Control Segment (GCS)' and falls under the NAICS code '517919 - All Other Telecommunications'. This suggests the services likely encompass the operation, maintenance, and potentially upgrade of ground-based infrastructure that supports telecommunications and command and control functions for defense operations. This could include managing satellite ground stations, data links, network infrastructure, and associated software systems. The 'Cost No Fee' contract type implies that the government reimburses allowable costs incurred by Lockheed Martin and pays a fixed fee, which is negotiated separately and does not vary with costs. This structure requires careful monitoring of expenditures to ensure they are reasonable and allocable to the contract.

How does the 'Cost No Fee' contract type compare to other contract types used for similar defense IT services?

The 'Cost No Fee' (CNF) contract type is relatively uncommon for large, complex service contracts like this, especially compared to Cost-Plus-Fixed-Fee (CPFF) or Cost-Plus-Incentive-Fee (CPIF) contracts. CNF contracts reimburse the contractor for allowable costs but provide a fixed fee that is not adjusted based on cost performance. This means the contractor has less financial incentive to control costs compared to CPIF, where the fee is adjusted based on achieving cost targets. CPFF contracts also provide a fixed fee, but it's typically negotiated upfront. For long-term, large-scale projects, governments often prefer fixed-price contracts (like FFP or FP-EPA) or incentive-based cost-plus contracts to encourage efficiency and cost savings. The use of CNF here suggests a unique situation or a specific rationale, possibly related to the nature of the services or the early stages of a program where cost estimation is difficult, but it warrants close oversight to prevent cost overruns.

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

Lockheed Martin is a major defense contractor with extensive experience in large-scale, complex systems integration, including telecommunications, command and control, and satellite ground systems. They have a long history of managing significant government contracts across various branches of the U.S. military and intelligence agencies. While specific performance details for every contract are not publicly available, their sustained position as a top-tier defense contractor suggests a general capability to execute such programs. However, like any large contractor, they have faced scrutiny on specific contracts regarding cost, schedule, and performance. For the GCS contract, the 'Cost No Fee' structure and the moderate competition level are key factors to consider alongside their general track record.

What are the potential risks associated with a contract of this duration and value?

Contracts spanning nearly 8 years and valued at $334 million carry inherent risks. These include: 1) Technological Obsolescence: The rapid pace of technological change could render the GCS or its components outdated before the contract ends. 2) Scope Creep: The 'Cost No Fee' structure might not adequately deter requests for additional work or changes in scope, leading to cost increases. 3) Contractor Performance Drift: Over a long period, contractor focus or performance could decline if not continuously monitored and incentivized. 4) Economic Fluctuations: Unforeseen economic conditions could impact the cost of labor and materials, affecting the 'allowable costs' under the contract. 5) Budgetary Uncertainty: Future government funding priorities could shift, potentially impacting the program's continuity or scope.

How does the spending on this GCS contract compare to overall DoD spending on telecommunications?

The $334 million awarded to Lockheed Martin for the GCS represents a significant, but likely small, portion of the Department of Defense's overall telecommunications spending. DoD's annual IT and telecommunications budgets typically run into the tens of billions of dollars, encompassing a vast array of services, infrastructure, and systems across all branches and agencies. This specific contract addresses a particular segment (GCS), which is critical but specialized. To provide a precise comparison, one would need to analyze total DoD obligations for NAICS code 517919 and related telecommunications/C4I codes over the contract's performance period (2012-2021) and compare it to this single award.

What does the 'DEFINITIVE CONTRACT' designation imply about the contract's structure?

A 'Definitive Contract' is the standard, most common type of contract used when the terms, conditions, and price or fee are determined at the outset. It signifies a firm agreement with all clauses and details finalized, unlike a contract that might start as a letter contract or other preliminary agreement. In this case, it was a 'definitive contract' awarded under 'full and open competition' with a 'cost no fee' payment structure. This means the core terms were established, but the payment mechanism focused on reimbursing costs plus a fixed fee, rather than a predetermined fixed price. It implies a commitment to a specific scope of work and a defined period of performance.

Industry Classification

NAICS: Information › Other Telecommunications › All Other Telecommunications

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 480 WOOTEN RD STE 104, COLORADO SPRINGS, CO, 80916

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

Financial Breakdown

Contract Ceiling: $422,397,326

Exercised Options: $334,951,795

Current Obligation: $333,912,398

Actual Outlays: $420,810

Subaward Activity

Number of Subawards: 319

Total Subaward Amount: $343,078,771

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline