DoD's $766M Lockheed Martin Orbital Logistics Contract Awarded Without Competition
Contract Overview
Contract Amount: $766,224,527 ($766.2M)
Contractor: Lockheed Martin Corp
Awarding Agency: Department of Defense
Start Date: 2015-06-01
End Date: 2019-11-30
Contract Duration: 1,643 days
Daily Burn Rate: $466.4K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: IGF::OT::IGF COMBINED ORBITAL OPERATIONS LOGISTICS SUSTAINMENT BASIC AWARD
Place of Performance
Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089
Plain-Language Summary
Department of Defense obligated $766.2 million to LOCKHEED MARTIN CORP for work described as: IGF::OT::IGF COMBINED ORBITAL OPERATIONS LOGISTICS SUSTAINMENT BASIC AWARD Key points: 1. Significant contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. The 'NOT COMPETED' status suggests potential limitations in market exploration and price discovery. 3. The contract's duration of over 4 years indicates a long-term commitment to this specific provider. 4. Performance-based contract type (Cost Plus Incentive Fee) aims to align contractor incentives with government objectives. 5. The substantial value of the award warrants scrutiny regarding cost-effectiveness and alternative solutions. 6. Focus on orbital logistics highlights a critical but potentially concentrated area of defense spending.
Value Assessment
Rating: questionable
The contract's value of over $766 million, awarded without competition, presents a significant concern for value for money. Benchmarking against similar orbital logistics contracts is difficult due to the lack of competitive bidding. While the Cost Plus Incentive Fee (CPIF) structure attempts to control costs, the absence of a competitive process means the government may not have secured the most favorable pricing. The contract's substantial size and duration suggest a critical need, but the procurement method limits the ability to assess if the price reflects true market value or if alternative, more cost-effective solutions were overlooked.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded using a 'NOT COMPETED' procedure, indicating that a full and open competition was not conducted. This sole-source award means that only one offeror, Lockheed Martin Corp, was solicited and considered. The lack of competition limits the government's ability to leverage market forces to drive down prices and ensure the best possible value. Without multiple bids, it is challenging to ascertain the prevailing market rates for these specialized orbital logistics services.
Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government missed an opportunity to explore a wider range of solutions and potentially achieve significant cost savings through a competitive bidding process.
Public Impact
The primary beneficiary is the Department of Defense, specifically the U.S. Air Force, for its space-based operations. The contract supports critical orbital logistics and sustainment services, essential for maintaining national security assets in space. Services are likely to have a national geographic impact, given the nature of space operations. The contract supports a highly specialized workforce within Lockheed Martin, likely involving engineers, technicians, and program managers in the aerospace sector.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition raises concerns about potential overpricing and reduced innovation.
- Sole-source awards can create vendor lock-in, limiting future flexibility and potentially increasing long-term costs.
- The substantial value of the contract without competitive vetting warrants close monitoring of performance and costs.
Positive Signals
- Cost Plus Incentive Fee structure is designed to incentivize contractor performance and cost control.
- Awarding to a known entity like Lockheed Martin may leverage existing expertise and infrastructure for critical space operations.
- The contract addresses a vital need for orbital logistics, crucial for national security.
Sector Analysis
This contract falls within the Engineering Services sector, specifically supporting advanced aerospace and defense capabilities. The market for orbital logistics and sustainment is highly specialized, dominated by a few large defense contractors with the requisite expertise and security clearances. Spending in this niche area is critical for maintaining national security and technological superiority in space. Comparable spending benchmarks are difficult to establish due to the proprietary nature of such services and the limited number of qualified providers.
Small Business Impact
The contract was awarded to Lockheed Martin Corp, a large prime contractor, and there is no indication of small business set-asides or subcontracting plans within the provided data. This suggests that small businesses are unlikely to be direct beneficiaries of this specific award. The absence of explicit small business participation requirements could limit opportunities for smaller, innovative firms to contribute to this critical defense capability.
Oversight & Accountability
Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices, potentially involving the Defense Contract Management Agency (DCMA). The Cost Plus Incentive Fee structure implies performance metrics and cost targets that would be monitored. Transparency may be limited due to the sole-source nature and the sensitive defense implications. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.
Related Government Programs
- DoD Space Force Operations
- National Reconnaissance Office Contracts
- Aerospace Engineering Services
- Satellite Sustainment Programs
- Defense Logistics Agency Contracts
Risk Flags
- Sole-source award
- Lack of competition
- High contract value
- Long contract duration
Tags
defense, department-of-defense, air-force, lockheed-martin-corp, engineering-services, orbital-logistics, space-operations, definitive-contract, cost-plus-incentive-fee, not-competed, sole-source, california
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $766.2 million to LOCKHEED MARTIN CORP. IGF::OT::IGF COMBINED ORBITAL OPERATIONS LOGISTICS SUSTAINMENT BASIC AWARD
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 $766.2 million.
What is the period of performance?
Start: 2015-06-01. End: 2019-11-30.
What is Lockheed Martin Corp's track record with similar sole-source defense contracts, particularly in space logistics?
Lockheed Martin Corp has a long history of securing large, sole-source contracts with the Department of Defense, particularly in the aerospace and defense sectors. Their extensive experience in developing and maintaining complex defense systems, including satellites and launch vehicles, positions them as a go-to provider for specialized services. While specific data on their track record with sole-source orbital logistics contracts is not publicly detailed, their established presence and capabilities in space operations suggest a pattern of being awarded such contracts due to unique expertise or existing program integration. However, the lack of competition in these instances often raises concerns about cost efficiency and the potential for missed opportunities to engage a broader range of suppliers.
How does the $766 million award compare to other orbital logistics contracts, and what does the lack of competition imply for value?
The $766 million award is substantial, reflecting the high cost and complexity of orbital logistics and sustainment. However, comparing it directly to other contracts is challenging, especially given its sole-source nature. Typically, competitive bidding drives down prices and ensures better value for taxpayers. The 'NOT COMPETED' status for this contract implies that the government did not explore the market for potentially lower-cost alternatives or innovative solutions from other providers. This absence of competition means the government may not have achieved the best possible price, and the value proposition is harder to independently verify. It suggests a reliance on Lockheed Martin's existing capabilities, potentially at a higher cost than a competitive scenario might yield.
What are the primary risks associated with awarding a contract of this magnitude without competition?
The primary risks associated with awarding a contract of this magnitude without competition include potential overpricing, reduced incentive for innovation, and vendor lock-in. Without competitive pressure, the contractor may have less motivation to control costs or offer the most cost-effective solutions. The government also foregoes the opportunity to discover new technologies or more efficient service delivery methods from a wider pool of potential suppliers. Furthermore, a sole-source award can create a dependency on a single provider, making it difficult and costly to switch contractors in the future, even if performance or pricing becomes unsatisfactory. This lack of market validation is a significant risk to fiscal responsibility.
How effective is the Cost Plus Incentive Fee (CPIF) structure in managing costs for long-term, sole-source contracts like this?
The Cost Plus Incentive Fee (CPIF) structure is designed to manage costs by aligning the contractor's financial incentives with the government's objectives. In a CPIF contract, the final profit is adjusted based on whether the final cost is below or above a target cost, and performance targets are met. For long-term contracts, this can be effective in encouraging efficiency and cost control, especially when performance metrics are well-defined and measurable. However, the effectiveness of CPIF is significantly diminished in a sole-source environment. While it provides some incentive for cost reduction compared to a simple cost-plus contract, the absence of competitive benchmarks means the target costs themselves might be inflated. Therefore, while CPIF offers a mechanism for cost management, its full benefit is constrained without competitive validation of the baseline costs.
What are the historical spending patterns for orbital logistics and sustainment within the Department of Defense, and how does this award fit?
Historical spending patterns within the Department of Defense for orbital logistics and sustainment have generally shown a consistent and increasing trend, driven by the growing reliance on space-based assets for intelligence, communication, and navigation. These services are critical and often require specialized capabilities, leading to significant investments. Contracts in this domain are frequently awarded to large, established aerospace and defense companies due to the technical complexity and security requirements. Awards like this $766 million contract to Lockheed Martin are not unusual in terms of the dollar value or the contractor's profile, reflecting the high-stakes nature of space operations. However, the trend towards sole-source awards in such critical, specialized areas warrants ongoing analysis to ensure that competition is pursued wherever feasible to optimize taxpayer investment.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services
Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES
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: $973,546,838
Exercised Options: $803,494,671
Current Obligation: $766,224,527
Actual Outlays: $6,112
Subaward Activity
Number of Subawards: 215
Total Subaward Amount: $1,043,178,770
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2015-06-01
Current End Date: 2019-11-30
Potential End Date: 2019-11-30 00:00:00
Last Modified: 2022-09-01
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