DoD's $42.5M AC-130J modification contract awarded to Lockheed Martin shows potential for cost overruns

Contract Overview

Contract Amount: $42,482,260 ($42.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-11-30

End Date: 2021-05-31

Contract Duration: 913 days

Daily Burn Rate: $46.5K/day

Competition Type: FULL AND OPEN COMPETITION

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AC-130J FY19 -109 BASELINE INSTALLS AND DELTA SUB KIT INSTALLS.

Place of Performance

Location: CRESTVIEW, OKALOOSA County, FLORIDA, 32539

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $42.5 million to LOCKHEED MARTIN CORPORATION for work described as: AC-130J FY19 -109 BASELINE INSTALLS AND DELTA SUB KIT INSTALLS. Key points: 1. The contract's cost-plus-fixed-fee (CPFF) structure carries inherent risk of exceeding initial estimates. 2. Limited competition may have impacted price discovery and potentially inflated costs. 3. The duration of the contract (913 days) suggests a complex scope of work. 4. The base contract value of $46.5M indicates a significant investment in aircraft modification. 5. The contract is for modification and delta sub-kit installs, suggesting upgrades to existing platforms. 6. The absence of small business involvement raises questions about broader economic impact.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee (CPFF) pricing structure, while allowing for flexibility, often leads to higher final costs compared to fixed-price contracts. Without detailed breakdowns of labor hours, material costs, and overhead, it's difficult to benchmark the value for money. The initial award amount of $42.5M for modifications and sub-kit installs on AC-130J aircraft warrants scrutiny, especially given the potential for cost growth inherent in CPFF contracts. Comparing this to similar aircraft modification contracts would be necessary for a more definitive assessment of its value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the provided data does not specify the number of bids received. A high level of competition typically drives down prices, but if only a few technically qualified bidders participated, the price discovery might still be suboptimal. The specific nature of AC-130J modifications could limit the pool of capable contractors.

Taxpayer Impact: Taxpayers benefit from the competitive process potentially leading to a more reasonable price, but the actual savings are not quantifiable without knowing the number of bids and their respective pricing.

Public Impact

The U.S. Special Operations Command (SOCOM) is the primary beneficiary, receiving upgraded AC-130J aircraft. The services delivered include modifications and the installation of delta sub-kits, enhancing aircraft capabilities. The contract is being performed in Florida, implying a localized economic impact in that state. The contract supports specialized aviation maintenance and modification workforce, likely requiring skilled technicians.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract type increases the risk of cost overruns.
Lack of specific performance metrics makes it difficult to assess efficiency.
Limited data on the number of bidders in the full and open competition.
No indication of small business participation or subcontracting goals.

Positive Signals

Awarded under full and open competition, suggesting a robust bidding process.
Contract is for critical aircraft modifications, enhancing national defense capabilities.
Contract performance is located within the United States.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft modification and support services. The market for such specialized services is characterized by high barriers to entry due to technical expertise and security clearances required. Comparable spending benchmarks would involve analyzing other modification contracts for similar large, specialized military aircraft, where costs can range significantly based on complexity and scope.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the primary award went to a large corporation, Lockheed Martin. There is no information provided regarding subcontracting plans or goals for small businesses. Consequently, the direct impact on the small business ecosystem from this specific contract appears minimal, though large prime contractors often engage small businesses for various components and services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and U.S. Special Operations Command. As a cost-plus-fixed-fee contract, rigorous financial oversight and auditing are crucial to monitor expenditures and prevent cost overruns. Transparency is facilitated through contract award databases, but detailed performance reports and audit findings are often not publicly accessible. The Inspector General of the Department of Defense would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

AC-130J Ghostrider Program
Special Operations Forces Aviation Support
Military Aircraft Modification Contracts
Defense Logistics Agency (DLA) Support Services
Air Force Materiel Command (AFMC) Contracts

Risk Flags

Cost Overrun Risk (CPFF Contract Type)
Technical Integration Challenges
Supply Chain Dependency
Limited Competition Impact on Price
Extended Performance Period Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.5 million to LOCKHEED MARTIN CORPORATION. AC-130J FY19 -109 BASELINE INSTALLS AND DELTA SUB KIT INSTALLS.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (U.S. Special Operations Command).

What is the total obligated amount?

The obligated amount is $42.5 million.

What is the period of performance?

Start: 2018-11-30. End: 2021-05-31.

What is the historical spending pattern for AC-130J modifications and upgrades by SOCOM?

Analyzing historical spending for AC-130J modifications by SOCOM reveals a consistent investment in maintaining and enhancing the capabilities of this specialized aircraft. Prior to this $42.5M award, SOCOM has allocated funds for various upgrades, including avionics, weapons systems, and structural enhancements. For instance, previous contracts may have focused on integrating new sensor suites or improving electronic warfare capabilities. The total expenditure over the past five fiscal years for AC-130J-related modifications and sustainment could be in the hundreds of millions of dollars, reflecting the aircraft's critical role in special operations. This specific contract represents a significant, but not unprecedented, investment in the platform's lifecycle.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar aircraft modifications in terms of cost-effectiveness?

Cost-Plus-Fixed-Fee (CPFF) contracts are often used when the scope of work is not precisely defined or is expected to evolve, as is common in complex aircraft modifications. While CPFF allows for flexibility and ensures the contractor is compensated for unforeseen difficulties, it inherently carries a higher risk of cost overruns compared to fixed-price contracts (like FFP or FP-EPA). In fixed-price contracts, the contractor assumes more risk for cost overruns, incentivizing efficiency. For aircraft modifications, if the requirements are well-defined, a fixed-price contract might yield better value for the government. However, for developmental or highly complex modifications where technical uncertainties are high, CPFF might be deemed necessary to attract contractors and manage risks, though it necessitates stringent government oversight to control costs.

What specific technical capabilities does the 'delta sub-kit' installation provide to the AC-130J?

The 'delta sub-kit' installation for the AC-130J Ghostrider gunship typically refers to a package of modifications designed to introduce new capabilities or significantly upgrade existing ones. While the exact specifications are often classified or proprietary, these kits commonly involve enhancements to the aircraft's mission systems, such as improved targeting pods, advanced electronic warfare suites, or upgraded communication and data-link systems. They might also include modifications to the aircraft's defensive systems or structural reinforcements to support new payloads. The 'delta' designation often implies a significant change or addition to the baseline configuration, aimed at keeping the AC-130J operationally relevant against evolving threats.

What is Lockheed Martin's track record with SOCOM and similar large-scale aircraft modification contracts?

Lockheed Martin has an extensive and long-standing track record with the Department of Defense, including SOCOM, particularly concerning large-scale aircraft programs. As the prime contractor for the C-130 family of aircraft, including the AC-130J variant, Lockheed Martin possesses deep institutional knowledge and technical expertise. They have historically been awarded numerous contracts for the production, modification, sustainment, and upgrade of these platforms. Their performance on similar complex, high-value modification contracts is generally characterized by their ability to manage intricate supply chains and integrate advanced technologies. However, like any large defense contractor, they have also faced scrutiny regarding cost and schedule performance on specific programs, necessitating ongoing government oversight.

Are there any performance risks associated with this specific contract, beyond the general risks of CPFF contracts?

Beyond the inherent risks of a Cost-Plus-Fixed-Fee (CPFF) contract, specific performance risks for this AC-130J modification contract could include technical challenges in integrating the delta sub-kits, potential supply chain disruptions for specialized components, and the availability of skilled labor required for the complex modifications. The AC-130J is a highly specialized platform, and ensuring seamless integration of new systems without impacting operational availability is critical. Furthermore, the extended performance period (913 days) increases the exposure to evolving threats and technological advancements, which might necessitate further changes or adjustments during the contract's execution, potentially leading to scope creep or delays if not managed effectively.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Other Support Services › All Other Support Services

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: H9225416R0001

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 5749 BRIAR HILL RD, LEXINGTON, KY, 40516

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

Financial Breakdown

Contract Ceiling: $42,482,260

Exercised Options: $42,482,260

Current Obligation: $42,482,260

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $915,086

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: H9225417D0001

IDV Type: IDC

Timeline