DoD's $33.4M logistics consulting contract awarded to Lockheed Martin raises questions on competition and value

Contract Overview

Contract Amount: $33,413,556 ($33.4M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-11-18

End Date: 2020-05-21

Contract Duration: 550 days

Daily Burn Rate: $60.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FOUNDATION IGF::OT::IGF

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $33.4 million to LOCKHEED MARTIN CORPORATION for work described as: FOUNDATION IGF::OT::IGF Key points: 1. The contract's sole-source nature limits price discovery and potentially increases costs for taxpayers. 2. A high per-unit cost suggests potential overspending or a lack of competitive pressure. 3. The absence of small business set-asides may reduce opportunities for smaller, specialized firms. 4. The contract duration of 550 days is substantial for consulting services, warranting scrutiny of deliverables. 5. Logistics consulting is a critical but often opaque area, making performance assessment vital. 6. The use of a Cost Plus Incentive Fee (CPIF) contract type requires careful monitoring to ensure cost control.

Value Assessment

Rating: questionable

The total award of $33.4 million for logistics consulting services appears high, especially given the lack of competition. Without comparable sole-source contracts or detailed performance metrics, it is difficult to definitively benchmark value. However, the absence of competitive bidding inherently reduces the likelihood of achieving the best possible price. The CPIF contract type, while offering flexibility, can lead to cost overruns if not rigorously managed, further impacting the overall value proposition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies submitting proposals. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities or urgent needs), they generally lead to less price competition and potentially higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from a competitive bidding environment. This can result in higher overall spending for the same or similar services.

Public Impact

The Department of Defense benefits from specialized logistics consulting services to optimize its supply chain and distribution networks. This contract supports the operational readiness and efficiency of military logistics operations. The services provided likely impact the strategic positioning and effectiveness of missile defense systems. While specific geographic impacts are not detailed, improved logistics can indirectly benefit military personnel and operations nationwide.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition increases risk of inflated pricing.
Sole-source award limits transparency and accountability in pricing.
CPIF contract type requires diligent oversight to prevent cost overruns.
Absence of small business participation may indicate missed opportunities for innovation and cost-effectiveness.

Positive Signals

Award to a large, established contractor like Lockheed Martin suggests potential for deep expertise in complex logistics.
The contract aims to improve critical logistics functions for the Missile Defense Agency.
The CPIF structure, if managed well, can incentivize contractor performance towards specific goals.

Sector Analysis

The federal sector for logistics consulting services is substantial, encompassing a wide range of support functions for government agencies. This contract falls within the broader professional services category, often characterized by specialized expertise. Comparable spending benchmarks are difficult to establish without more granular data on the specific nature of the consulting provided, but large-scale defense logistics contracts can run into tens or hundreds of millions of dollars. The market includes major defense contractors and specialized consulting firms.

Small Business Impact

This contract did not include a small business set-aside, nor is there an indication of subcontracting with small businesses. This suggests that opportunities for small businesses in this specific procurement were limited. The absence of set-asides in large sole-source contracts can concentrate spending among prime contractors and may not fully leverage the innovative capabilities or cost efficiencies that small businesses can often provide.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Missile Defense Agency would be responsible for monitoring performance and ensuring compliance with the contract terms, particularly the incentive fee structure. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Defense Logistics Agency Contracts
Missile Defense Agency Support Services
Department of Defense Consulting Services
Logistics and Supply Chain Management Contracts

Risk Flags

Sole-source award lacks competitive pricing.
Potential for cost overruns with CPIF contract type.
Limited transparency on performance metrics and value.
Absence of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.4 million to LOCKHEED MARTIN CORPORATION. FOUNDATION IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $33.4 million.

What is the period of performance?

Start: 2018-11-18. End: 2020-05-21.

What specific logistics challenges was Lockheed Martin contracted to address for the Missile Defense Agency?

The contract data indicates the scope was 'Process, Physical Distribution, and Logistics Consulting Services' (NAICS 541614). While the specific challenges are not detailed in the provided data, this typically involves optimizing supply chains, improving inventory management, enhancing transportation efficiency, and streamlining distribution processes. For the Missile Defense Agency, this could relate to the complex logistical requirements of maintaining and deploying advanced missile defense systems, ensuring timely delivery of components, and managing the lifecycle of sensitive equipment.

How does the Cost Plus Incentive Fee (CPIF) structure work in this contract, and what are the risks?

A CPIF contract involves a target cost, a target profit, and a share ratio between the government and the contractor. If the final cost is below the target, both share in the savings. If it exceeds the target, both share in the overruns, up to a ceiling. The incentive fee is adjusted based on performance against pre-defined criteria. The primary risk is that if the target cost is set too high or the performance metrics are not sufficiently challenging, the contractor may receive higher profits without a commensurate increase in value or efficiency, potentially leading to higher overall costs for the government.

What is the typical market rate or benchmark for similar logistics consulting services in the federal government?

Benchmarking logistics consulting services is challenging due to the wide variation in scope, complexity, and duration. However, federal contracts for similar professional services, especially those involving defense logistics, can range significantly. Without knowing the specific deliverables and performance metrics of this $33.4 million contract, a direct comparison is difficult. Generally, competitive bidding yields lower prices. Sole-source awards, particularly to large contractors, often command premium rates due to perceived expertise and established relationships, but this can also indicate a lack of market pressure to reduce costs.

What is Lockheed Martin's track record with similar sole-source logistics contracts within the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with extensive experience in logistics and systems integration across various defense programs. While specific details on their sole-source logistics contracts are not provided here, the company frequently holds large, complex contracts with the DoD. Their track record generally involves managing intricate supply chains and providing advanced technical support. However, the nature of sole-source awards means their performance and pricing on such contracts may not be publicly scrutinized through competitive comparisons, making independent assessment of their value proposition on this specific contract difficult.

Are there any indications of potential cost overruns or performance issues based on the contract's duration and award type?

The contract was awarded in November 2018 and ended in May 2020, spanning approximately 550 days. The award type is 'Cost Plus Incentive Fee' (CPIF), which inherently carries a risk of cost overruns if not managed meticulously. Without access to the final cost, performance reports, or any modifications, it's impossible to definitively state if cost overruns occurred. However, the CPIF structure necessitates close government oversight to ensure the contractor is incentivized to control costs and meet performance targets effectively. The duration itself is substantial for consulting, suggesting a complex or ongoing set of logistical challenges.

How does this contract's spending compare to other federal logistics support or consulting services?

The $33.4 million award is a significant sum for a single logistics consulting contract. However, within the broader context of Department of Defense spending, particularly for major defense systems like missile defense, this amount might be considered moderate. The DoD procures billions of dollars annually in logistics, maintenance, and support services. Comparing this specific contract requires looking at contracts with similar NAICS codes (541614) and similar agencies. Given its sole-source nature and award to a prime contractor, it likely represents a specialized, high-value service rather than a broadly competed commodity service.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Process, Physical Distribution, and Logistics Consulting Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1701 W MARSHALL DR, GRAND PRAIRIE, TX, 75051

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: $34,343,154

Exercised Options: $34,343,154

Current Obligation: $33,413,556

Actual Outlays: $1,033,173

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ014710D0001

IDV Type: IDC

Timeline