DoD's $604M C2BMC contract to Lockheed Martin raises questions on value and competition

Contract Overview

Contract Amount: $604,106,073 ($604.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-03-15

End Date: 2025-10-31

Contract Duration: 2,422 days

Daily Burn Rate: $249.4K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THE PURPOSE OF THIS TO IS TO DEFINE THE REQUIREMENTS FOR THE CONTRACTOR TO DEVELOP AND DEPLOY THE COMMAND AND CONTROL, BATTLE MANAGEMENT AND COMMUNICATIONS (C2BMC) CAPABILITY IN MULTIPLE PHASES THROUGH FY 2022 AND PLANNING FOR FUTURE BMDS INCREMENTS.

Place of Performance

Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80921

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $604.1 million to LOCKHEED MARTIN CORPORATION for work described as: THE PURPOSE OF THIS TO IS TO DEFINE THE REQUIREMENTS FOR THE CONTRACTOR TO DEVELOP AND DEPLOY THE COMMAND AND CONTROL, BATTLE MANAGEMENT AND COMMUNICATIONS (C2BMC) CAPABILITY IN MULTIPLE PHASES THROUGH FY 2022 AND PLANNING FOR FUTURE BMDS INCREMENTS. Key points: 1. The contract's significant value warrants scrutiny for cost-effectiveness and alignment with performance objectives. 2. Limited competition for this critical defense system may impact pricing and innovation. 3. The long duration and cost-plus incentive fee structure present potential risks for budget adherence. 4. Performance context is crucial to understand the value delivered against the substantial investment. 5. This contract positions Lockheed Martin as a key provider for a vital national security capability. 6. The absence of small business participation warrants examination of subcontracting opportunities.

Value Assessment

Rating: questionable

The total contract value of over $604 million for the Command and Control, Battle Management, and Communications (C2BMC) capability is substantial. Benchmarking this against similar complex defense system development contracts is challenging due to the unique nature of C2BMC. However, the cost-plus incentive fee (CPIF) pricing structure, while incentivizing performance, can lead to cost overruns if not rigorously managed. The absence of a clear per-unit cost metric makes direct value-for-money assessment difficult without detailed performance and cost breakdowns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often justified for highly specialized or critical systems where only one contractor possesses the necessary expertise or has already developed the foundational technology. However, the lack of competition limits the government's ability to explore alternative solutions or secure more favorable pricing through a competitive bidding process. The justification for this sole-source award needs to be robust to ensure taxpayer funds are used efficiently.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. It also limits opportunities for other capable companies to contribute to this important defense capability.

Public Impact

The primary beneficiaries are the Department of Defense and national security operations, which gain enhanced command and control capabilities. The contract delivers the development and deployment of the C2BMC capability, crucial for missile defense. The geographic impact is likely global, supporting U.S. military operations and missile defense efforts worldwide. Workforce implications include specialized roles in software development, systems engineering, and program management, primarily benefiting Lockheed Martin employees.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs and reduced innovation.
Cost-plus incentive fee contracts can incentivize cost growth if not closely monitored.
The long contract duration increases the risk of scope creep and budget overruns.
The sole-source nature limits opportunities for small businesses to participate directly.

Positive Signals

The contract supports a critical national security capability (C2BMC).
Lockheed Martin has established expertise in this domain.
The CPIF structure aims to align contractor performance with government objectives.
The contract includes planning for future system increments, suggesting a long-term strategic approach.

Sector Analysis

The Command and Control, Battle Management, and Communications (C2BMC) capability falls within the defense information technology and systems integration sector. This sector is characterized by high R&D investment, long development cycles, and significant government spending. The market is dominated by large defense contractors due to the complexity and security requirements. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of C2BMC, but it represents a significant investment in a specialized area of defense technology.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. The absence of explicit set-asides means that small businesses are unlikely to be direct prime contractors. However, there may be opportunities for small businesses to participate as subcontractors to Lockheed Martin. The impact on the small business ecosystem depends on the extent to which Lockheed Martin engages with and utilizes small business capabilities for specialized services or components.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are usually embedded within the CPIF structure, linking contractor bonuses to performance metrics. Transparency is often limited for classified or sensitive defense systems, but contract awards and modifications are generally reported. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Ballistic Missile Defense Program
Command and Control Systems
Defense Communications Networks
Aerospace and Defense IT Services

Risk Flags

Sole-source award lacks competitive pricing pressure.
Cost-plus contract type carries inherent risk of cost overruns.
Long contract duration increases potential for scope creep and obsolescence.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $604.1 million to LOCKHEED MARTIN CORPORATION. THE PURPOSE OF THIS TO IS TO DEFINE THE REQUIREMENTS FOR THE CONTRACTOR TO DEVELOP AND DEPLOY THE COMMAND AND CONTROL, BATTLE MANAGEMENT AND COMMUNICATIONS (C2BMC) CAPABILITY IN MULTIPLE PHASES THROUGH FY 2022 AND PLANNING FOR FUTURE BMDS INCREMENTS.

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 $604.1 million.

What is the period of performance?

Start: 2019-03-15. End: 2025-10-31.

What is the historical spending trend for the C2BMC program under Lockheed Martin?

Historical spending data for the C2BMC program under Lockheed Martin would reveal the cumulative investment over time. Analyzing this trend against contract milestones and system deployments is crucial for understanding the program's lifecycle costs and financial trajectory. Significant year-over-year increases or decreases could indicate program expansion, contraction, or shifts in funding priorities. Without specific historical data, it's difficult to assess if the current $604 million represents a typical annual spend or a peak investment phase. Understanding past spending patterns helps in forecasting future budgetary needs and identifying potential cost efficiencies.

How does the cost-plus incentive fee (CPIF) structure compare to other contract types for similar defense systems?

Cost-Plus Incentive Fee (CPIF) contracts are common in complex defense programs where technical uncertainties are high and performance outcomes are difficult to define precisely upfront. Unlike fixed-price contracts, CPIF allows for cost reimbursement plus a fee that is adjusted based on performance against targets (e.g., cost, schedule, technical). Compared to Cost Plus Fixed Fee (CPFF), CPIF offers greater incentive for the contractor to control costs. However, it still carries the risk of cost overruns if targets are not met or if the baseline estimates are inaccurate. For highly innovative or developmental systems, CPIF can be more appropriate than fixed-price contracts, but it requires robust government oversight to manage effectively and ensure value for money.

What are the specific performance metrics tied to the incentive fee in this contract?

The specific performance metrics tied to the incentive fee in this contract are not publicly detailed in the provided data. Typically, for a CPIF contract of this nature, metrics could include achieving specific technical performance thresholds (e.g., system reliability, processing speed, data accuracy), adhering to delivery schedules for different phases, and controlling costs relative to established targets. The 'incentive' portion of the fee is earned when the contractor meets or exceeds these pre-defined objectives. The effectiveness of the CPIF structure hinges on the clarity, measurability, and attainability of these metrics, as well as the government's ability to objectively assess performance against them.

What is the justification for awarding this contract on a sole-source basis?

The justification for awarding this contract on a sole-source basis is not explicitly provided in the data. However, sole-source awards for complex defense systems like C2BMC are typically justified under specific circumstances outlined in federal acquisition regulations. These often include situations where: 1) the system is unique and only one responsible source can provide the required capability; 2) there is a critical need for the system, and competition would cause unacceptable delays; or 3) the system is a follow-on to a previous contract where the original contractor possesses unique knowledge or proprietary data. A thorough justification document, often requiring higher-level approval, would detail the specific reasons why full and open competition was not feasible or advantageous.

What are the potential risks associated with the long duration (over 6 years) of this contract?

The long duration of this contract, spanning from March 2019 to October 2025 (over 6 years), presents several potential risks. Firstly, the risk of scope creep is significant, as requirements may evolve over such an extended period, potentially leading to cost increases and schedule delays. Secondly, technological obsolescence is a concern; by the end of the contract, the deployed systems might be less advanced than current market offerings. Thirdly, maintaining consistent contractor performance and oversight over many years can be challenging. Finally, long-term contracts can tie up significant government resources, potentially limiting flexibility to adapt to changing strategic needs or explore alternative solutions that may emerge during the contract period.

How does the C2BMC capability contribute to the broader Missile Defense Agency (MDA) mission?

The Command and Control, Battle Management, and Communications (C2BMC) capability is fundamental to the Missile Defense Agency's (MDA) overall mission. C2BMC acts as the 'brain' of the Ballistic Missile Defense System (BMDS), integrating data from various sensors (radars, satellites) to detect, track, and identify threats. It then provides the necessary command and control functions to engage those threats with interceptors. Essentially, C2BMC enables the coordinated operation of disparate missile defense elements, ensuring a unified and effective response to ballistic missile attacks. Without a robust C2BMC system, the individual components of the BMDS would operate in isolation, significantly diminishing the overall effectiveness of U.S. missile defense capabilities.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014711R0003

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 700 N FREDERICK AVE, GAITHERSBURG, MD, 20878

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: $618,855,294

Exercised Options: $618,855,294

Current Obligation: $604,106,073

Actual Outlays: $50,977,345

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ014712D0003

IDV Type: IDC

Timeline