DoD awards $505.6M for missile defense operations and maintenance to Lockheed Martin

Contract Overview

Contract Amount: $505,655,936 ($505.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-11-15

End Date: 2025-06-30

Contract Duration: 2,054 days

Daily Burn Rate: $246.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AWARD OF TASK ORDER HQ0852-20-F-0002 OPERATIONS AND MAINTENANCE FOLLOW ON EFFORT.

Place of Performance

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

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $505.7 million to LOCKHEED MARTIN CORPORATION for work described as: AWARD OF TASK ORDER HQ0852-20-F-0002 OPERATIONS AND MAINTENANCE FOLLOW ON EFFORT. Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Significant duration of 2054 days suggests a long-term, critical support role. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring robust oversight. 4. Missile Defense Agency's reliance on a single contractor for essential operations. 5. Operations and maintenance focus indicates a need for sustained technical expertise. 6. The contract's value represents a substantial investment in national defense infrastructure.

Value Assessment

Rating: questionable

Benchmarking the value of this $505.6 million contract is challenging without detailed cost breakdowns and comparisons to similar sole-source operations and maintenance contracts. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex services, can lead to higher overall costs if not managed effectively. The lack of competition inherently limits the government's ability to secure the best possible price. Further analysis of the fixed fee and indirect cost rates would be necessary to assess true value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when a specific contractor possesses unique capabilities or when urgency precludes a competitive process. The absence of multiple bidders means the government did not benefit from price discovery through competitive bidding, potentially leading to a higher price than if multiple offers had been considered.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive pressure to drive down costs. Without competition, there is less incentive for the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are the Department of Defense and the Missile Defense Agency, ensuring the continued operation of critical missile defense systems. Services delivered include operations and maintenance, crucial for the readiness and effectiveness of national defense assets. The contract has a geographic impact primarily in Colorado, where the contractor is located, but supports national defense operations. Workforce implications include the employment of personnel with specialized skills in systems operations and maintenance, likely within Lockheed Martin's existing workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Long contract duration (2054 days) requires sustained oversight to ensure performance and cost control.
Lack of transparency in sole-source justification makes it difficult to assess necessity.
Potential for contractor lock-in due to specialized knowledge and long-term relationship.

Positive Signals

Award to a known contractor (Lockheed Martin) with established experience in defense systems.
Focus on operations and maintenance suggests a need for continuity and reliability.
The contract supports critical national security functions, ensuring system readiness.
Fixed fee component provides some cost predictability compared to purely cost-reimbursement contracts.

Sector Analysis

This contract falls within the Defense sector, specifically supporting missile defense systems. The market for such specialized operations and maintenance services is highly concentrated, often dominated by a few large defense contractors with the requisite expertise and security clearances. Spending in this area is driven by national security priorities and the ongoing need to maintain and upgrade complex defense platforms. Comparable spending benchmarks would likely involve other large-scale sustainment contracts for major defense systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'st': 'CO' and 'sn': 'COLORADO' suggest the primary awardee is located in Colorado, and 'ss': false indicates it's not a small business. While Lockheed Martin is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors. However, the specific subcontracting plan details are not provided here, making it difficult to assess the direct impact on the small business ecosystem for this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Missile Defense Agency. Given the sole-source nature and CPFF structure, rigorous oversight of costs, performance, and compliance is crucial. Accountability measures would likely involve regular performance reviews, audits, and adherence to contractual milestones. Transparency may be limited due to the sole-source justification, but reporting requirements within the contract should provide some level of insight into program execution.

Related Government Programs

Missile Defense Systems
Aerospace and Defense Contracting
Operations and Maintenance Services
Department of Defense IT and Support Services
Major Weapon System Sustainment

Risk Flags

Sole Source Justification
Cost-Plus-Fixed-Fee Pricing
Long Contract Duration
Lack of Competition
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $505.7 million to LOCKHEED MARTIN CORPORATION. AWARD OF TASK ORDER HQ0852-20-F-0002 OPERATIONS AND MAINTENANCE FOLLOW ON EFFORT.

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 $505.7 million.

What is the period of performance?

Start: 2019-11-15. End: 2025-06-30.

What is Lockheed Martin's track record with the Missile Defense Agency and similar defense contracts?

Lockheed Martin Corporation is a major defense contractor with extensive experience supporting U.S. military programs, including missile defense systems. They have a long-standing relationship with the Missile Defense Agency (MDA), often serving as a prime contractor for various components and systems. Their track record includes developing, producing, and sustaining complex platforms like the Terminal High Altitude Area Defense (THAAD) system and Aegis Ballistic Missile Defense. While generally considered a reliable performer, like any large contractor, they have faced scrutiny on specific programs regarding cost, schedule, and performance. For operations and maintenance contracts, their experience typically involves providing sustainment, logistics, and technical support, leveraging their deep understanding of the systems they help develop. Specific performance metrics for this particular follow-on effort would be detailed in internal MDA performance reports.

How does the $505.6 million award compare to historical spending on missile defense operations and maintenance?

The $505.6 million award represents a significant, but not unprecedented, investment in missile defense operations and maintenance. The Missile Defense Agency's budget typically runs into the billions of dollars annually, with substantial portions allocated to sustainment and operational readiness of its diverse systems. Historical spending on O&M for missile defense has fluctuated based on program maturity, threat assessments, and modernization efforts. For instance, major system procurements often lead to increased O&M costs in subsequent years. Without specific historical data for this exact follow-on effort or comparable systems, it's difficult to provide a precise percentage comparison. However, this award aligns with the substantial, long-term financial commitment required to maintain the complex and critical capabilities of the U.S. missile defense architecture.

What are the primary risks associated with this sole-source, cost-plus-fixed-fee contract?

The primary risks associated with this sole-source, cost-plus-fixed-fee (CPFF) contract are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated costs and reduced incentive for efficiency. The government has limited leverage to negotiate the best price. Secondly, the CPFF structure, while providing flexibility, carries the inherent risk of cost overruns. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize spending if oversight is not rigorous. If costs increase, the contractor's profit (the fixed fee) remains the same, but the total contract value escalates. Thirdly, there's a risk of contractor complacency or 'lock-in' due to the long duration and specialized nature of the services, making it difficult and costly to transition to another provider. Finally, ensuring adequate performance and quality assurance under a sole-source arrangement requires robust government oversight and clear performance metrics.

How effective is the Missile Defense Agency in overseeing large, sole-source contracts like this one?

The Missile Defense Agency (MDA) employs various oversight mechanisms for its contracts, including large sole-source awards. These typically involve program management reviews, technical assessments, contract surveillance, and performance monitoring. The effectiveness of this oversight is crucial, especially for CPFF contracts, to control costs and ensure mission success. MDA utilizes contracting officers' representatives (CORs) and quality assurance specialists to monitor contractor performance and compliance. However, the effectiveness can be influenced by factors such as the availability of skilled government personnel, the complexity of the systems being supported, and the degree of transparency provided by the contractor. While MDA has a mandate for oversight, the inherent challenges of sole-source procurements mean that continuous vigilance and robust internal controls are essential to mitigate risks and ensure value for taxpayer money.

What are the implications of the 2054-day duration for program continuity and contractor performance?

The contract's duration of 2054 days (approximately 5.6 years) has significant implications. For program continuity, it ensures a stable and uninterrupted provision of essential operations and maintenance services for critical missile defense systems, minimizing risks associated with service disruptions. This long-term commitment allows the contractor, Lockheed Martin, to invest in specialized personnel and infrastructure, fostering deep expertise. However, it also presents challenges. A long duration increases the risk of contractor complacency and can lead to 'vendor lock-in,' making it difficult and potentially costly to switch providers later. It necessitates sustained government oversight throughout the contract's life cycle to ensure performance remains high, costs are controlled, and the contractor remains responsive to evolving requirements. Regular performance reviews and contract modifications will be key to managing this extended period effectively.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ014711R0003

Pricing Type: COST PLUS FIXED FEE (U)

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: $533,852,252

Exercised Options: $533,852,252

Current Obligation: $505,655,936

Actual Outlays: $235,887,224

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