DoD awards $105M contract for navigation systems to Lockheed Martin, raising questions about competition

Contract Overview

Contract Amount: $105,218,433 ($105.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2000-12-08

End Date: 2011-09-01

Contract Duration: 3,919 days

Daily Burn Rate: $26.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $105.2 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long contract duration (nearly 10 years) suggests a need for sustained support, but also limits flexibility. 3. The firm-fixed-price structure shifts risk to the contractor, which can be beneficial if managed effectively. 4. Awarded to a single, large defense contractor, potentially crowding out smaller, innovative firms. 5. The specific North American Industry Classification System (NAICS) code indicates a focus on specialized manufacturing. 6. Geographic location of the contractor (Florida) may have implications for regional economic impact.

Value Assessment

Rating: questionable

Benchmarking the value of this $105 million contract is challenging without more detailed cost breakdowns or comparisons to similar sole-source awards. The firm-fixed-price (FFP) contract type suggests that the contractor bears the risk of cost overruns, which can be a positive indicator of value if the price is competitive. However, the lack of competition inherently limits the government's ability to ensure it is receiving the best possible price. Without competitive bids, it's difficult to ascertain if the price reflects true market value or if it includes a premium due to the sole-source nature of the award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one bidder, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances, such as when only one entity possesses the required unique capabilities or when urgency precludes a full competition, they inherently reduce the potential for robust price discovery and may lead to higher costs for the government.

Taxpayer Impact: The absence of competition means taxpayers may not benefit from the cost savings that typically arise from a competitive bidding environment. This could translate to a higher overall expenditure for the required navigation systems.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical navigation systems for its operations. The contract supports the manufacturing and potential sustainment of specialized search, detection, navigation, guidance, aeronautical, and nautical systems. The geographic impact is concentrated in Florida, where Lockheed Martin's operations are based, potentially supporting local jobs and the regional economy. Workforce implications include the employment of skilled engineers, technicians, and manufacturing personnel within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to suboptimal pricing.
Long contract duration could indicate a lack of agile acquisition strategies.
Reliance on a single large contractor may reduce market dynamism.
Lack of transparency inherent in sole-source procurements hinders public scrutiny.
Potential for cost creep if contract terms are not rigorously managed despite FFP.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
Award to an established contractor like Lockheed Martin suggests a track record of capability.
Contract duration implies a stable, long-term need for these systems.
Specialized nature of the systems may indeed require a specific, experienced provider.

Sector Analysis

The contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation and guidance systems. This is a highly specialized and technologically intensive area within the broader defense industry. The market is characterized by high barriers to entry, significant R&D investment, and a primary customer base of government entities. Comparable spending benchmarks would typically involve other large-scale defense system procurements, often awarded to major prime contractors.

Small Business Impact

This contract does not appear to involve a small business set-aside, as it was awarded to Lockheed Martin Corporation, a major defense contractor. There is no explicit information regarding subcontracting plans for small businesses. The sole-source nature of the award further suggests that opportunities for small businesses to participate as prime contractors were not pursued through a competitive process. This could limit the direct impact on the small business ecosystem in this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and oversight bodies, such as the Defense Contract Management Agency (DCMA), which is listed as the administering agency. Accountability measures are typically embedded within the contract terms, including performance standards and reporting requirements. Transparency is limited due to the sole-source nature of the award, making detailed public scrutiny of the procurement process and pricing more difficult. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

DoD Navigation Systems Procurement
Aerospace & Defense Manufacturing Contracts
Lockheed Martin Corporation Contracts
Sole-Source Defense Awards
Firm-Fixed-Price Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Long contract duration
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $105.2 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $105.2 million.

What is the period of performance?

Start: 2000-12-08. End: 2011-09-01.

What is Lockheed Martin Corporation's track record with similar sole-source navigation system contracts awarded by the Department of Defense?

Lockheed Martin Corporation has a long history of developing and supplying complex systems, including navigation, guidance, and control technologies, to the Department of Defense. Their track record with sole-source contracts in this domain is extensive, often stemming from their established role as a prime contractor for major defense platforms. While specific data on all sole-source awards is not publicly itemized, their consistent presence in large-scale defense procurements suggests a capacity to meet demanding technical requirements. However, the justification for sole-sourcing often relates to unique capabilities or prior development work, which can limit direct comparisons to competitive bids. Analyzing past sole-source awards to Lockheed Martin would require delving into specific contract justifications and performance histories to assess value and necessity.

How does the $105 million value of this contract compare to similar navigation system procurements, considering it was sole-sourced?

Directly comparing the $105 million value of this sole-source contract to similar procurements is challenging due to the inherent lack of competitive benchmarking. In a competitive environment, multiple bids would establish a market-driven price. For sole-source awards, the government relies on negotiation and justification of costs. If this contract were competed, it's plausible that the price could be lower due to competitive pressures. However, the specific nature of the systems, the duration of the contract (nearly 10 years), and the specialized capabilities required by Lockheed Martin might justify a significant investment. Without access to detailed cost proposals or data from comparable sole-source awards for highly specialized navigation systems, it's difficult to definitively state whether $105 million represents a fair market price or a premium.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with awarding a contract of this magnitude ($105 million) on a sole-source basis include: 1. **Higher Costs:** The absence of competition can lead to the government paying a premium compared to what might be achieved through a competitive bidding process. 2. **Reduced Innovation:** Sole-sourcing may disincentivize innovation, as the contractor faces less pressure to develop more cost-effective or technologically advanced solutions. 3. **Lack of Transparency:** Sole-source procurements are often less transparent, making it harder for the public and oversight bodies to scrutinize the justification for the award and the pricing. 4. **Contractor Lock-in:** The government may become overly reliant on a single contractor, potentially limiting future flexibility and options. 5. **Potential for Complacency:** Without competitive threats, the contractor might experience reduced motivation to maintain peak performance or efficiency.

What specific navigation systems or technologies does this contract cover, and what is their importance to the Department of Defense?

This contract, under NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing), likely covers a range of sophisticated systems critical for military operations. These could include inertial navigation systems (INS), global positioning system (GPS) receivers, radar-based navigation, electronic warfare integration for navigation, and associated software and hardware. Such systems are fundamental for aircraft, ships, ground vehicles, and potentially even individual soldiers to accurately determine their position, course, and speed. Their importance to the DoD is paramount for mission success, enabling precise targeting, safe transit through contested airspace or waters, troop deployment, and logistical support. Failures or inaccuracies in these systems can have severe operational consequences.

What is the historical spending pattern for navigation systems by the Department of Defense, and how does this contract fit within that trend?

The Department of Defense historically spends billions of dollars annually on a wide array of systems, including navigation, guidance, and control technologies. Spending in this category is driven by the need to equip diverse platforms (air, land, sea, space) with state-of-the-art capabilities for situational awareness and mission execution. Trends often involve upgrades to existing systems to counter evolving threats (e.g., GPS jamming), integration of new technologies (e.g., AI-driven navigation), and sustainment of long-lifecycle platforms. This $105 million contract, awarded over a nearly decade-long period, represents a significant, albeit specific, investment within this broader spending landscape. It likely contributes to the sustainment or modernization of particular DoD assets requiring these specialized navigation capabilities, fitting into the ongoing effort to maintain technological superiority.

What are the implications of the firm-fixed-price (FFP) contract type for managing costs and risks on this $105 million award?

The Firm-Fixed-Price (FFP) contract type is generally favored by the government when the scope of work is well-defined and risks can be reasonably estimated. For this $105 million award to Lockheed Martin, FFP means the contractor agrees to a total price, and is responsible for all costs incurred to complete the work. This shifts the primary cost risk from the government to the contractor. If Lockheed Martin's costs exceed the agreed-upon price, their profit margin will decrease. Conversely, if they manage costs effectively and complete the work under budget, their profit will increase. This structure incentivizes the contractor to control costs and improve efficiency. However, for complex, long-duration contracts, there's a risk that the initial price may not adequately account for unforeseen challenges, potentially leading to contractor requests for modifications or, in extreme cases, performance issues if the contractor cannot absorb unexpected cost increases.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 12506LAKE UNDERHILL ROAD, ORLANDO, FL, 90

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline