DoD's $610M aircraft manufacturing contract with Lockheed Martin shows long duration and sole-source award

Contract Overview

Contract Amount: $610,175,549 ($610.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2006-04-28

End Date: 2020-06-23

Contract Duration: 5,170 days

Daily Burn Rate: $118.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76101

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $610.2 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded as sole-source, raising questions about price discovery and potential for overpayment. 2. Long contract duration of over 14 years suggests a sustained need but also potential for scope creep and evolving requirements. 3. The 'Aircraft Manufacturing' NAICS code indicates a focus on complex, high-value production, typical of defense spending. 4. The contract's cost-plus-incentive-fee (CPIF) structure aims to balance contractor risk and government savings, but requires careful oversight. 5. The absence of small business set-asides or subcontracting data warrants further investigation into potential impacts on smaller firms. 6. Awarded by the Department of Defense, this contract likely supports critical national security objectives.

Value Assessment

Rating: questionable

Benchmarking the value of this $610 million contract is challenging without specific deliverables or comparable sole-source awards. However, the extended duration and sole-source nature raise concerns about potential inefficiencies and lack of competitive pressure on pricing. The CPIF structure, while designed to incentivize performance, can lead to higher costs if not rigorously managed. Without detailed cost breakdowns or comparisons to similar sole-source aircraft manufacturing contracts, it's difficult to definitively assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when only one source is capable of meeting the government's needs, often due to proprietary technology, unique capabilities, or urgent requirements. The lack of competition means the government did not benefit from a bidding process that could drive down prices and encourage innovation.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Sole-source awards reduce the government's leverage in negotiating favorable terms and prices, potentially leading to higher overall expenditure.

Public Impact

The primary beneficiaries are likely the Department of Defense, receiving critical aircraft manufacturing capabilities. The contract supports the production of aircraft, essential for national defense and military operations. The geographic impact is centered in Texas (ST: TX), where Lockheed Martin's operations are located, potentially supporting the local economy and workforce. Workforce implications include employment for skilled labor in aircraft manufacturing, engineering, and related support roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs.
Long contract duration increases risk of cost overruns and scope creep.
Lack of transparency in pricing due to sole-source nature.
Absence of small business participation data requires further review.
CPIF contract type necessitates robust government oversight to ensure cost control.

Positive Signals

Awarded to a major defense contractor with established capabilities.
CPIF structure includes incentives for performance, potentially improving efficiency.
Long duration indicates a sustained and critical need for the manufactured aircraft.
Contract supports national security objectives.

Sector Analysis

The aircraft manufacturing sector within the defense industry is characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract falls within a segment of the aerospace and defense market focused on the production of complex military aircraft. Spending in this sector is heavily influenced by geopolitical factors and national security priorities. Comparable spending benchmarks would typically involve other large-scale defense manufacturing contracts for aircraft, engines, or related systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there readily available data on subcontracting to small businesses. The sole-source nature of the award further limits opportunities for small businesses to participate directly. This could mean that the economic benefits are concentrated within the prime contractor, and efforts to engage the small business industrial base may be minimal or managed separately.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Given the CPIF structure, rigorous oversight of costs, performance metrics, and incentive achievement is crucial. Transparency may be limited due to the sole-source nature, but reporting requirements within the contract should provide some level of accountability. Inspector General investigations could be initiated if specific concerns regarding fraud, waste, or abuse arise.

Related Government Programs

Aircraft Procurement
Defense Manufacturing
Major Weapon Systems Acquisition
Lockheed Martin Contracts
Cost-Plus Contracts

Risk Flags

Sole-source award may lead to higher costs.
Long contract duration increases risk of obsolescence and cost growth.
Lack of competition limits price discovery.
CPIF requires diligent oversight to manage costs effectively.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $610.2 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 $610.2 million.

What is the period of performance?

Start: 2006-04-28. End: 2020-06-23.

What specific aircraft are being manufactured under this contract, and what is their intended use?

The provided data does not specify the exact type of aircraft being manufactured under this contract. However, given the contractor (Lockheed Martin) and the awarding agency (Department of Defense), it is highly probable that these are military aircraft, potentially fighter jets, transport planes, or specialized reconnaissance aircraft. The intended use would align with the DoD's strategic objectives, such as air superiority, troop/cargo transport, intelligence gathering, or close air support. Further details would require access to the contract's statement of work or related documentation.

How does the $610 million total award amount compare to typical aircraft manufacturing contracts of similar scope?

A total award of $610 million for aircraft manufacturing is substantial, but its comparability depends heavily on the specific aircraft type, quantity, and complexity. Large-scale defense contracts for advanced fighter jets or bombers can easily run into billions of dollars over their lifecycle. However, for a single definitive contract spanning over 14 years, $610 million might represent a significant portion of a program's development or initial production phase, or it could be for a smaller fleet of specialized aircraft. Without knowing the specific deliverables, it's difficult to benchmark accurately against industry averages.

What are the key performance metrics and incentive structures within the Cost Plus Incentive Fee (CPIF) arrangement?

A Cost Plus Incentive Fee (CPIF) contract involves a target cost, a target profit, and a fee that is adjusted based on the contractor's performance against pre-defined criteria. Key performance metrics often relate to schedule adherence, technical performance (e.g., system reliability, operational effectiveness), and cost control. The incentive structure typically defines how the final fee will vary – either upward or downward – from the target fee based on achieving or exceeding these metrics. For this contract, specific metrics would be detailed in the contract's Statement of Work and would likely focus on production efficiency, quality standards, and timely delivery of aircraft.

What is the rationale behind the sole-source award, and were alternative sources considered?

The rationale for a sole-source award is typically that only one responsible source is capable of providing the required supplies or services. For complex defense systems like aircraft, this often stems from unique technological capabilities, proprietary designs, existing infrastructure, or the need for commonality with existing fleets. The data indicates the contract was 'NOT COMPETED,' suggesting that a formal competitive process was bypassed. While alternatives might have been considered internally, the official justification for sole-sourcing would need to be documented by the agency, often involving a Justification and Approval (J&A) document outlining why full and open competition was not feasible or not in the government's best interest.

What are the potential risks associated with a contract duration of over 14 years (5170 days)?

A contract duration of over 14 years presents several risks. Firstly, requirements can change significantly over such a long period due to evolving threats, technological advancements, or shifts in strategic priorities, potentially rendering the original scope obsolete or inefficient. Secondly, long-term contracts increase the risk of cost growth due to inflation, unforeseen technical challenges, and potential scope creep if not managed tightly. Thirdly, maintaining contractor focus and performance over an extended period can be challenging. Finally, the government may miss opportunities to leverage newer technologies or more cost-effective solutions that emerge during the contract's life.

How has Lockheed Martin's performance been on similar large-scale defense manufacturing contracts?

Lockheed Martin is a major defense contractor with extensive experience in large-scale aircraft manufacturing, including programs like the F-35, F-16, C-130, and various missile systems. Historically, the company has a track record of delivering complex systems, but like many large defense firms, it has also faced scrutiny regarding cost overruns, schedule delays, and performance issues on certain programs. Assessing performance on this specific contract would require examining its individual performance reports, award fee determinations, and any contract modifications or disputes. General performance trends across the company suggest a capacity for high-value production but also highlight the importance of robust government oversight.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $602,662,455

Current Obligation: $610,175,549

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline