DoD Awards $2.87B for JSF LRIP LOT II to Lockheed Martin, Raising Cost Concerns

Contract Overview

Contract Amount: $2,870,976,999 ($2.9B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-07-27

End Date: 2016-07-06

Contract Duration: 3,267 days

Daily Burn Rate: $878.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: JSF LRIP LOT II - AAC

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76101

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $2.87 billion to LOCKHEED MARTIN CORPORATION for work described as: JSF LRIP LOT II - AAC Key points: 1. Significant investment in advanced aircraft manufacturing. 2. Sole-source award to Lockheed Martin limits competitive pricing. 3. Potential for cost overruns due to cost-plus contract type. 4. Long contract duration suggests sustained program needs.

Value Assessment

Rating: questionable

The contract's cost-plus incentive fee structure, coupled with a sole-source award, raises concerns about optimal pricing. Benchmarking against similar advanced aircraft development contracts would be necessary to fully assess value.

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 significantly limits price discovery and may lead to higher costs than if multiple vendors had competed.

Taxpayer Impact: The lack of competition in this large contract could result in taxpayers paying a premium for the aircraft, as the government did not leverage competitive pressures to drive down costs.

Public Impact

Impacts national defense capabilities through advanced fighter jet acquisition. Long-term commitment to a single prime contractor for a critical defense system. Potential for follow-on contracts and sustainment costs impacting future budgets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost-plus contract type
Lack of competition
High contract value

Positive Signals

Critical defense program
Long-term commitment

Sector Analysis

This contract falls within the aerospace and defense sector, specifically aircraft manufacturing. Spending in this area is often characterized by high R&D costs, long production cycles, and significant government oversight due to national security implications.

Small Business Impact

The data does not indicate any specific provisions or subcontracting goals for small businesses within this contract. As a sole-source award to a large prime contractor, opportunities for small businesses may be limited unless actively pursued through subcontracting.

Oversight & Accountability

The contract's long duration and sole-source nature necessitate robust oversight from the Defense Contract Management Agency to ensure performance, cost control, and adherence to contract terms. Regular audits and performance reviews are crucial.

Related Government Programs

Aircraft Manufacturing
Department of Defense Contracting
Defense Contract Management Agency Programs

Risk Flags

Sole-source award limits competition and price discovery.
Cost-plus contract type can incentivize spending.
High contract value increases financial exposure.
Long contract duration may mask inefficiencies.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.87 billion to LOCKHEED MARTIN CORPORATION. JSF LRIP LOT II - AAC

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 $2.87 billion.

What is the period of performance?

Start: 2007-07-27. End: 2016-07-06.

What is the projected total cost of the JSF program across all lots and phases, and how does this specific lot's cost compare?

The Joint Strike Fighter (JSF) program, encompassing all its lots and phases, represents a multi-trillion dollar investment over its lifecycle. This specific Lot II LRIP award of $2.87 billion is a significant portion, but it's crucial to analyze it within the broader program's total projected expenditure to understand its relative cost impact and identify potential cost efficiencies or overruns across the entire program.

What are the specific performance metrics and incentive structures within this cost-plus incentive fee contract, and how are they designed to mitigate risk?

The cost-plus incentive fee (CPIF) structure aims to share risk between the government and contractor. Specific performance metrics likely relate to production targets, quality standards, and delivery schedules. The incentive fee is earned if targets are met or exceeded, while cost overruns are shared, theoretically motivating the contractor to control expenses. However, the effectiveness depends heavily on the clarity and attainability of these metrics.

How does the unit cost of the aircraft produced under this lot compare to previous lots or similar aircraft programs, considering the sole-source nature?

Given this is a sole-source award for Lot II LRIP, direct unit cost comparisons to competitively bid lots or other programs are challenging. While the CPIF contract has incentive elements, the absence of competition inherently limits downward price pressure. Analysis would require comparing the target cost and fee structure against historical data for the JSF program and, where possible, against benchmarks for comparable advanced military aircraft, acknowledging the unique nature of this award.

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

Address: LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $5,366,016,454

Exercised Options: $5,366,016,454

Current Obligation: $2,870,976,999

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline