Lockheed Martin awarded $25.6M for KC-130J LAIRCM NRE, a sole-source aircraft manufacturing contract

Contract Overview

Contract Amount: $25,588,617 ($25.6M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2012-12-21

End Date: 2016-01-31

Contract Duration: 1,136 days

Daily Burn Rate: $22.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: KC-130J LAIRCM NRE

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $25.6 million to LOCKHEED MARTIN CORP for work described as: KC-130J LAIRCM NRE Key points: 1. Contract awarded for non-recurring engineering (NRE) related to the Large Aircraft Infrared Countermeasures (LAIRCM) system for the KC-130J. 2. The contract was awarded on a sole-source basis, indicating limited competition. 3. The duration of the contract was 1136 days, spanning from late 2012 to early 2016. 4. The contract type is Firm Fixed Price (FFP), which shifts cost risk to the contractor. 5. The North American Industry Classification System (NAICS) code 336411 points to Aircraft Manufacturing. 6. The contract was managed by the Defense Contract Management Agency (DCMA). 7. The base value of the contract was $22.5M, with the total award reaching $25.6M.

Value Assessment

Rating: fair

Assessing the value for money on this specific NRE contract is challenging without detailed cost breakdowns and comparisons to similar LAIRCM development efforts. The firm fixed price structure is a positive indicator for cost control, but the sole-source nature limits the ability to benchmark pricing against competitive bids. The total award of $25.6 million for NRE over approximately three years suggests a significant investment in system development or modification.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, Lockheed Martin Corporation, was solicited. This typically occurs when a specific capability is unique to a single provider, or in situations where urgency or proprietary technology necessitates a direct award. The lack of competition means that the government did not benefit from a price discovery process driven by multiple bids, potentially leading to a higher price than if it had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing the requirement, there is less assurance that the price reflects the lowest possible cost for the required development work.

Public Impact

The primary beneficiaries are the U.S. military branches operating the KC-130J aircraft, which will receive enhanced survivability through the LAIRCM system. The services delivered involve non-recurring engineering, which includes design, development, testing, and integration of the LAIRCM system onto the KC-130J platform. The geographic impact is primarily within the operational theaters where the KC-130J is deployed, enhancing the safety of aircrews. Workforce implications include specialized engineering and technical roles within Lockheed Martin and its subcontractors involved in the development and integration process.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Lack of transparency in the sole-source justification could mask inefficiencies or higher-than-market pricing.
NRE contracts can sometimes be subject to scope creep if not tightly managed, leading to cost overruns.

Positive Signals

Firm Fixed Price contract structure shifts cost risk to the contractor.
Awarding NRE for critical survivability systems like LAIRCM demonstrates a commitment to aircrew safety.
The contract supports the sustainment and modernization of a key military transport and support aircraft, the KC-130J.

Sector Analysis

The defense industry, particularly the aircraft manufacturing sector (NAICS 336411), is characterized by high R&D costs and long product lifecycles. Contracts for specialized systems like the Large Aircraft Infrared Countermeasures (LAIRCM) are common as militaries seek to enhance aircraft survivability. Spending on such systems is often concentrated among a few prime contractors due to the complexity and security requirements. Comparable spending benchmarks for NRE on advanced defense systems can vary widely based on system complexity and integration challenges.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements explicitly detailed in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Lockheed Martin voluntarily includes them in its supply chain for this specific NRE effort. Further analysis of subcontracting plans would be needed to fully assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance with contract terms. The firm fixed price nature provides some level of financial oversight by limiting cost increases. Transparency regarding the justification for the sole-source award and detailed cost elements would be crucial for a comprehensive accountability assessment. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

KC-130J Aircraft Program
Large Aircraft Infrared Countermeasures (LAIRCM) System
Department of Defense Aircraft Procurement
Defense Contract Management Agency (DCMA) Oversight

Risk Flags

Sole-source award limits competition
Potential for higher cost due to lack of competition
NRE contracts can have scope definition challenges

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.6 million to LOCKHEED MARTIN CORP. KC-130J LAIRCM NRE

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $25.6 million.

What is the period of performance?

Start: 2012-12-21. End: 2016-01-31.

What is the specific nature of the 'Non-Recurring Engineering' (NRE) work performed under this contract for the KC-130J LAIRCM system?

Non-Recurring Engineering (NRE) refers to the costs associated with the design, development, testing, and integration of a new system or significant modification to an existing one. For the KC-130J LAIRCM system, this likely involved activities such as initial design concepts, detailed engineering drawings, prototyping, laboratory testing of components, system integration testing on the aircraft, and potentially initial flight testing to validate performance. The goal of NRE is to establish the baseline design and prove its feasibility before moving into full-rate production or sustainment phases. The $25.6 million awarded covers these upfront development efforts, aiming to equip the KC-130J with advanced countermeasures against infrared-guided missiles.

Why was this contract awarded on a sole-source basis, and what are the implications for cost?

Sole-source awards are typically justified when only one responsible source is available or capable of meeting the requirement. This could be due to unique proprietary technology, specialized expertise, or the need for compatibility with existing systems where only one contractor can provide the necessary solution. For this KC-130J LAIRCM NRE contract, Lockheed Martin may have possessed the specific intellectual property or integration knowledge for the LAIRCM system as applied to the KC-130J platform. The implication for cost is that the government foregoes the benefits of competitive bidding, which usually drives down prices. Without competing the requirement, there is less assurance that the negotiated price represents the best value or the lowest possible cost for the government.

How does the Firm Fixed Price (FFP) contract type mitigate risk for the government in this NRE context?

The Firm Fixed Price (FFP) contract type is advantageous for the government because it establishes a ceiling price that the contractor must adhere to, regardless of their actual costs. This shifts the financial risk of cost overruns from the government to the contractor. In an NRE context, where development challenges can be unpredictable, FFP incentivizes the contractor to manage their resources efficiently and control costs to maximize their profit margin. It provides greater cost certainty for the government compared to cost-reimbursement contracts, although it may require a higher initial price to account for the contractor's risk premium.

What is the significance of the North American Industry Classification System (NAICS) code 336411 (Aircraft Manufacturing) for this contract?

The NAICS code 336411 signifies that the primary business activity related to this contract falls under the manufacturing of aircraft, aircraft engines, and parts. This classification is important for statistical purposes, economic analysis, and determining industry standards. For this specific contract, it indicates that the work involves the physical integration or modification of systems onto an aircraft platform, aligning with the core competencies of aircraft manufacturers. It helps categorize government spending within the broader aerospace and defense industrial base.

Can we compare the value or cost-effectiveness of this $25.6M NRE contract to other similar defense system development efforts?

Direct comparison of this $25.6 million NRE contract's value or cost-effectiveness is difficult without access to detailed cost breakdowns, specific performance metrics achieved, and data on comparable NRE efforts for similar defense systems. Factors such as the complexity of the LAIRCM system, the specific integration challenges with the KC-130J airframe, and the technological maturity at the time of award significantly influence NRE costs. While the contract was sole-source, making direct price benchmarking impossible, its value can be indirectly assessed by its contribution to enhancing the survivability and operational effectiveness of the KC-130J fleet. Future sustainment and upgrade costs associated with the developed system would also factor into a long-term value assessment.

What is the historical spending pattern for KC-130J LAIRCM related contracts, and how does this award fit in?

Analyzing historical spending patterns for KC-130J LAIRCM related contracts requires access to a broader dataset of federal procurement. This specific award of $25.6 million represents a significant investment in the Non-Recurring Engineering (NRE) phase for integrating the LAIRCM system onto the KC-130J. It likely precedes or coincides with the initial fielding of this capability on the platform. Subsequent contracts would typically involve production of the systems, installation, sustainment, upgrades, and potentially further NRE for different variants or improved versions. Understanding the total lifecycle cost and investment in the LAIRCM system for the KC-130J would involve examining a series of contracts over several years.

Industry Classification

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

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001912R1023

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 86 SOUTH COBB DR, MARIETTA, GA, 30063

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: $34,208,777

Exercised Options: $25,588,617

Current Obligation: $25,588,617

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $7,826,266

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline