Over $12.2 billion awarded to Lockheed Martin for LRIP 11 AAC, with a long contract duration extending to 2031

Contract Overview

Contract Amount: $12,269,145,508 ($12.3B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2015-12-21

End Date: 2031-03-31

Contract Duration: 5,579 days

Daily Burn Rate: $2.2M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LRIP 11 AAC

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $12.27 billion to LOCKHEED MARTIN CORPORATION for work described as: LRIP 11 AAC Key points: 1. Significant long-term commitment to a single contractor suggests potential for economies of scale but also risks of vendor lock-in. 2. The fixed-price incentive contract type aims to balance cost control with performance incentives. 3. A long contract duration of over 15 years presents risks related to technological obsolescence and changing requirements. 4. The absence of small business set-asides or subcontracting requirements warrants further investigation into potential impacts on smaller businesses. 5. This award represents a substantial portion of the Aircraft Manufacturing sector's federal spending, highlighting its importance. 6. The contract's value and duration indicate a critical program for the Department of Defense's aviation capabilities.

Value Assessment

Rating: fair

Benchmarking the value-for-money of this contract is challenging without detailed cost breakdowns and performance metrics. The fixed-price incentive structure suggests an attempt to manage costs, but the sheer scale and long duration mean that any cost overruns could be substantial. Comparing this to similar large-scale defense aircraft production contracts would be necessary to assess if the pricing is competitive over its lifecycle. The total award value of over $12.2 billion over more than 15 years requires rigorous oversight to ensure continued value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that competition was either not feasible or not pursued. This could be due to the specialized nature of the aircraft, proprietary technology, or existing integration with other systems. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bidders had been involved.

Taxpayer Impact: The absence of competition for such a large contract means taxpayers may not be benefiting from the most cost-effective pricing achievable through a competitive bidding process.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other branches of the Department of Defense, receiving advanced aircraft manufacturing capabilities. The services delivered include the production of LRIP 11 AAC aircraft, crucial for national defense and strategic operations. The geographic impact is primarily centered around Lockheed Martin's manufacturing facilities, likely in Texas, supporting a significant industrial base. Workforce implications include the sustained employment of highly skilled engineers, technicians, and manufacturing personnel within the aerospace sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced innovation.
Long contract duration increases the risk of the procured asset becoming obsolete before the end of its service life.
Absence of explicit small business subcontracting requirements may limit opportunities for smaller firms in the supply chain.

Positive Signals

Fixed-price incentive contract type aims to align contractor and government interests for cost efficiency.
Long-term award provides stability and predictability for production planning and workforce management.
The contract supports a critical defense capability, ensuring national security.

Sector Analysis

The Aircraft Manufacturing sector (NAICS 336411) is a high-value, technology-intensive industry critical to national defense and aerospace. Federal spending in this sector is dominated by large, complex contracts for military aircraft, engines, and related systems. This contract represents a significant investment within this sector, likely supporting a key platform for the Navy. Comparable spending benchmarks would involve analyzing other major defense aircraft procurement programs, which often run into billions of dollars over many years.

Small Business Impact

This contract does not appear to have small business set-aside provisions, nor is there explicit mention of subcontracting goals for small businesses. This suggests that the prime contractor, Lockheed Martin, will likely manage the entire supply chain. This could limit opportunities for small businesses to participate directly in this large program, potentially impacting the small business ecosystem within the aerospace supply chain. Further review of subcontracting plans would be needed to confirm the extent of small business involvement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA). Inspector General audits and reviews are standard for contracts of this magnitude to ensure compliance, prevent fraud, and assess performance. Transparency may be limited due to the classified nature of some defense programs, but contract modifications, payment milestones, and performance reports are typically subject to review.

Related Government Programs

F-35 Lightning II Program
Naval Aviation Programs
Advanced Tactical Aircraft Procurement
Defense Production Act Investments
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award limits price competition.
Long contract duration increases risk of obsolescence and cost growth.
Lack of explicit small business subcontracting requirements.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.27 billion to LOCKHEED MARTIN CORPORATION. LRIP 11 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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $12.27 billion.

What is the period of performance?

Start: 2015-12-21. End: 2031-03-31.

What is the historical spending trend for LRIP 11 AAC with Lockheed Martin?

The provided data indicates a single award of $12,269,145,508.23 for LRIP 11 AAC to Lockheed Martin Corporation, with a contract start date of December 21, 2015, and an estimated completion date of March 31, 2031. This suggests a long-term, high-value program. Without access to historical contract modification data or previous LRIP phases, it's difficult to establish a precise spending trend over time. However, the substantial total award value and the extended duration imply consistent, significant annual spending allocated towards the production and delivery of these aircraft. Future spending will depend on contract modifications, delivery schedules, and any potential adjustments to the program's scope or requirements.

How does the pricing structure of this fixed-price incentive contract compare to other similar defense aircraft contracts?

Fixed-price incentive (FPI) contracts are designed to share cost risks and rewards between the government and the contractor. In an FPI contract, there's a target cost, a target profit, and a price ceiling. If the final cost is below the target, both parties share the savings. If it exceeds the target, they share the overrun up to the ceiling. Comparing the specific pricing structure (target cost, incentive sharing ratios, ceiling) of this $12.2 billion LRIP 11 AAC contract to other similar defense aircraft contracts is complex without detailed contract line item data. However, FPI contracts are common for major defense procurements where performance and cost targets can be reasonably estimated but some uncertainty remains. The effectiveness of the pricing hinges on the realism of the initial targets and the fairness of the sharing arrangements, which are subject to negotiation and oversight.

What are the key performance indicators (KPIs) being used to assess the success of this contract?

The provided data does not explicitly list the Key Performance Indicators (KPIs) for this LRIP 11 AAC contract. However, for major defense aircraft production contracts, typical KPIs often include on-time delivery rates, adherence to quality standards (e.g., defect rates, reliability metrics), achievement of specified performance characteristics (e.g., range, speed, payload capacity), and cost control relative to the target cost. The 'incentive' aspect of the Fixed-Price Incentive contract suggests that specific performance targets related to cost, schedule, or technical capabilities are tied to financial rewards or penalties for the contractor, Lockheed Martin. Detailed KPIs would be outlined in the contract's statement of work and performance specifications.

What is the potential risk of technological obsolescence given the contract's end date in 2031?

With a contract end date extending to March 31, 2031, there is a moderate to high risk of technological obsolescence for the LRIP 11 AAC aircraft being produced. Defense platforms often have service lives measured in decades, and technology evolves rapidly. Aircraft produced towards the end of this contract's duration might incorporate technologies that are already several years old by the time they enter full operational service. Mitigation strategies could include incorporating modular designs for easier upgrades, ensuring the platform can accommodate future technological insertions, or planning for mid-life upgrades and sustainment programs that address evolving threats and technological advancements. The specific nature of the 'AAC' (likely Advanced Aerial Combat or similar) would influence the pace of technological change.

How has the Department of Defense managed contractor performance with Lockheed Martin on similar large-scale aircraft programs?

The Department of Defense (DoD) has extensive experience managing large-scale aircraft programs with major contractors like Lockheed Martin. Performance management typically involves a multi-faceted approach including regular program reviews, Earned Value Management (EVM) systems to track cost and schedule performance, quality assurance inspections, and adherence to contractual milestones. For programs like this, dedicated government program offices and contracting teams work closely with the contractor. Lockheed Martin has a long history with the DoD, and their performance is continuously monitored against contractual requirements. Issues are typically addressed through formal communications, contract modifications, or corrective action requests, depending on the severity.

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

Solicitation ID: N0001916R0033

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1 LOCKHEED BLVD, FORT WORTH, TX, 76108

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: $12,282,750,928

Exercised Options: $12,269,843,991

Current Obligation: $12,269,145,508

Actual Outlays: $116,514,230

Subaward Activity

Number of Subawards: 2379

Total Subaward Amount: $2,315,839,502

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline