DoD awards $397M to Lockheed Martin for LRASM integration and testing, raising value-for-money questions

Contract Overview

Contract Amount: $397,326,093 ($397.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2016-04-01

End Date: 2022-05-22

Contract Duration: 2,242 days

Daily Burn Rate: $177.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: LRASM INTEGRATION AND TEST PHASE

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $397.3 million to LOCKHEED MARTIN CORPORATION for work described as: LRASM INTEGRATION AND TEST PHASE Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. Significant duration of over 2200 days suggests a long-term, complex integration effort. 3. Cost-plus contract type introduces risk of cost overruns without strong performance incentives. 4. Focus on integration and testing indicates a critical but potentially less innovative phase of development. 5. Lack of small business participation noted, suggesting limited opportunities for smaller firms in this specific award. 6. Geographic concentration in Florida for contract performance.

Value Assessment

Rating: questionable

The $397 million award to Lockheed Martin for LRASM integration and testing lacks clear benchmarks for value. As a sole-source, cost-plus contract, it inherently limits opportunities for competitive pricing and cost control. Without comparative data on similar integration and testing phases for advanced missile systems, it is difficult to definitively assess if the pricing is competitive or if the government is receiving optimal value. The extended duration further complicates value assessment, as costs can escalate over time.

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 approach is typically used when a specific contractor possesses unique capabilities or intellectual property essential for the requirement. However, the absence of competition means there was no direct price comparison, potentially leading to higher costs for the government and limiting the government's ability to explore alternative solutions or pricing structures.

Taxpayer Impact: Sole-source awards can result in taxpayers paying a premium due to the lack of competitive pressure to drive down prices. This necessitates robust oversight to ensure the contractor's pricing is fair and reasonable.

Public Impact

The primary beneficiary is the Department of Defense, specifically the branch utilizing the LRASM (Long Range Anti-Ship Missile). The contract supports the integration and testing of advanced missile technology, crucial for naval and air defense capabilities. The geographic impact is concentrated in Florida, where the contractor's facilities are located. Workforce implications include employment for engineers, technicians, and support staff involved in missile system development and testing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings.
Cost-plus contract type carries inherent risk of cost escalation.
Extended contract duration increases exposure to cost overruns and schedule delays.
Lack of transparency in pricing due to non-competitive nature.
Limited visibility into the specific performance metrics driving the incentive fee.

Positive Signals

Focus on critical integration and testing for an advanced weapon system.
Award to a known prime contractor with established expertise in defense systems.
Contract aims to enhance national defense capabilities through advanced missile technology.

Sector Analysis

The defense sector, particularly guided missile and space vehicle manufacturing, is characterized by high R&D costs, long development cycles, and significant government investment. Contracts in this area often involve complex integration and testing phases. Spending benchmarks are difficult to establish precisely due to the specialized nature of the technology, but multi-billion dollar programs are common. This contract fits within the broader strategy of modernizing naval and air-based offensive capabilities.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of significant subcontracting opportunities for small businesses within the provided data. The nature of advanced missile system integration and testing often involves large, prime contractors who possess specialized capabilities, potentially limiting the direct involvement of smaller firms in the primary award. Further investigation into subcontracting plans would be needed to assess the full impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The cost-plus incentive fee structure suggests performance metrics are in place, but the specifics of these metrics and their oversight are not detailed. Transparency is limited due to the sole-source nature and the proprietary aspects of advanced defense technology. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

LRASM Program
Advanced Cruise Missile Development
Naval Aviation Systems
Air-Launched Weapons
Defense Contract Awards

Risk Flags

Sole-source award
Cost-plus contract type
Extended contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $397.3 million to LOCKHEED MARTIN CORPORATION. LRASM INTEGRATION AND TEST PHASE

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 $397.3 million.

What is the period of performance?

Start: 2016-04-01. End: 2022-05-22.

What is the specific performance history of Lockheed Martin Corporation with similar sole-source, cost-plus incentive fee contracts for missile system integration and testing?

Lockheed Martin Corporation has a long history of performing complex defense contracts, including those involving missile systems. Their track record with sole-source, cost-plus incentive fee (CPIF) contracts is extensive, often stemming from their position as a prime contractor for major defense platforms. CPIF contracts are designed to incentivize both the contractor and the government by sharing cost savings or overruns based on performance targets. While this structure can align interests, it also requires diligent government oversight to ensure targets are appropriate and achievable, and that costs remain controlled. Analyzing Lockheed Martin's past performance on similar CPIF contracts would involve reviewing their historical cost performance, adherence to schedules, and the effectiveness of incentive fee structures in driving desired outcomes. Without specific data on this contract's performance against its targets, a definitive assessment is challenging, but their general experience suggests a capacity to manage such complex efforts, albeit with the inherent risks associated with non-competitive, cost-reimbursable contract types.

How does the $397 million cost compare to the estimated value of similar LRASM integration and testing phases in the past or for comparable systems?

Directly comparing the $397 million cost for LRASM integration and testing is challenging without access to detailed cost breakdowns and historical data for similar phases of advanced missile development. As a sole-source award, there is no competitive benchmark to assess pricing fairness. However, integration and testing phases for complex defense systems are inherently expensive due to the sophisticated technology, rigorous testing protocols, and specialized expertise required. The LRASM itself is a significant technological advancement, implying substantial costs for its integration into existing platforms and thorough testing to ensure operational effectiveness and safety. If comparable systems have undergone similar integration and testing phases, their costs, adjusted for inflation and technological complexity, could serve as a rough benchmark. However, the unique nature of the LRASM and its specific integration requirements make direct comparisons difficult, suggesting the $397 million figure represents a significant investment in a critical capability.

What are the primary risks associated with this sole-source, cost-plus incentive fee contract structure for the LRASM integration and test phase?

The primary risks associated with this sole-source, cost-plus incentive fee (CPIF) contract structure are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a fully competed environment. The government has less leverage to negotiate favorable terms. Secondly, the CPIF structure, while intended to align incentives, carries inherent risks of cost escalation. If the target costs are set too high or the incentive structure is not robust, the contractor may not be sufficiently motivated to control expenses, leading to cost overruns that are shared with the government. Furthermore, the complexity of integrating and testing a sophisticated weapon system like the LRASM over an extended period (2242 days) increases the likelihood of unforeseen technical challenges, schedule delays, and associated cost increases. Effective government oversight is crucial to mitigate these risks by closely monitoring performance, validating costs, and ensuring incentive targets remain appropriate and challenging.

What is the expected effectiveness or impact of the LRASM integration and testing supported by this contract on the Department of Defense's capabilities?

The integration and testing of the Long Range Anti-Ship Missile (LRASM) supported by this contract are expected to significantly enhance the Department of Defense's capabilities, particularly in naval warfare and power projection. The LRASM is designed as a stealthy, precision-guided munition capable of detecting and destroying high-value enemy ships at extended ranges, even in contested environments. Successful integration means ensuring the missile can be effectively deployed from various platforms (e.g., Navy F/A-18s, Air Force B-1Bs), communicate with them, and achieve its targeting objectives. Rigorous testing validates its performance, reliability, and safety under diverse operational conditions. Therefore, the effectiveness of this contract directly translates to bolstering the U.S. military's ability to deter potential adversaries, maintain freedom of navigation, and project power across the seas, providing a critical standoff strike capability against maritime threats.

How has federal spending on guided missile and space vehicle manufacturing (NAICS 336414) trended over the past five years, and where does this contract fit within that trend?

Federal spending on guided missile and space vehicle manufacturing (NAICS 336414) has historically been substantial, driven by national defense priorities. Over the past five years, this sector has likely seen consistent, high levels of investment, reflecting ongoing modernization efforts for strategic weapon systems, missile defense, and space-based assets. Specific figures would require detailed analysis of government procurement data, but it is reasonable to assume billions of dollars are allocated annually. This $397 million contract for LRASM integration and testing represents a significant, but not unprecedented, investment within this category. It fits within the trend of developing and fielding advanced offensive capabilities, particularly those aimed at countering sophisticated maritime threats. Such contracts are crucial components of the overall defense budget allocated to maintaining technological superiority in strategic weapon systems.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001915R0015

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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: $402,736,197

Exercised Options: $402,736,197

Current Obligation: $397,326,093

Actual Outlays: $3,002,605

Subaward Activity

Number of Subawards: 76

Total Subaward Amount: $488,095,521

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline