DoD awards $47.7M to Lockheed Martin for F-35 modification kits, raising value-for-money questions

Contract Overview

Contract Amount: $47,749,586 ($47.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-08-03

End Date: 2025-09-30

Contract Duration: 2,980 days

Daily Burn Rate: $16.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PARTNER FUNDING FOR F35 MOD KITS AND INSTALLATION UCA 4/5

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76177

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $47.7 million to LOCKHEED MARTIN CORPORATION for work described as: PARTNER FUNDING FOR F35 MOD KITS AND INSTALLATION UCA 4/5 Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant contract duration of nearly 3,000 days suggests long-term sustainment needs. 3. Cost-plus-fixed-fee structure may incentivize cost escalation. 4. Lack of competition raises concerns about achieving optimal value. 5. Performance context is critical given the F-35's strategic importance. 6. Sector positioning within aircraft manufacturing is dominated by large prime contractors.

Value Assessment

Rating: questionable

The contract's value-for-money is difficult to assess without competitive benchmarks. Awarded on a sole-source basis, there's no direct comparison to market rates for similar modification kits and installation services. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex defense work, can lead to higher costs compared to fixed-price contracts if not managed rigorously. The total value of $47.7 million over an extended period warrants close scrutiny of cost drivers and efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or intellectual property. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces. This limits the government's ability to ensure it is receiving the best possible price.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without competing bids, there is less incentive for the contractor to offer the lowest possible price.

Public Impact

The U.S. Department of Defense benefits from the sustainment and modernization of its F-35 fleet. Services delivered include the provision of modification kits and their installation, crucial for maintaining aircraft capability. Geographic impact is likely concentrated around F-35 operational bases and maintenance facilities. Workforce implications include specialized technical roles for installation and logistics.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings.
Cost-plus-fixed-fee contract type can lead to cost overruns if not tightly managed.
Extended contract duration requires sustained oversight to ensure efficiency.
Lack of transparency in sole-source justifications can obscure true value.
Dependence on a single contractor for critical F-35 modifications poses supply chain risk.

Positive Signals

Lockheed Martin is the prime contractor for the F-35 program, possessing unique expertise.
Modification kits and installation are essential for maintaining the F-35's technological edge.
The contract supports the long-term operational readiness of a key defense asset.
The fixed-fee component of the CPFF contract provides some cost predictability.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long product lifecycles. The F-35 program represents a major segment of this market, with Lockheed Martin as the prime contractor. Spending on sustainment, modifications, and upgrades for such platforms is substantial and ongoing. Comparable spending benchmarks are difficult to establish due to the unique nature of the F-35 and its proprietary systems, but overall defense aircraft manufacturing and sustainment represent billions in annual federal outlays.

Small Business Impact

This contract does not appear to involve small business set-asides, as it is a sole-source award to a large prime contractor. Subcontracting opportunities for small businesses may exist within Lockheed Martin's supply chain for components or services, but this is not explicitly detailed in the provided data. The direct impact on the small business ecosystem is likely minimal unless significant subcontracting plans are in place.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the contract terms, including reporting requirements and the fixed-fee component. Transparency is limited due to the sole-source nature of the award, making public scrutiny of the procurement process challenging. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

F-35 Lightning II Program
Aircraft Modification and Repair Services
Defense Logistics and Sustainment

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Extended contract duration
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.7 million to LOCKHEED MARTIN CORPORATION. PARTNER FUNDING FOR F35 MOD KITS AND INSTALLATION UCA 4/5

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 $47.7 million.

What is the period of performance?

Start: 2017-08-03. End: 2025-09-30.

What is Lockheed Martin's track record with F-35 modifications and sustainment contracts?

Lockheed Martin, as the prime contractor for the F-35 program, has an extensive and established track record with modifications and sustainment. They are responsible for the overall design, production, and sustainment of the F-35 fleet. Historically, their performance has been critical to the program's development and ongoing operations. However, like many large, complex defense programs, the F-35 has faced scrutiny regarding cost overruns, schedule delays, and performance issues. Lockheed Martin's ability to deliver modifications and sustainment services on time and within budget has been a subject of ongoing review by the Government Accountability Office (GAO) and the Department of Defense (DoD) Inspector General. Their deep integration with the F-35 systems provides unique expertise, but also necessitates rigorous oversight to ensure accountability and value.

How does the $47.7 million value compare to similar F-35 modification contracts?

Direct comparison of the $47.7 million value for this specific contract is challenging due to its sole-source nature and the specific scope of 'F35 MOD KITS AND INSTALLATION UCA 4/5'. F-35 sustainment and modification costs are substantial and vary widely based on the complexity of the modifications, the number of aircraft affected, and the duration of the work. Larger sustainment contracts covering entire fleets or major upgrades can run into billions of dollars. Smaller, specific modification kits and installation efforts might range from hundreds of thousands to tens of millions. Without competitive bidding, it's difficult to benchmark this $47.7 million figure against what other vendors might have charged for similar work, or even against previous iterations of this specific modification if it were competed. The value is best assessed internally by the DoD against program budgets and projected needs.

What are the primary risks associated with this sole-source contract?

The primary risks associated with this sole-source contract are centered around cost and competition. Firstly, the lack of competition means the government may not be achieving the best possible price, potentially leading to higher costs for taxpayers. There is less market pressure on Lockheed Martin to be as cost-efficient as they might be in a competitive environment. Secondly, the cost-plus-fixed-fee (CPFF) contract type carries inherent risks of cost escalation. While the fee is fixed, the allowable costs can increase, leading to a higher total contract value if not managed diligently. Thirdly, sole-sourcing creates a dependency on a single contractor, which can pose supply chain risks and limit flexibility if performance issues arise or if alternative solutions become available. Finally, the extended duration requires sustained oversight to prevent complacency and ensure ongoing value.

How effective is the cost-plus-fixed-fee (CPFF) structure for this type of work?

The Cost-Plus-Fixed-Fee (CPFF) structure is often used for complex, research-intensive, or developmental work where the final costs are difficult to estimate accurately upfront. For F-35 modification kits and installation, where the scope might evolve or involve unforeseen technical challenges, CPFF can provide flexibility. The 'cost-plus' element allows the contractor to recover incurred costs, while the 'fixed-fee' provides a predetermined profit margin. This structure can incentivize contractors to perform the work, as they are assured their costs will be covered and a profit made. However, it can also reduce the contractor's incentive to control costs rigorously, as the profit is fixed regardless of the total cost incurred. Effective management and oversight by the government are crucial to mitigate the risk of cost overruns and ensure the contractor remains focused on efficiency.

What are the historical spending patterns for F-35 modifications and sustainment?

Historical spending on F-35 modifications and sustainment has been substantial and represents a significant portion of the overall F-35 program budget. The total cost of ownership for the F-35 fleet over its lifecycle is projected to be in the trillions of dollars, encompassing procurement, operations, and sustainment. Within this, sustainment and modification efforts are continuous, involving upgrades to software, hardware, and mission systems to maintain the aircraft's technological relevance and operational capability. Annual spending on sustainment alone can amount to billions of dollars across the fleet. This specific contract for $47.7 million is a component of that larger, ongoing investment. Trends show a consistent need for upgrades and maintenance, driven by evolving threats, technological advancements, and the sheer scale of the F-35 program across multiple services and international partners.

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 FIXED FEE (U)

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: $50,808,786

Exercised Options: $50,808,786

Current Obligation: $47,749,586

Actual Outlays: $1,895,769

Subaward Activity

Number of Subawards: 31

Total Subaward Amount: $15,835,698

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001914G0020

IDV Type: BOA

Timeline