Department of the Navy awards $106.6M for Non-Recurring Engineering Services to Lockheed Martin Corporation

Contract Overview

Contract Amount: $106,641,801 ($106.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-06-25

End Date: 2025-11-30

Contract Duration: 2,715 days

Daily Burn Rate: $39.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: NON-RECURRING ENGINEERING SERVICES OTF::IG::OTF

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $106.6 million to LOCKHEED MARTIN CORPORATION for work described as: NON-RECURRING ENGINEERING SERVICES OTF::IG::OTF Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, suggesting potential for cost overruns if not managed effectively. 2. The contract has a long duration of 2715 days, indicating a significant, long-term commitment. 3. Awarded to a single, large defense contractor, raising questions about potential lack of competition and innovation. 4. The North American Industry Classification System (NAICS) code 334511 points to a specialized manufacturing sector. 5. The contract is for Non-Recurring Engineering (NRE) services, which are typically one-time development costs. 6. The contract was not competed, limiting opportunities for other vendors and potentially impacting price discovery.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without specific deliverables or comparable NRE contracts. The cost-plus-incentive-fee structure means actual costs could exceed initial estimates, and the incentive fee's effectiveness depends on clear performance metrics. Given the lack of competition, it's difficult to assess if the pricing reflects a competitive market rate. The total award value of over $106 million for NRE services over nearly seven years suggests a substantial investment in development or modification.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not open to competitive bidding. This approach is typically used when only one vendor possesses the necessary unique 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 or spurred innovation from multiple sources.

Taxpayer Impact: Taxpayers may not be receiving the best possible value due to the absence of competitive pressure. The government's negotiating position is weakened without alternative offers.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive specialized engineering services. Services are related to search, detection, navigation, guidance, and related systems and instruments. The contract is likely to support advanced naval capabilities and technological advancements. Work is expected to be performed in New York, potentially impacting the local workforce and economy in that state.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competition and potentially increases costs for taxpayers.
Cost-plus-incentive-fee contract structure carries inherent risks of cost overruns if not closely managed.
Long contract duration of over 7 years requires sustained oversight to ensure performance and value.
Lack of transparency in the justification for sole-source award.
Absence of small business subcontracting goals due to sole-source nature.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise and technology.
Focus on Non-Recurring Engineering (NRE) indicates investment in critical, potentially unique, system development.
The incentive fee structure, if well-defined, can align contractor and government interests towards successful outcomes.
Long-term nature of the contract may provide stability for critical R&D efforts.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on advanced navigation and guidance systems. The NAICS code 334511 covers establishments primarily engaged in manufacturing instruments for measuring, displaying, and controlling industrial process variables. The market for such specialized systems is often characterized by high barriers to entry due to complex technology, significant R&D investment, and stringent government requirements. Comparable spending in this niche can vary widely depending on the specific technological advancements and program scope.

Small Business Impact

As this contract was awarded on a sole-source basis, there is no explicit small business set-aside. Consequently, there are no mandated subcontracting goals for small businesses. This limits opportunities for small businesses to participate in this specific contract's value chain, potentially impacting the broader small business ecosystem within the defense industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the cost-plus-incentive-fee structure, requiring rigorous tracking of costs and performance against defined milestones and incentives. Transparency may be limited due to the sole-source nature, with justifications for the award likely detailed in internal government documentation. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Department of Defense Research and Development
Advanced Navigation Systems Procurement
Aeronautical and Nautical Instrument Manufacturing

Risk Flags

Sole-source award
Cost-plus-incentive-fee structure
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $106.6 million to LOCKHEED MARTIN CORPORATION. NON-RECURRING ENGINEERING SERVICES OTF::IG::OTF

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 $106.6 million.

What is the period of performance?

Start: 2018-06-25. End: 2025-11-30.

What specific technologies or systems does this Non-Recurring Engineering (NRE) contract cover for the Department of the Navy?

The contract data indicates that the NRE services are related to 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing.' While specific system names are not provided, this suggests the contract supports the development, design, or significant modification of advanced hardware and software components critical for naval operations. This could encompass areas like radar systems, sonar technology, inertial navigation units, GPS integration, or other sophisticated sensor and control equipment essential for modern naval platforms. The 'non-recurring' nature implies these are foundational development costs rather than routine maintenance or production.

What is the justification for awarding this $106.6 million contract on a sole-source basis to Lockheed Martin Corporation?

The provided data states the contract was 'NOT COMPETED,' indicating a sole-source award. Typically, sole-source contracts are justified when only one responsible source is available or capable of meeting the government's requirements. For a company like Lockheed Martin, this often stems from unique proprietary technology, extensive prior development investment in a specific system, or a critical need for specialized expertise that no other contractor possesses. The Department of the Navy would have a formal justification document (e.g., a Justification and Approval - J&A) outlining the specific reasons why competition was not feasible or advantageous for these particular NRE services.

How does the Cost Plus Incentive Fee (CPIF) contract type potentially impact the final cost and performance for this $106.6 million award?

A Cost Plus Incentive Fee (CPIF) contract allows the contractor (Lockheed Martin) to incur costs, and is reimbursed for those costs, plus a fee that is adjusted based on performance against pre-determined targets. For this $106.6 million contract, the government sets targets for cost, schedule, and performance. If Lockheed Martin exceeds these targets (e.g., finishes under budget or ahead of schedule), they receive a higher fee, up to a pre-negotiated maximum. Conversely, if they underperform, their fee is reduced. This structure aims to incentivize the contractor to control costs and achieve desired outcomes efficiently. However, it also carries risk; if targets are set too high or too low, or if performance metrics are poorly defined, the incentive may not be effective, potentially leading to cost overruns or suboptimal results.

What are the potential risks associated with the long duration (2715 days) of this contract for the Department of the Navy?

The contract duration of 2715 days (approximately 7.5 years) presents several risks for the Department of the Navy. Firstly, technology can rapidly evolve over such a long period; the systems being developed might become outdated before the contract concludes or shortly thereafter. Secondly, maintaining consistent oversight and program management continuity over such an extended timeframe can be challenging, potentially leading to scope creep or a decline in vigilance regarding cost and performance. Thirdly, economic conditions and budget priorities can shift, potentially impacting the long-term funding stability for this program. Finally, the longer the duration, the greater the cumulative exposure to potential contractor performance issues or unforeseen technical challenges.

How does the $106.6 million total award value compare to typical spending on Non-Recurring Engineering (NRE) services in the defense sector?

The $106.6 million award for NRE services is a significant sum, reflecting the substantial investment often required for developing or substantially modifying complex defense systems. NRE costs are typically front-loaded and represent the initial investment in design, prototyping, testing, and tooling before full-scale production or deployment. In the defense sector, where systems are highly sophisticated and often bespoke, NRE contracts can easily run into tens or hundreds of millions of dollars, especially for major platforms or critical technologies like advanced navigation and detection systems. Without knowing the specific system or its lifecycle stage, it's difficult to provide a precise benchmark, but this figure is within the expected range for substantial NRE efforts in areas like aerospace and naval systems.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0001917R0088

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 1801 STATE RT 17 C, OWEGO, NY, 13827

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: $109,377,904

Exercised Options: $109,377,904

Current Obligation: $106,641,801

Subaward Activity

Number of Subawards: 220

Total Subaward Amount: $36,296,663

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline