DoD's $36.9M Lockheed Martin contract for aircraft manufacturing systems awarded without competition

Contract Overview

Contract Amount: $36,873,939 ($36.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-09-27

End Date: 2023-02-28

Contract Duration: 1,615 days

Daily Burn Rate: $22.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SYSTEM CONFIGURATION 20 AND ENHANCED FUEL MANAGEMENT SYSTEM

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $36.9 million to LOCKHEED MARTIN CORPORATION for work described as: SYSTEM CONFIGURATION 20 AND ENHANCED FUEL MANAGEMENT SYSTEM Key points: 1. Contract awarded on a cost-plus incentive fee basis, potentially leading to higher costs if not managed closely. 2. The contract spans over 4 years, indicating a long-term need for these systems. 3. Sole-source award raises questions about potential price inflation and lack of market pressure. 4. The North American Industry Classification System (NAICS) code 336411 points to aircraft manufacturing, a critical defense sector. 5. The contract's value is substantial, requiring robust oversight to ensure taxpayer funds are used efficiently. 6. Delivery order type suggests this is part of a larger, existing framework agreement or program.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific application within aircraft manufacturing. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The cost-plus incentive fee structure necessitates careful monitoring of costs to ensure efficiency and prevent overruns. Comparing it to similar sole-source contracts for specialized systems would be the most relevant approach, but such data is often proprietary.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. The lack of competition means there was no opportunity for other qualified companies to offer their solutions, potentially limiting price discovery and the best possible value for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of a competitive bidding process. Without multiple offers, the government lacked leverage to negotiate the lowest possible price.

Public Impact

The primary beneficiaries are the Department of Defense and Lockheed Martin Corporation, facilitating the production and enhancement of aircraft. Services delivered include the provision and enhancement of fuel management systems critical for aircraft operations. The geographic impact is primarily within New York (ST: NY), where the contractor is located, and potentially at various DoD operational sites. Workforce implications include employment opportunities within Lockheed Martin and its supply chain, particularly in specialized engineering and manufacturing roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential for cost savings.
Cost-plus incentive fee contracts can incentivize higher spending if not rigorously managed.
Lack of transparency in sole-source justifications can obscure potential alternatives.
Long contract duration (over 4 years) increases exposure to cost fluctuations and potential inefficiencies.
Specific system details are not publicly available, hindering independent value assessment.

Positive Signals

Lockheed Martin is a major defense contractor with extensive experience in aircraft manufacturing.
The contract addresses a critical need for enhanced fuel management systems in defense aircraft.
The incentive fee structure, if well-defined, can align contractor and government interests towards performance goals.
Delivery order mechanism suggests integration into a broader, established program.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft components and systems. The market for such specialized systems is often dominated by a few large, established players like Lockheed Martin due to high barriers to entry, including technological expertise, security clearances, and existing government relationships. Comparable spending benchmarks are difficult to establish publicly for highly specialized, sole-source defense systems.

Small Business Impact

The contract data indicates that small business participation was not a primary consideration, as the 'sb' (small business) flag is false and the contract was sole-sourced. There is no explicit mention of small business set-asides or subcontracting plans. This suggests that opportunities for small businesses within this specific contract are likely limited, unless they are part of Lockheed Martin's established supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contract compliance and performance. The cost-plus incentive fee structure requires diligent financial oversight to monitor expenditures and verify that incentives are being met appropriately. Transparency is limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal DoD review and potentially Inspector General audits.

Related Government Programs

Aircraft Manufacturing
Defense Logistics
Avionics Systems
Fuel Systems Technology
Department of Defense Procurement

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $36.9 million to LOCKHEED MARTIN CORPORATION. SYSTEM CONFIGURATION 20 AND ENHANCED FUEL MANAGEMENT SYSTEM

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 $36.9 million.

What is the period of performance?

Start: 2018-09-27. End: 2023-02-28.

What is Lockheed Martin Corporation's track record with similar sole-source contracts for aircraft systems?

Lockheed Martin Corporation, as a major defense contractor, has a history of receiving sole-source contracts for various defense systems, including aircraft components and specialized technologies. These awards are often justified by unique capabilities, existing platform integration, or national security imperatives that limit the pool of potential suppliers. While specific details of past sole-source awards for fuel management systems are not readily available in the public domain, the company's extensive experience in aerospace suggests a capacity to deliver complex solutions. However, the recurring nature of sole-source awards for large contractors like Lockheed Martin often raises concerns among oversight bodies regarding the consistent application of competitive principles and the potential for above-market pricing.

How does the 'Cost Plus Incentive Fee' (CPIF) contract type typically impact final costs compared to fixed-price contracts?

A Cost Plus Incentive Fee (CPIF) contract allows the contractor to be reimbursed for all allowable costs plus a predetermined incentive fee, which is adjusted based on whether the final cost is below or above the target cost. Unlike fixed-price contracts, where the contractor bears more risk for cost overruns, CPIF shifts some of that risk to the government. The incentive component aims to motivate the contractor to control costs and meet performance targets. However, if the target cost is set too high or the incentive structure is not carefully designed, CPIF contracts can lead to higher final costs than anticipated, as the government shares in the cost savings or overruns. Rigorous oversight is crucial to ensure the target costs are realistic and the incentives are aligned with government objectives.

What are the primary risks associated with a sole-source award for a critical system like enhanced fuel management?

The primary risks associated with a sole-source award for a critical system like enhanced fuel management include lack of price competition, which can lead to inflated costs for taxpayers. Without competing bids, the government loses the opportunity to leverage market forces to secure the best possible value. There's also a risk of reduced innovation, as the incumbent contractor may face less pressure to improve efficiency or develop more cost-effective solutions. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. Dependence on a single supplier can also pose supply chain risks, especially if that supplier faces production issues or financial instability.

What does the duration of this contract (1615 days) imply about the program's lifecycle and future needs?

The duration of this contract, approximately 1615 days (over 4 years), suggests that the enhanced fuel management system is intended for long-term use and integration within the Department of Defense's aircraft fleet. This extended period implies a significant investment in the system's development, implementation, and sustainment. It indicates that the DoD foresees a continued operational need for this specific technology, potentially tied to the lifecycle of the aircraft platforms it serves. Such a long duration also underscores the importance of robust contract management and performance monitoring to ensure the system remains effective and cost-efficient throughout its service life, and to plan for potential upgrades or replacements as technology evolves.

How does the NAICS code 336411 (Aircraft Manufacturing) inform the context of this spending?

The NAICS code 336411, 'Aircraft Manufacturing,' places this contract squarely within the core industrial base supporting military aviation. This classification signifies that the spending is directed towards the production, modification, or sustainment of aircraft or their major components. For enhanced fuel management systems, this implies the technology is either integral to new aircraft production lines, essential for upgrading existing fleets, or critical for the ongoing maintenance and operational readiness of defense aircraft. The defense aerospace manufacturing sector is characterized by high technological complexity, stringent quality requirements, and often, a limited number of highly specialized suppliers, which helps explain the context for contracts like this one, including the potential for sole-source awards.

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 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: $36,873,939

Exercised Options: $36,873,939

Current Obligation: $36,873,939

Actual Outlays: $1,596,438

Subaward Activity

Number of Subawards: 45

Total Subaward Amount: $3,171,728

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001914G0019

IDV Type: BOA

Timeline