DoD awards $21.8M to Lockheed Martin for aircraft manufacturing, raising questions about competition and value

Contract Overview

Contract Amount: $21,815,559 ($21.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-11-30

End Date: 2022-12-30

Contract Duration: 1,856 days

Daily Burn Rate: $11.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MC/FMC OBSOLESCENCE NRE EFFORT

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $21.8 million to LOCKHEED MARTIN CORPORATION for work described as: MC/FMC OBSOLESCENCE NRE EFFORT Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of over 5 years suggests a long-term need for these services. 3. The contract is for obsolescence and NRE (Non-Recurring Engineering) efforts, indicating a focus on maintaining or upgrading existing systems. 4. Lack of competition is a key risk indicator for potential overpricing. 5. The fixed-price contract type offers some cost certainty but doesn't mitigate the risk of an inflated baseline price. 6. The awardee, Lockheed Martin, is a major defense contractor with extensive experience in this sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific NRE focus. Without competitive bids, it's difficult to ascertain if the $21.8 million represents a fair market price. The duration and scope suggest a substantial effort, but the absence of comparative data prevents a definitive assessment of value for money. Further analysis would require understanding the specific obsolescence issues addressed and the market rates for similar NRE work.

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 only one vendor possesses the necessary capabilities, technology, or proprietary knowledge. The lack of competition means that taxpayers did not benefit from the price reductions that can arise from a competitive bidding process.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the best possible price, potentially leading to higher costs for taxpayers. It also reduces transparency in the procurement process.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical support for its aircraft. Services delivered include addressing obsolescence issues and performing non-recurring engineering, crucial for maintaining fleet readiness. The geographic impact is primarily within New York, where the contractor is located. Workforce implications include employment for engineers and technicians at Lockheed Martin involved in aircraft manufacturing and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing.
Sole-source award limits transparency and potential cost savings.
Long contract duration could mask inefficiencies or scope creep.

Positive Signals

Award to a reputable and experienced contractor (Lockheed Martin).
Firm fixed-price contract provides some cost predictability.
Focus on obsolescence and NRE addresses critical sustainment needs.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a significant segment of the broader aerospace and defense industry. The market is characterized by high barriers to entry, specialized technology, and a limited number of large prime contractors. Spending in this area is often driven by defense modernization, sustainment, and upgrade programs. Comparable spending benchmarks would typically involve other large-scale aircraft sustainment or modification contracts within the DoD.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no explicit information on subcontracting plans for small businesses. The focus on a large prime contractor like Lockheed Martin suggests that the primary work will be performed by the prime, with potential for subcontracting opportunities being limited or not specifically mandated for small businesses in this sole-source award.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the contract terms, including delivery schedules and performance requirements. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Aircraft Sustainment Programs
Defense Logistics Agency (DLA) Support Contracts
Aerospace Research and Development
Military Aircraft Modernization

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.8 million to LOCKHEED MARTIN CORPORATION. MC/FMC OBSOLESCENCE NRE EFFORT

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 $21.8 million.

What is the period of performance?

Start: 2017-11-30. End: 2022-12-30.

What specific obsolescence issues are being addressed by this contract, and what is the criticality of these issues to the DoD's operational readiness?

The contract details do not specify the exact obsolescence issues. However, in the context of aircraft manufacturing and sustainment, obsolescence typically refers to components or systems that are no longer manufactured, supported by the original vendor, or have become outdated due to technological advancements. Addressing these issues is critical for maintaining the safety, reliability, and operational effectiveness of military aircraft fleets. Failure to resolve obsolescence can lead to increased maintenance costs, reduced mission capability, and potential safety hazards. The criticality would depend on which specific aircraft platforms and systems are affected and their role in current military operations.

How does the $21.8 million cost compare to similar sole-source NRE contracts for aircraft manufacturing within the DoD?

Direct comparison of this $21.8 million sole-source NRE contract to similar DoD contracts is difficult without access to proprietary pricing data and detailed scope of work for other awards. Sole-source contracts inherently lack the price discovery mechanism of competition. However, NRE efforts can be substantial, involving design, engineering, testing, and prototyping for new or modified systems. The cost is influenced by factors such as the complexity of the obsolescence, the required technological solutions, the duration of the effort, and the specific labor and material costs involved. A comprehensive benchmark would require analyzing a portfolio of NRE contracts with similar technical challenges and contract durations, adjusted for inflation and market conditions.

What are the potential risks associated with a sole-source award of this magnitude and duration to Lockheed Martin?

The primary risk of a sole-source award of this magnitude ($21.8 million over 5+ years) is the potential for inflated pricing due to the absence of competitive pressure. Lockheed Martin, as a large and established defense contractor, may not have the same incentive to minimize costs as they would in a competitive environment. Other risks include a lack of innovation if alternative solutions are not explored, and potential contractor over-reliance. Furthermore, the long duration could mask inefficiencies or scope creep if not rigorously overseen. Ensuring robust government oversight and performance metrics is crucial to mitigate these risks.

What is Lockheed Martin's track record with the DoD on similar aircraft manufacturing and sustainment contracts?

Lockheed Martin has an extensive and long-standing track record with the Department of Defense across a wide array of aircraft manufacturing, sustainment, and upgrade programs. They are a prime contractor for numerous major platforms, including fighter jets (e.g., F-35, F-16, F-22), transport aircraft, and helicopters. Their history includes both successful program execution and instances of cost overruns or schedule delays, which are common in complex defense programs. The DoD's continued reliance on Lockheed Martin for critical programs suggests a generally positive assessment of their capabilities, though specific contract performance can vary.

What historical spending patterns exist for aircraft obsolescence and NRE efforts within the DoD, and how does this contract fit?

The DoD consistently allocates significant funding towards aircraft sustainment, including addressing obsolescence and performing NRE. These efforts are crucial for maintaining the readiness and longevity of aging fleets. Historical spending patterns show a continuous need for such services as technology evolves and components become unavailable. This $21.8 million contract fits within this pattern as a specific allocation to address these ongoing sustainment challenges for particular aircraft. Without more granular data on specific platforms or historical trends for this exact type of NRE, it's hard to say if this amount is unusually high or low, but it represents a typical investment in fleet readiness.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $21,815,559

Exercised Options: $21,815,559

Current Obligation: $21,815,559

Subaward Activity

Number of Subawards: 16

Total Subaward Amount: $16,167,893

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