DoD's $220M initial spares contract for aircraft parts awarded to Lockheed Martin raises value concerns

Contract Overview

Contract Amount: $219,514,779 ($219.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-09-17

End Date: 2025-11-13

Contract Duration: 2,249 days

Daily Burn Rate: $97.6K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY19 BSP/GSP AV INITIAL SPARES

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $219.5 million to LOCKHEED MARTIN CORPORATION for work described as: FY19 BSP/GSP AV INITIAL SPARES Key points: 1. The contract's value is substantial, representing a significant investment in initial spare parts. 2. Competition dynamics are limited, with a 'NOT COMPETED' award, potentially impacting price discovery. 3. Risk indicators include the lack of competitive bidding and the long performance period. 4. Performance context shows this is an initial spares order, suggesting future needs may arise. 5. Sector positioning is within the defense industrial base, specifically aircraft parts manufacturing. 6. The contract's fixed-price nature offers some cost certainty, but the lack of competition is a key concern.

Value Assessment

Rating: questionable

The contract's value of over $219 million for initial spare parts is substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The lack of competition raises questions about whether the government secured the best possible value. The fixed-price nature provides some cost predictability, but the absence of competitive pressure means the price might not reflect optimal market conditions.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'NOT COMPETED' basis, indicating a sole-source procurement. There is no information provided on the number of bidders, as competition was not sought. This approach limits the government's ability to explore alternative suppliers or negotiate more favorable terms, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: The lack of competition means taxpayers may be paying a premium for these initial spare parts, as there was no market pressure to drive down prices.

Public Impact

The primary beneficiaries are the Department of Defense and potentially military personnel relying on operational aircraft. The services delivered include the provision of initial spare parts essential for aircraft maintenance and readiness. The geographic impact is primarily within Texas, where the contractor is located, and wherever the supplied parts are deployed. Workforce implications include support for jobs within Lockheed Martin's manufacturing and supply chain operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source award limits opportunities for other suppliers.
Long contract duration could mask inefficiencies.
Initial spares may not reflect long-term sustainment costs.
Limited transparency on pricing justification due to non-competitive award.

Positive Signals

Fixed-price contract provides cost certainty for the awarded amount.
Award to a major defense contractor suggests established capabilities.
Focus on initial spares addresses a critical readiness need.
Contract supports the operational readiness of military aircraft.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on aircraft parts manufacturing. The market for defense aircraft parts is often characterized by specialized production and long-standing relationships between prime contractors and the government. While the overall market for aircraft parts is large, defense-specific components can have limited suppliers, making competition challenging. Benchmarking spending in this niche requires comparison to similar sole-source or limited-competition awards for specialized military components.

Small Business Impact

The contract data indicates that small business participation was not a stated requirement or outcome ('ss': false, 'sb': false). As a sole-source award to a large prime contractor, there is no explicit set-aside for small businesses. Subcontracting opportunities for small businesses would depend on Lockheed Martin's internal procurement practices and their existing supply chain relationships, which are not detailed in this award notice.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the fixed-price contract type, which caps the government's liability. Transparency is limited due to the non-competitive nature of the award; justification for the sole-source decision and detailed pricing breakdowns are often not publicly disclosed. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Aircraft Procurement
Military Aircraft Sustainment Programs
Defense Logistics Agency (DLA) Spare Parts Procurement
Naval Air Systems Command (NAVAIR) Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
High contract value for initial spares
Long performance period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $219.5 million to LOCKHEED MARTIN CORPORATION. FY19 BSP/GSP AV INITIAL SPARES

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 $219.5 million.

What is the period of performance?

Start: 2019-09-17. End: 2025-11-13.

What is the historical spending pattern for initial spare parts for this specific aircraft type or similar platforms?

Analyzing historical spending for initial spare parts for similar aircraft platforms is crucial for context. Without specific data on this contract's predecessor or comparable programs, it's difficult to definitively assess if the $219.5 million is an outlier. However, large sole-source awards for initial spares often occur during new platform introductions or significant upgrades, where specialized components are needed rapidly. Historical data from the Defense Contract Audit Agency (DCAA) or program executive offices could reveal trends in pricing, lead times, and the necessity of non-competitive awards for such critical initial provisioning. If past awards for similar initial spares packages were significantly lower or competitively bid, it would strengthen the argument that this contract's value warrants closer scrutiny.

What justification was provided for the sole-source award, and does it align with federal procurement regulations?

Federal procurement regulations, such as the Federal Acquisition Regulation (FAR) Part 6, outline conditions under which full and open competition is not required, including sole-source justifications. Common reasons include the existence of only one responsible source, urgent and compelling needs, or specific national security requirements. For this Lockheed Martin contract, the justification would likely center on proprietary technology, unique manufacturing capabilities, or the need for immediate availability of parts critical to a specific platform's operational readiness, potentially tied to a new system or a critical upgrade. A review of the Justification and Approval (J&A) document, if publicly available, would detail the specific rationale and demonstrate compliance with FAR requirements. Without access to the J&A, it remains an assumption that the sole-source award was legally justified.

How does the $219.5 million contract value compare to the total lifecycle cost of the associated aircraft program?

The $219.5 million allocated for initial spare parts represents a fraction of the total lifecycle cost of any major military aircraft program. Lifecycle costs encompass research and development, procurement of the aircraft platforms themselves, sustainment (including maintenance, repairs, and ongoing spare parts), training, and eventual disposal. Initial spares are a critical upfront investment necessary to ensure operational readiness from the outset. While substantial, this figure should be evaluated in the context of multi-billion dollar acquisition programs. If the aircraft program's total lifecycle cost is projected to be in the tens or hundreds of billions, then the initial spares cost, even at $219.5 million, might be considered a reasonable proportion. Conversely, if this amount seems disproportionately high compared to the acquisition cost of the airframes, it could signal potential overpricing.

What are the potential risks associated with awarding initial spare parts on a fixed-price basis without competition?

Awarding initial spare parts on a fixed-price basis without competition presents several risks. Firstly, the absence of competition means the government loses the primary mechanism for ensuring the best possible price. The contractor, facing no market pressure, may set a higher price than would be achievable through bidding. Secondly, while fixed-price contracts offer cost certainty for the government regarding the agreed-upon price, they do not guarantee value for money. If the contractor's costs are significantly lower than anticipated, they retain the excess profit. For initial spares, which are often unique and require specialized manufacturing, the contractor may have substantial leverage in pricing negotiations. The long performance period (over two years) also increases the risk of unforeseen cost increases for the contractor, which, in a fixed-price contract, they absorb, but this risk is factored into the initial price.

What is Lockheed Martin's track record in supplying aircraft parts and fulfilling similar DoD contracts?

Lockheed Martin Corporation is a major defense contractor with an extensive track record in supplying aircraft, components, and spare parts to the Department of Defense and allied nations. They are a prime contractor for numerous advanced military aircraft platforms, including fighters, transport planes, and helicopters. Their experience encompasses the entire lifecycle of these platforms, including the provisioning of initial and long-term spare parts. Historically, Lockheed Martin has demonstrated the capability to deliver complex systems and components. However, like any large contractor, they have also been subject to scrutiny regarding contract pricing and performance. Assessing their specific track record for this particular contract would involve examining past performance evaluations, any disputes or claims filed, and the efficiency of their supply chain management for similar parts.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1 LOCKHEED BLVD BLDG 10, 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: $395,896,997

Exercised Options: $395,896,997

Current Obligation: $219,514,779

Actual Outlays: $18,261,206

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001919D0015

IDV Type: IDC

Timeline