DoD's $34.8M Lockheed Martin contract for aircraft manufacturing lacks competition, raising cost concerns

Contract Overview

Contract Amount: $34,874,288 ($34.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-03-31

End Date: 2026-12-31

Contract Duration: 2,466 days

Daily Burn Rate: $14.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: BELGIUM INTEGRATION CONTRACT

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $34.9 million to LOCKHEED MARTIN CORPORATION for work described as: BELGIUM INTEGRATION CONTRACT Key points: 1. Contract awarded without competition, potentially limiting price discovery and value for money. 2. Long contract duration of over 6 years suggests a need for ongoing services. 3. Cost-plus-fixed-fee pricing structure may incentivize higher costs without strict oversight. 4. The contract is for aircraft manufacturing, a critical but complex sector. 5. Awarded by the Department of the Navy, indicating a specific defense need. 6. No small business set-aside, potentially excluding smaller players from this large contract.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bidding. The cost-plus-fixed-fee (CPFF) structure, while common for complex R&D or production where costs are uncertain, can lead to higher overall spending if not managed rigorously. Without comparable contract data from a competitive process, it's difficult to definitively assess if the pricing reflects fair market value. The fixed fee component provides some incentive for the contractor to control costs, but the primary cost driver is the reimbursement of expenses, which requires robust oversight.

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. This typically occurs when only one responsible source is available or when there is a compelling urgency. The lack of competition means that the Department of the Navy did not solicit bids from multiple vendors, which can limit opportunities for price negotiation and potentially lead to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may be paying a premium for this aircraft manufacturing service due to the absence of competitive pressure to drive down prices. The government did not benefit from the usual cost-saving mechanisms inherent in a competitive bidding process.

Public Impact

The primary beneficiary is the Department of the Navy, which will receive aircraft manufacturing services. The contract supports the production or modification of aircraft, crucial for national defense. Services are likely to be performed in Texas, based on the contractor's location. This contract supports jobs within Lockheed Martin Corporation and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition could lead to inflated costs.
Cost-plus-fixed-fee structure requires diligent oversight to prevent cost overruns.
Long contract duration increases exposure to potential performance issues over time.
Sole-source award limits transparency in pricing and value assessment.

Positive Signals

Awarded to a major defense contractor with established capabilities.
Contract duration extends to late 2026, indicating a long-term need and commitment.
Fixed fee component provides some cost certainty for the fee portion.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and stringent quality and safety standards. The market is dominated by a few large, established players like Lockheed Martin. Government contracts, particularly defense-related ones, form a substantial portion of the revenue for companies in this space. Comparable spending benchmarks are difficult to establish without competitive data, but large-scale aircraft production contracts can run into hundreds of millions or billions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor does it indicate any specific subcontracting requirements for small businesses in the provided data. As a sole-source award to a large prime contractor, it is less likely to directly benefit the small business ecosystem unless Lockheed Martin voluntarily includes them in its supply chain. This represents a missed opportunity to foster small business participation in defense contracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the CPFF structure and sole-source nature, rigorous monitoring of costs, performance, and adherence to contract terms is essential. The Defense Contract Audit Agency (DCAA) and potentially the Department of Defense Inspector General (DoDIG) would have oversight jurisdiction, particularly concerning financial audits and performance reviews to ensure accountability and prevent waste, fraud, and abuse.

Related Government Programs

Aircraft Procurement
Defense Manufacturing
Aerospace Industry Contracts
Department of Defense Contracts
Naval Aviation Programs

Risk Flags

Lack of Competition
Cost-Plus Pricing Structure
Sole-Source Award Justification
Potential for Cost Overruns
Limited Transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.9 million to LOCKHEED MARTIN CORPORATION. BELGIUM INTEGRATION CONTRACT

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 $34.9 million.

What is the period of performance?

Start: 2020-03-31. End: 2026-12-31.

What is Lockheed Martin Corporation's track record with similar sole-source aircraft manufacturing contracts awarded by the Department of Defense?

Lockheed Martin Corporation, as one of the largest defense contractors globally, has a long history of securing significant sole-source contracts for aircraft manufacturing and related services. These often involve highly specialized platforms or upgrades where unique capabilities are required, justifying a non-competitive award. While specific details on past sole-source contracts are often sensitive, the company's extensive experience suggests a capacity to deliver on complex requirements. However, the recurring nature of sole-source awards, even for established contractors, warrants scrutiny regarding the justification for non-competition and the potential impact on pricing and innovation compared to competitively awarded contracts.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for aircraft manufacturing, and what are the implications for value?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is well-defined but the exact costs are uncertain, such as in advanced manufacturing or development phases. It reimburses the contractor for allowable costs and pays a predetermined fixed fee. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less cost certainty for the government, as cost overruns are borne by the agency. However, it can be advantageous when risks are high and innovation is paramount, as it incentivizes the contractor to perform the work without bearing the full financial risk of cost uncertainty. For value, the effectiveness of CPFF hinges on robust government oversight to manage costs and ensure the fixed fee adequately compensates the contractor for their effort and risk.

What are the primary risks associated with a sole-source award for aircraft manufacturing, and how can they be mitigated?

The primary risks associated with a sole-source award for aircraft manufacturing include potential overpricing due to lack of competition, reduced incentive for contractor efficiency, and limited opportunities for innovation from alternative providers. Mitigation strategies involve rigorous negotiation of contract terms, including detailed cost analysis and benchmarking against historical data or industry standards where possible. Strong government oversight is crucial to monitor performance, control costs, and ensure adherence to specifications. Additionally, establishing clear performance metrics and incentivizing cost savings within the fixed fee structure can help offset some of the risks associated with non-competitive awards.

What is the historical spending pattern for aircraft manufacturing contracts by the Department of the Navy, and how does this contract fit within that trend?

The Department of the Navy historically spends billions of dollars annually on aircraft procurement, modification, and sustainment. This spending encompasses a wide range of aircraft types, from fighter jets and helicopters to transport and surveillance platforms. Contracts can vary significantly in type, duration, and value, with both competitive and sole-source awards being common, particularly for specialized or sole-source platforms. This $34.8 million contract, while substantial, represents a specific component within the Navy's broader aircraft manufacturing expenditure. Its sole-source nature suggests it addresses a particular need that the Navy deemed could only be met by Lockheed Martin, fitting within a pattern where unique capabilities or existing platform integration often lead to non-competitive awards.

Are there any specific performance metrics or key performance indicators (KPIs) associated with this contract that are publicly available?

Publicly available information on specific performance metrics or Key Performance Indicators (KPIs) for individual government contracts, especially those involving defense manufacturing, is often limited due to security and proprietary concerns. While the contract itself would detail performance expectations, these are typically not disclosed in public contract databases. General KPIs for aircraft manufacturing might include on-time delivery rates, adherence to quality standards (e.g., defect rates), cost control against the estimated budget, and successful completion of testing and certification. The effectiveness of the CPFF structure relies on the government's ability to monitor these underlying performance aspects, even if the specific targets are not public.

Industry Classification

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

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

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 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: $34,874,288

Exercised Options: $34,874,288

Current Obligation: $34,874,288

Subaward Activity

Number of Subawards: 13

Total Subaward Amount: $4,626,771

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline