DoD awards $124.8M to Lockheed Martin for aircraft manufacturing, a sole-source contract with a long performance period

Contract Overview

Contract Amount: $124,769,224 ($124.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-08-21

End Date: 2030-06-28

Contract Duration: 3,598 days

Daily Burn Rate: $34.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: LOTS 6-14 CORRECTION OF KNOWN/UNKNOWN DEFICIENCIES CONTRACT

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $124.8 million to LOCKHEED MARTIN CORPORATION for work described as: LOTS 6-14 CORRECTION OF KNOWN/UNKNOWN DEFICIENCIES CONTRACT Key points: 1. Contract awarded to a single, established prime contractor, raising questions about potential cost efficiencies and competitive pricing. 2. The contract spans nearly a decade, suggesting a long-term need for these aircraft manufacturing services. 3. Performance is concentrated in Texas, indicating a significant regional economic impact and workforce reliance. 4. The contract type (Cost No Fee) may offer less incentive for cost control compared to fixed-price arrangements. 5. This award represents a substantial investment in maintaining and potentially upgrading existing aircraft fleets.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar sole-source awards. The Cost No Fee (CNF) contract type, while sometimes necessary for complex R&D or uncertain scope, generally offers less incentive for the contractor to control costs compared to fixed-price contracts. Without competitive bidding, it's difficult to ascertain if the pricing reflects market rates or represents a fair value for the services rendered. Further analysis would require access to the contractor's cost data and a comparison with historical CNF contracts for similar aircraft manufacturing services.

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 is the sole provider of a required item or service. While this can ensure specialized needs are met, it limits price discovery and potentially leads to higher costs for the government compared to a competitive procurement. The lack of competition means taxpayers do not benefit from the cost savings that can arise from a bidding process.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the most cost-effective solution. Without a bidding process, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other Department of Defense branches relying on the aircraft manufactured under this contract. Services delivered include the manufacturing of aircraft, likely encompassing production, assembly, and potentially integration of various components. The geographic impact is concentrated in Texas, where the contractor's facilities are located, supporting local employment and the regional economy. Workforce implications include the direct employment of skilled labor in aircraft manufacturing and related support roles within Lockheed Martin's Texas operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost No Fee contract type may reduce contractor incentive for cost control.
Long contract duration (nearly 10 years) could lock in potentially suboptimal pricing if market conditions change.
Lack of transparency in cost build-up due to sole-source and CNF nature.

Positive Signals

Award to a major defense contractor with established expertise in aircraft manufacturing.
Contract addresses a long-term need for critical defense assets.
Concentration of work in Texas supports regional economic development and skilled jobs.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on aircraft manufacturing. The U.S. defense industrial base relies heavily on large, established prime contractors like Lockheed Martin for the production of complex military aircraft. Spending in this area is driven by national security requirements, modernization efforts, and the need to maintain operational readiness. Comparable spending benchmarks would involve analyzing other sole-source or competitively awarded contracts for similar aircraft platforms or manufacturing services within the DoD.

Small Business Impact

This contract does not appear to include a small business set-aside. As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities specifically designated for small businesses through set-asides. However, the prime contractor may engage small businesses as subcontractors for specialized components or services, but the direct impact on the small business ecosystem through this specific award mechanism is limited.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy contracting officers and program managers. Given the sole-source nature and Cost No Fee structure, robust oversight of cost and performance is crucial. Transparency may be limited due to the lack of competitive proposals. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

F-35 Lightning II Program
C-130 Hercules Program
Aircraft Procurement, Navy
Aircraft Manufacturing Services

Risk Flags

Sole-source award
Cost-plus contract type (Cost No Fee)
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $124.8 million to LOCKHEED MARTIN CORPORATION. LOTS 6-14 CORRECTION OF KNOWN/UNKNOWN DEFICIENCIES 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 $124.8 million.

What is the period of performance?

Start: 2020-08-21. End: 2030-06-28.

What is Lockheed Martin's track record with sole-source Cost No Fee contracts for aircraft manufacturing with the Department of Defense?

Lockheed Martin, as a major defense contractor, has extensive experience with various contract types, including sole-source and Cost No Fee (CNF) arrangements, particularly for complex defense systems where unique capabilities or ongoing development are involved. Their track record with such contracts is generally characterized by the delivery of advanced military platforms. However, CNF contracts inherently carry a higher risk of cost overruns for the government because the contractor is reimbursed for all allowable costs, with no fee or profit, but also without a strong incentive to minimize expenses. Oversight and detailed cost auditing by the DoD are critical for managing these risks. Specific performance metrics and cost efficiency data for past sole-source CNF contracts would be necessary for a comprehensive assessment of their historical performance in this specific context.

How does the $124.8 million value compare to similar aircraft manufacturing contracts awarded by the DoD?

Comparing the $124.8 million value of this contract requires context regarding the specific type of aircraft and the scope of manufacturing services. If this contract is for the production of a significant number of new airframes or involves extensive modifications and upgrades to existing fleets, the value could be within a typical range for such endeavors. However, without knowing the specific aircraft platform and the quantity or nature of the work (e.g., new production vs. sustainment vs. modification), a direct comparison is difficult. Sole-source contracts, by their nature, may not reflect the most competitive pricing. Benchmarking against competitively awarded contracts for similar aircraft types or against historical spending on the same platform would be necessary to assess value for money.

What are the primary risks associated with a sole-source, Cost No Fee contract for aircraft manufacturing?

The primary risks associated with a sole-source, Cost No Fee (CNF) contract for aircraft manufacturing are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to innovate or optimize processes for cost-effectiveness. The government does not benefit from the price discovery that occurs in a competitive bidding environment. Secondly, the CNF structure means the contractor is reimbursed for all allowable costs incurred, but receives no fee. While this is intended for situations with high uncertainty, it significantly reduces the contractor's incentive to control costs, as their profit is not tied to efficiency. This can result in cost overruns and a lack of urgency in managing expenditures, placing a greater burden on government oversight to ensure fiscal responsibility.

What is the expected program effectiveness given the contract details?

The expected program effectiveness hinges on the Department of the Navy's ability to effectively manage this sole-source, Cost No Fee contract and the contractor's execution. The contract's long duration (ending in 2030) suggests a sustained need for the aircraft manufacturing services, implying that the program is intended to be a long-term solution for fleet readiness or modernization. Program effectiveness will be measured by the timely delivery of aircraft that meet stringent quality and performance specifications. However, the lack of competition and the CNF structure introduce risks to cost control and potentially schedule adherence if not rigorously overseen. The government's program management, including detailed cost tracking, performance monitoring, and proactive risk mitigation, will be critical determinants of overall effectiveness.

How does historical spending on aircraft manufacturing by the Department of the Navy compare to this award?

Historical spending by the Department of the Navy (DoN) on aircraft manufacturing is substantial, reflecting the significant investment required to maintain and modernize its air fleet. Annual spending can range from billions to tens of billions of dollars, encompassing new aircraft procurement, upgrades, sustainment, and research and development. This $124.8 million award, while significant, represents a portion of the DoN's overall aircraft-related expenditures. To assess its context, one would need to compare it against the historical spending trends for the specific aircraft platform or manufacturing category it falls under. Analyzing the proportion of sole-source versus competitively awarded contracts within the DoN's historical aircraft manufacturing spend would also provide insight into procurement strategies and their potential cost implications.

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 NO FEE (S)

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: $168,774,335

Exercised Options: $166,449,037

Current Obligation: $124,769,224

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: N0001919G0008

IDV Type: BOA

Timeline