DoD's $43M Lockheed Martin contract for BFD/DCU obsolescence faces limited competition, raising value concerns

Contract Overview

Contract Amount: $43,000,596 ($43.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2021-12-22

End Date: 2027-03-31

Contract Duration: 1,925 days

Daily Burn Rate: $22.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: BFD/DCU OBSOLESCENCE

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $43.0 million to LOCKHEED MARTIN CORPORATION for work described as: BFD/DCU OBSOLESCENCE Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. Lack of competition raises questions about whether the government is achieving optimal value for taxpayer dollars. 3. The Cost Plus Fixed Fee (CPFF) contract type can incentivize cost overruns. 4. Performance duration of over 5 years warrants close monitoring for efficiency and effectiveness. 5. The contract is concentrated with a single, large defense contractor, indicating potential market concentration. 6. Obsolescence management is critical but requires robust oversight to ensure cost-effectiveness.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific obsolescence management focus. The CPFF structure, while common for complex R&D or sustainment, carries inherent risks of cost escalation if not tightly managed. Without competitive bids, it's difficult to ascertain if the fixed fee adequately reflects the effort required or if the overall cost is aligned with market rates for similar specialized services. The extended duration further necessitates rigorous performance reviews to ensure continued value.

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 to fulfill the requirement. The lack of competition means there was no opportunity for price negotiation based on multiple offers, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to secure the best possible pricing, potentially resulting in less efficient use of taxpayer funds.

Public Impact

The Department of the Navy benefits from the sustainment of critical BFD/DCU systems, ensuring operational readiness. This contract supports the maintenance and modernization of defense equipment, indirectly benefiting national security. The contract's impact is primarily within the defense sector, supporting military operations. Workforce implications are likely concentrated within Lockheed Martin's facilities, particularly in New York.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can lead to cost overruns if not managed stringently.
Long contract duration increases the risk of performance drift or inefficiencies over time.
Lack of transparency in sole-source justification requires scrutiny.
Potential for vendor lock-in due to specialized nature of obsolescence management.

Positive Signals

Addresses critical obsolescence issues for defense systems.
Awarded to a prime contractor with extensive experience in defense systems.
Clear end date provides a defined period for management.
Fixed fee component provides some cost predictability.
Located in New York, potentially supporting regional employment.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for defense sustainment and obsolescence management is characterized by long-term relationships, high barriers to entry, and significant government spending. Companies like Lockheed Martin are major players in this space, often holding sole-source positions for legacy systems due to specialized knowledge and existing infrastructure. Comparable spending benchmarks are difficult to establish due to the unique nature of obsolescence management for specific military platforms.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Lockheed Martin actively engages small businesses for specialized support. Further investigation into subcontracting plans would be needed to assess any indirect benefits.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous performance monitoring, cost auditing, and regular reviews are crucial to ensure accountability and prevent waste. The Inspector General's office for the Department of Defense may also have jurisdiction for audits and investigations if concerns arise regarding fraud, waste, or abuse.

Related Government Programs

Department of Defense Sustainment Contracts
Aircraft Parts Manufacturing
Obsolescence Management Services
Lockheed Martin Defense Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of competitive benchmarking
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.0 million to LOCKHEED MARTIN CORPORATION. BFD/DCU OBSOLESCENCE

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 $43.0 million.

What is the period of performance?

Start: 2021-12-22. End: 2027-03-31.

What specific BFD/DCU systems are covered by this contract, and what is the criticality of their obsolescence?

The provided data does not specify the exact BFD/DCU systems. However, BFD/DCU typically refers to components within naval aviation platforms, such as fire control systems or data processing units. Obsolescence in these critical systems can severely impact aircraft readiness, mission effectiveness, and safety. The Navy's decision to award a sole-source contract suggests a high degree of criticality and a perceived lack of viable alternatives for timely resolution of these obsolescence issues. Further details on the specific systems and their operational impact would be necessary for a comprehensive risk assessment.

What was the justification for awarding this contract on a sole-source basis?

Sole-source justifications are typically based on factors such as unique capabilities, proprietary technology, urgent and compelling needs where competition is not feasible, or when only one responsible source exists. For obsolescence management of specialized defense systems, the contractor often possesses unique knowledge of the system's design, manufacturing history, and potential obsolescence pathways. The Department of the Navy would have had to formally document and approve this justification, likely citing Lockheed Martin's specific expertise and historical involvement with the BFD/DCU systems as the primary reason for avoiding a competitive procurement. This justification should be publicly available through contract award databases.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for obsolescence management, and what are its risks?

The CPFF structure is often used for research and development or complex services where the scope of work is not fully defined or is subject to change. It involves the government paying the contractor's actual costs plus a fixed fee representing profit. While it allows flexibility, its primary risk is cost escalation, as the contractor is incentivized to incur costs to increase the base upon which the fee is calculated, although the fee itself is fixed. For obsolescence management, a fixed-price contract might offer better cost control if the scope of obsolescence issues and resolution efforts can be clearly defined. However, the unpredictable nature of obsolescence can make fixed-price contracts difficult to structure effectively.

What are the potential long-term implications of this sole-source contract on future competition for BFD/DCU sustainment?

Sole-source awards can stifle future competition by reinforcing the incumbent contractor's market position and institutional knowledge. Over time, this can create a 'vendor lock-in' scenario where the original manufacturer or sole provider becomes the only viable option for sustainment, even if alternative solutions emerge. This contract, by addressing obsolescence with Lockheed Martin, may further entrench their role, making it harder for other companies to enter the market or compete for future sustainment contracts related to these systems. The Navy should consider strategies to foster competition or develop alternative solutions in the long term.

Are there any performance metrics or milestones associated with this contract that indicate its effectiveness?

The provided data does not include specific performance metrics or milestones for this contract. However, for a Cost Plus Fixed Fee contract of this nature, performance is typically evaluated based on factors such as adherence to schedule, quality of work, cost control within the estimated cost ceiling, and successful resolution of obsolescence issues. The Department of the Navy would be responsible for establishing and monitoring these metrics through contract administration. Without access to the contract's statement of work and performance requirements, it is impossible to assess the effectiveness of the services delivered.

How does this $43 million contract compare to overall Navy spending on aircraft parts and auxiliary equipment manufacturing (NAICS 336413)?

The provided data indicates this contract is valued at approximately $43 million and falls under NAICS code 336413 (Other Aircraft Parts and Auxiliary Equipment Manufacturing). To contextualize this, one would need to analyze the total annual spending by the Department of the Navy within this NAICS code. If the Navy spends billions annually on this category, $43 million represents a relatively small portion. However, if this contract addresses a highly specialized or critical niche within obsolescence management, its significance might be disproportionately high compared to its dollar value. A comparison requires broader spending data for the specific sector and agency.

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

Solicitation ID: N0001922N1147

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

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: $43,000,596

Exercised Options: $43,000,596

Current Obligation: $43,000,596

Subaward Activity

Number of Subawards: 7

Total Subaward Amount: $10,692,257

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001919G0029

IDV Type: BOA

Timeline