DoD awards $17.3M for NRE and Qualification Test Assets to Lockheed Martin, a sole-source contract

Contract Overview

Contract Amount: $17,272,050 ($17.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-09-30

End Date: 2027-04-05

Contract Duration: 1,648 days

Daily Burn Rate: $10.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NRE AND QUALIFICATION TEST ASSETS

Place of Performance

Location: STRATFORD, GREATER BRIDGEPORT County, CONNECTICUT, 06615

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $17.3 million to LOCKHEED MARTIN CORPORATION for work described as: NRE AND QUALIFICATION TEST ASSETS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award limits competitive pressure, potentially impacting price efficiency. 3. Long duration of over 4 years suggests a complex and potentially evolving requirement. 4. Focus on NRE and qualification test assets points to early-stage development or validation. 5. No small business set-aside or subcontracting noted, potentially limiting broader economic impact. 6. Contract awarded by the Department of the Navy, a major defense acquisition entity.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, raises concerns about value for money. Without competitive bidding, it is difficult to benchmark the pricing against market rates or alternative solutions. The extensive duration and focus on NRE and qualification assets suggest significant upfront investment, the ultimate value of which will depend on the success of the underlying program. Further analysis would be needed to compare the proposed fee structure and estimated costs against similar development contracts within the DoD.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. The Department of the Navy likely cited specific justifications for this approach, such as the unique capabilities of Lockheed Martin or the need for continuity with existing systems. The lack of competition means that taxpayers did not benefit from the price discovery that typically occurs in a competitive bidding process, potentially leading to a higher overall cost.

Taxpayer Impact: The absence of competition means taxpayers may not have received the best possible price for these critical test assets. Without competing bids, the government has less leverage to negotiate favorable terms and ensure cost-effectiveness.

Public Impact

The primary beneficiaries are the Department of Defense and potentially Lockheed Martin, through the provision of essential test assets. Services delivered include the development and qualification of test assets crucial for program validation. Geographic impact is primarily within Connecticut, where Lockheed Martin's operations are based. Workforce implications include employment for engineers, technicians, and support staff involved in the development and testing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially inflating costs.
Cost-plus-fixed-fee contract type carries inherent risk of cost overruns.
Lack of small business participation may limit broader economic benefits.
Long contract duration could indicate evolving requirements or potential for scope creep.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise.
Focus on NRE and qualification assets indicates investment in critical program development stages.
Contract awarded by the Department of the Navy, a key defense agency, implies strategic importance.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for such specialized test assets is often dominated by a few large, established contractors due to the high barriers to entry, including technical expertise, security clearances, and existing relationships with defense agencies. Spending in this area is driven by the continuous need for modernization and development of new military platforms. Comparable spending benchmarks would typically involve analyzing other NRE and qualification contracts for similar defense systems.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there explicit mention of subcontracting goals for small businesses. This suggests that the primary contractor, Lockheed Martin, will likely perform the majority of the work. The absence of small business involvement in this specific award means that opportunities for smaller, innovative firms to contribute to this defense acquisition are limited, potentially impacting the broader small business defense ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the cost-plus-fixed-fee structure, requiring detailed reporting and justification of costs incurred. Transparency may be limited due to the sole-source nature of the award and the proprietary nature of NRE and qualification activities. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Research and Development
Aircraft Manufacturing and Support
Defense Logistics and Sustainment
Naval Aviation Programs

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $17.3 million to LOCKHEED MARTIN CORPORATION. NRE AND QUALIFICATION TEST ASSETS

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 $17.3 million.

What is the period of performance?

Start: 2022-09-30. End: 2027-04-05.

What specific NRE and qualification test assets are being procured under this contract, and what is their criticality to ongoing defense programs?

The contract data indicates the procurement of 'NRE AND QUALIFICATION TEST ASSETS' valued at $17.3 million. NRE stands for Non-Recurring Engineering, which typically refers to the one-time costs associated with designing, developing, and testing a new product or system. Qualification test assets are specifically built or modified to undergo rigorous testing to ensure they meet performance, reliability, and safety standards before full-scale production or deployment. While the specific assets are not detailed in the provided data, their criticality is implied by the sole-source award to Lockheed Martin by the Department of the Navy and the substantial investment. These assets are likely essential for validating key technologies or components for a specific naval aviation platform or system, ensuring its readiness and effectiveness before wider implementation. The long duration of the contract (over 4 years) further suggests these assets are integral to a complex development or upgrade cycle.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other similar NRE and qualification contracts within the Department of Defense?

The Cost-Plus-Fixed-Fee (CPFF) pricing structure is common in defense contracts, particularly for research, development, and complex engineering efforts where the final scope and costs are not fully defined at the outset. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While this structure allows for flexibility and encourages innovation in uncertain environments, it also carries a higher risk of cost overruns compared to fixed-price contracts. Benchmarking this specific CPFF contract against similar NRE and qualification efforts within the DoD would require access to detailed cost data from comparable sole-source or competed contracts. Factors to consider in such a comparison would include the contractor's historical performance, the complexity of the technology, the program's maturity, and the negotiated fee percentage. Without such comparative data, it's challenging to definitively assess if the $17.3 million award represents optimal value for the government.

What are the potential risks associated with a sole-source award for critical test assets, and how are these risks mitigated?

Sole-source awards, like the one for $17.3 million in NRE and Qualification Test Assets to Lockheed Martin, carry inherent risks. The primary risk is the lack of competitive pressure, which can lead to inflated prices and reduced incentive for the contractor to achieve maximum efficiency. There's also a risk that the government may not be aware of or have access to the most innovative or cost-effective solutions available in the market. Mitigation strategies employed by the Department of the Navy typically involve robust negotiation processes, detailed technical reviews, and stringent oversight. The government would likely conduct extensive market research (even if ultimately leading to a sole-source justification) and engage in thorough price and cost analysis to ensure the negotiated fee and estimated costs are fair and reasonable. Furthermore, the CPFF structure necessitates detailed cost accounting and reporting, allowing for monitoring of expenditures and identification of potential inefficiencies. The long-term relationship and potential for future contracts can also incentivize the contractor to perform well.

What is Lockheed Martin's track record with the Department of the Navy, particularly on contracts involving NRE and qualification assets?

Lockheed Martin Corporation is a major defense contractor with a long-standing and extensive relationship with the Department of the Navy (DoN). They are a primary provider of advanced aerospace and defense systems, including naval aircraft, submarines, and related technologies. Their track record with the DoN on contracts involving Non-Recurring Engineering (NRE) and qualification assets is generally substantial, given their role in developing and producing complex military hardware. Historically, Lockheed Martin has been awarded numerous contracts for the design, development, testing, and integration of new systems and upgrades for naval platforms. While specific performance metrics for past NRE and qualification contracts are not detailed here, their continued selection for significant sole-source awards suggests a perceived capability and reliability in meeting the DoN's demanding requirements. However, like any large contractor, their performance history would include a range of outcomes, and a deeper dive into specific contract performance reports and past issues would be necessary for a comprehensive assessment.

How does the $17.3 million contract value compare to the Department of the Navy's overall spending on aircraft parts and auxiliary equipment manufacturing (NAICS 336413)?

The $17.3 million contract value for NRE and Qualification Test Assets represents a specific investment within the broader category of Aircraft Parts and Auxiliary Equipment Manufacturing (NAICS 336413) for the Department of the Navy (DoN). To contextualize this amount, one would need to examine the DoN's total annual or multi-year spending within this NAICS code. The DoN, as a major branch of the U.S. military, invests billions of dollars annually in aircraft procurement, maintenance, and modernization, a significant portion of which falls under NAICS 336413. This $17.3 million contract, while substantial for a single award, is likely a fraction of the DoN's total expenditure in this sector. It specifically targets early-stage development and validation, which often involves high upfront costs but is crucial for future program success. Comparing it to the overall sector spending would highlight its relative size and importance within the DoN's strategic acquisition priorities for aviation assets.

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: N0001922NFSOV

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: $17,272,050

Exercised Options: $17,272,050

Current Obligation: $17,272,050

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $6,230,746

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