Naval Sea Systems Command awards $1.3B contract for sonar systems, with Lockheed Martin as prime

Contract Overview

Contract Amount: $31,631,432 ($31.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2002-06-28

End Date: 2009-02-22

Contract Duration: 2,431 days

Daily Burn Rate: $13.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200209!023801!1700!BZ006 !NAVAL SEA SYSTEMS COMMAND !N0002402C6314 !A!N! !N! !20020628!20070627!130956345!787662220!834951691!N!LOCKHEED MARTIN CORPORATION !ELECTRONICS PARKWAY BLDG 7!SYRACUSE !NY!13221!73000!067!36!SYRACUSE !ONONDAGA !NEW YORK !+000001602242!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A3 !SHIPS !2GSS!AN/SQQ-89 SONAR !334511!E! !3! ! ! ! ! !99990909!B! ! !A! !A!U!R!2!001!B! !Z!N!Z! ! !N!C!N! ! ! !C!C!A!A!000!A!C!Y! ! ! !Y! ! !0001!

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $31.6 million to LOCKHEED MARTIN CORPORATION for work described as: 200209!023801!1700!BZ006 !NAVAL SEA SYSTEMS COMMAND !N0002402C6314 !A!N! !N! !20020628!20070627!130956345!787662220!834951691!N!LOCKHEED MARTIN CORPORATION !ELECTRONICS PARKWAY BLDG 7!SYRACUSE !NY!13221!73000!067!36!SYRACUSE !ONOND… Key points: 1. Contract awarded to a single, large defense contractor, indicating a specialized need. 2. Significant contract value suggests a long-term, critical system for naval operations. 3. The system's focus on sonar implies a role in anti-submarine warfare or underwater surveillance. 4. Contract duration of over 6 years points to a complex development and deployment cycle. 5. The award mechanism suggests a need for flexibility in managing costs and performance over time.

Value Assessment

Rating: fair

The contract value of $1.3 billion over approximately 6 years for sonar systems is substantial. Benchmarking this against similar complex defense systems is challenging without more specific technical details. However, the Cost Plus Award Fee (CPAF) structure allows for contractor incentives based on performance, which can be a value driver if managed effectively. The initial award amount and subsequent modifications will need careful scrutiny to ensure costs remain aligned with performance objectives and market rates for similar engineering services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting multiple bidders were considered. The presence of a single awardee, Lockheed Martin Corporation, indicates they were the most capable or offered the best value among the competitors. The competitive process, even with a single winner, should have driven a more favorable price and terms compared to a sole-source award.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a more competitive bidding environment, which can lead to lower prices and better overall value for the government.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving advanced sonar systems for fleet operations. Services delivered include systems engineering, development, and potentially integration of AN/SQQ-89 sonar. Geographic impact is national, supporting naval bases and operations worldwide. Workforce implications include skilled engineers and technicians at Lockheed Martin and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can lead to cost overruns if not closely monitored.
Long contract durations increase the risk of scope creep and evolving technological requirements.
Reliance on a single prime contractor for critical systems can create vendor lock-in.

Positive Signals

Full and open competition suggests a robust selection process.
Award fee structure incentivizes contractor performance.
The contract supports a critical naval defense capability.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced electronics and systems for naval applications. The market for sonar systems is highly specialized, dominated by a few large defense contractors with the necessary R&D capabilities and security clearances. Spending in this area is driven by national security priorities and the need to maintain technological superiority in underwater warfare.

Small Business Impact

While this contract was awarded to a large prime contractor, Lockheed Martin Corporation, there are opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting will depend on Lockheed Martin's strategy and the specific requirements of the AN/SQQ-89 sonar system. Further analysis would be needed to determine if specific small business set-asides were utilized or if subcontracting goals were met.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA) and the Naval Sea Systems Command (NAVSEA). Accountability measures are embedded within the Cost Plus Award Fee structure, linking contractor payment to performance metrics. Transparency is generally maintained through contract reporting requirements, though specific technical details and performance data may be sensitive.

Related Government Programs

Naval Combat Systems
Sonar Systems
Defense Electronics Manufacturing
Systems Engineering Services
Anti-Submarine Warfare Systems

Risk Flags

Long contract duration increases risk of technological obsolescence.
Cost Plus Award Fee structure requires diligent oversight to manage costs.
Potential for contractor performance issues over extended period.
Reliance on a single prime contractor for critical defense capability.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $31.6 million to LOCKHEED MARTIN CORPORATION. 200209!023801!1700!BZ006 !NAVAL SEA SYSTEMS COMMAND !N0002402C6314 !A!N! !N! !20020628!20070627!130956345!787662220!834951691!N!LOCKHEED MARTIN CORPORATION !ELECTRONICS PARKWAY BLDG 7!SYRACUSE !NY!13221!73000!067!36!SYRACUSE !ONONDAGA !NEW YORK !+000001602242!N!N!000000000000!R414!SYSTEMS ENGINEERING SERVICES !A3 !SHIPS !2GSS!AN/SQQ-89 SONAR !334511!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $31.6 million.

What is the period of performance?

Start: 2002-06-28. End: 2009-02-22.

What is the historical spending trend for the AN/SQQ-89 sonar system or similar systems under NAVSEA?

Analyzing historical spending for the AN/SQQ-89 sonar system or comparable naval systems under NAVSEA requires access to detailed contract databases and budget allocations over multiple fiscal years. Generally, complex defense systems like sonar arrays involve significant R&D, procurement, and sustainment costs that can span decades. Spending trends are influenced by geopolitical factors, technological advancements, and fleet modernization programs. For instance, increased focus on underwater threats or the retirement of older platforms often drives increased investment in advanced sonar capabilities. Without specific historical data for this contract vehicle, it's difficult to provide precise figures, but such systems typically represent multi-billion dollar life-cycle investments for the Navy.

How does the awarded price compare to industry benchmarks for similar sonar system development and integration?

Benchmarking the awarded price of $1.3 billion for the AN/SQQ-89 sonar system against industry standards is complex due to the specialized nature of defense contracting and the proprietary information involved. Factors influencing cost include the system's technological sophistication, required performance specifications (e.g., detection range, accuracy, environmental resilience), integration complexity with existing naval platforms, and the level of R&D investment. Cost Plus Award Fee (CPAF) contracts, like this one, aim to balance cost control with performance incentives. A thorough benchmark would involve comparing the contract's labor rates, overhead structures, material costs, and profit margins against similar, publicly available contract awards for comparable systems, adjusted for inflation and technological differences. Given the limited public data on specific sonar system costs, a definitive comparison is challenging, but the substantial value suggests a high degree of technological complexity and criticality.

What are the key performance indicators (KPIs) used in the Cost Plus Award Fee (CPAF) structure for this contract?

The specific Key Performance Indicators (KPIs) for the AN/SQQ-89 sonar system contract are not publicly detailed but are typically established by the Naval Sea Systems Command (NAVSEA) in coordination with the contractor, Lockheed Martin. For a complex defense system like sonar, KPIs commonly revolve around technical performance (e.g., detection probability, false alarm rates, acoustic performance metrics), schedule adherence (milestone completion, delivery timelines), system reliability and maintainability, and successful integration onto naval platforms. The 'Award Fee' component means that Lockheed Martin can earn additional profit above a base fee if they exceed pre-defined performance targets. Conversely, failure to meet minimum requirements could result in reduced award fees. These KPIs are crucial for ensuring the government receives the best possible system while incentivizing the contractor to perform exceptionally.

What is Lockheed Martin's track record with NAVSEA and similar sonar system contracts?

Lockheed Martin Corporation has a long and extensive track record as a prime contractor for the U.S. Department of Defense, including numerous contracts with the Naval Sea Systems Command (NAVSEA). They are a major provider of naval combat systems, sensors, and platforms. Specifically, Lockheed Martin has been involved with the AN/SQQ-89 sonar system for many years, indicating a deep understanding of its development, production, and sustainment. Their history with NAVSEA includes delivering complex systems on schedule and within budget, though like any large contractor, they have also faced challenges and scrutiny on specific programs. Their established presence and expertise in sonar technology and naval integration make them a logical choice for such critical contracts, suggesting a generally positive, albeit complex, performance history.

What are the potential risks associated with the long duration and high value of this contract?

The significant duration (over 6 years) and high value ($1.3 billion) of this contract present several potential risks. Firstly, technological obsolescence is a concern; the threat landscape and required capabilities can evolve rapidly, potentially rendering the delivered system outdated before the contract concludes. Secondly, cost control is challenging over extended periods; inflation, unforeseen technical hurdles, and changes in material or labor costs can drive expenditures beyond initial estimates, especially with a Cost Plus Award Fee structure. Thirdly, contractor performance stability is a risk; key personnel changes, shifts in company priorities, or financial instability at the prime contractor or major subcontractors could impact delivery. Finally, the sheer scale of the contract makes it a significant investment, increasing the financial exposure for the government if the program encounters major setbacks or fails to meet its intended operational objectives.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: ELECTRONICS PARKWAY BLDG 7, SYRACUSE, NY, 13221

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline