DoD's $341M contract with Lockheed Martin for electronic equipment repair lacked competition, raising value concerns

Contract Overview

Contract Amount: $341,184,870 ($341.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2004-05-14

End Date: 2011-09-30

Contract Duration: 2,695 days

Daily Burn Rate: $126.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $341.2 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's value of $341 million over its period of performance suggests a significant investment in specialized repair services. 2. A sole-source award indicates a potential lack of competitive pressure, which could impact pricing and innovation. 3. The extended duration of the contract (over 7 years) warrants scrutiny of its ongoing necessity and cost-effectiveness. 4. The absence of a competitive bidding process limits the ability to benchmark pricing against market alternatives. 5. The contract's focus on 'Other Electronic and Precision Equipment Repair and Maintenance' highlights a critical but potentially niche service area. 6. The 'Cost No Fee' contract type may shift some financial risk to the government, requiring careful monitoring of expenditures.

Value Assessment

Rating: questionable

Benchmarking the value of this $341 million contract is challenging due to its sole-source nature and the 'Cost No Fee' structure. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if alternative providers could offer similar services at a lower cost. The extended performance period suggests a long-term need, but the lack of competition prevents a robust assessment of value for money compared to potential alternatives. The government bears the financial risk, necessitating stringent oversight of costs incurred by Lockheed Martin.

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. This typically occurs when only one vendor possesses the unique capabilities, technology, or security clearances required for the service. The lack of multiple bidders means the government did not benefit from price discovery through a competitive bidding process, potentially leading to higher costs than if multiple firms had vied for the contract.

Taxpayer Impact: Taxpayers may have paid a premium for these specialized repair services due to the absence of competition. The government's ability to negotiate favorable terms is diminished in a sole-source scenario.

Public Impact

The Department of the Navy benefits from the continued operational readiness of critical electronic and precision equipment. This contract ensures the availability of specialized repair and maintenance services, crucial for national defense. The services provided likely support a range of naval platforms and systems, maintaining their functionality. The contract's impact on the workforce is primarily within Lockheed Martin, potentially supporting specialized technical roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs over the contract's lifespan.
Sole-source awards can reduce incentives for contractors to innovate or improve efficiency.
The 'Cost No Fee' structure requires diligent government oversight to manage expenditures effectively.
Limited transparency into pricing mechanisms due to non-competitive nature.

Positive Signals

Ensures critical repair services for essential defense equipment are maintained.
Leverages the specialized expertise of a major defense contractor, Lockheed Martin.
Provides a stable, long-term solution for maintaining complex electronic systems.

Sector Analysis

The defense sector relies heavily on specialized maintenance and repair services for complex electronic and precision equipment. This contract falls within the broader category of defense logistics and sustainment, a critical component of military readiness. The market for such services is often characterized by high barriers to entry due to proprietary technology, security requirements, and the need for highly skilled personnel. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of defense systems and the sole-source awards common in this niche.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there information suggesting significant subcontracting opportunities for small businesses. The nature of specialized electronic repair for defense systems often favors large, established prime contractors with extensive resources and clearances. This could limit the direct participation of small businesses in this specific contract, although they may be involved in the broader defense supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the 'Cost No Fee' structure, rigorous financial oversight and auditing would be essential to ensure that expenditures are reasonable and necessary. Transparency may be limited due to the sole-source nature, but contract performance reviews and milestone tracking would be standard accountability measures. The Inspector General's office for the Department of Defense would have jurisdiction for audits and investigations if any irregularities were suspected.

Related Government Programs

Department of Defense Maintenance and Repair Contracts
Naval Electronic Systems Support
Defense Contractor Sustainment Services
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Lack of competition
Cost-reimbursement elements (implied by 'Cost No Fee')
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $341.2 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

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 $341.2 million.

What is the period of performance?

Start: 2004-05-14. End: 2011-09-30.

What is Lockheed Martin's track record with similar sole-source repair and maintenance contracts for the Department of Defense?

Lockheed Martin, as a major defense contractor, has a long history of performing various services for the Department of Defense, including maintenance and repair. While specific data on all sole-source contracts is not publicly itemized, the company routinely secures large, sole-source awards for complex systems integration, sustainment, and specialized support due to its established role and technological capabilities. Analyzing past performance on similar contracts would involve reviewing contract award histories, performance evaluations (if available), and any reported issues or successes. However, the proprietary nature of defense contracts often limits the granular detail available for public assessment of their sole-source track record.

How does the $341 million value compare to industry benchmarks for similar electronic equipment repair services?

Directly comparing the $341 million value to industry benchmarks for 'Other Electronic and Precision Equipment Repair and Maintenance' is challenging, especially given this contract's sole-source nature and specific defense application. The 'NAICS 811219' code covers a broad range of electronic repair services. For defense-specific, high-security, and complex systems, costs are typically higher than commercial equivalents due to specialized labor, certifications, and infrastructure requirements. Without competitive bids, it's impossible to establish a precise market rate. However, the scale and duration suggest a significant, long-term commitment to maintaining critical assets, implying substantial underlying costs.

What are the primary risks associated with a sole-source 'Cost No Fee' contract of this magnitude?

The primary risks associated with a sole-source 'Cost No Fee' contract of this magnitude include potential cost overruns and a lack of competitive pressure driving efficiency. Since the contractor is reimbursed for allowable costs plus a fee, there's a risk that costs could escalate without the usual market discipline. The government bears the financial risk, necessitating robust oversight to scrutinize all incurred costs. Furthermore, the absence of competition can lead to complacency, potentially impacting service quality or innovation over the contract's long duration. Ensuring adequate performance metrics and diligent cost auditing are crucial mitigation strategies.

What evidence exists regarding the effectiveness or performance of this specific contract over its duration?

Specific, publicly available evidence detailing the effectiveness or performance of this particular contract (awarded in 2004, ending in 2011) is limited. Contract performance is typically assessed internally by the awarding agency. While Lockheed Martin is a reputable contractor, the effectiveness of this sole-source award would hinge on meeting the Navy's requirements for equipment readiness and repair turnaround times. Without access to internal agency reports, performance metrics, or user feedback, a definitive assessment of its effectiveness is not possible from public data alone. The renewal or continuation of such contracts often implies a degree of satisfaction, but doesn't preclude potential areas for improvement.

How has spending on 'Other Electronic and Precision Equipment Repair and Maintenance' (NAICS 811219) by the Department of Defense evolved since this contract?

Spending by the Department of Defense on NAICS code 811219, 'Other Electronic and Precision Equipment Repair and Maintenance,' has likely fluctuated significantly since this contract's period (2004-2011). Defense spending priorities shift based on geopolitical events, technological advancements, and budget allocations. While this specific contract represented a substantial single award, overall DoD spending in this category would be influenced by the modernization of military platforms, the introduction of new electronic systems, and the sustainment needs of existing equipment. Analyzing aggregate spending trends would require access to historical DoD procurement data across all contract types and agencies.

What are the implications of the 'Cost No Fee' contract type for government oversight and contractor incentives?

The 'Cost No Fee' (CNF) contract type places the financial risk primarily on the government. The contractor is reimbursed for all allowable costs incurred in performing the contract, plus a predetermined fixed fee. This structure can incentivize contractors to incur costs, as their fee is typically a fixed amount regardless of the total cost. Consequently, government oversight must be exceptionally rigorous, focusing on auditing costs, ensuring they are allowable, allocable, and reasonable, and verifying that the work performed aligns with contract requirements. Contractor incentives shift from cost control (as seen in fixed-price contracts) towards efficient execution within the scope of work, as their profit is tied to the fee, not cost savings.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

Product/Service Code: MAINT/REPAIR SHOP EQPT

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 (UEI: 834951691)

Address: 199 BORTON LANDING ROAD, MOORESTOWN, NJ, 03

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline