DoD's $256M Lockheed Martin contract for IT services shows limited competition and fair value

Contract Overview

Contract Amount: $256,277,796 ($256.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2004-09-16

End Date: 2009-08-31

Contract Duration: 1,810 days

Daily Burn Rate: $141.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $256.3 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded through a sole-source process, limiting price discovery and potentially increasing costs. 2. Value appears fair when benchmarked against similar IT services contracts, though a more competitive process could yield better pricing. 3. The contract duration of 1810 days (approx. 5 years) indicates a long-term need for these services. 4. Performance context is limited due to the lack of publicly available performance metrics. 5. This contract falls within the broader IT services sector, specifically 'Other Computer Related Services'. 6. The absence of small business set-asides suggests a focus on large prime contractors.

Value Assessment

Rating: fair

The total award of $256.3 million for 'Other Computer Related Services' over approximately five years appears to be within a reasonable range when compared to similar large-scale IT service contracts awarded by the Department of Defense. However, the lack of competition makes a definitive value assessment challenging. Without competitive bidding, it's difficult to ascertain if the pricing reflects the best possible market rates or if there's an opportunity for cost savings through a more open procurement process. The cost-plus-fixed-fee (CPFF) structure, while common for complex IT projects, can also lead to higher costs if not carefully managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This approach bypasses the competitive bidding process, which typically involves multiple companies submitting proposals. While sole-source awards can be justified for specialized services or when only one vendor possesses the necessary capabilities, they inherently limit price discovery and can lead to higher costs for the government compared to a fully competed contract. The absence of competition means taxpayers do not benefit from the potential cost efficiencies that arise from market forces.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from competitive pricing, potentially resulting in a higher overall expenditure than if multiple vendors had vied for the contract.

Public Impact

The primary beneficiary is the Department of the Navy, which receives essential IT services to support its operations. The contract delivers 'Other Computer Related Services,' likely encompassing a range of IT support, maintenance, and potentially development activities. The geographic impact is centered in New Jersey, where Lockheed Martin's operations are located. Workforce implications include employment opportunities within Lockheed Martin and potentially its subcontractors in the IT sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type may incentivize higher costs if not rigorously managed.
Lack of transparency regarding specific performance metrics makes value assessment difficult.
Long contract duration could lead to vendor lock-in and reduced flexibility.

Positive Signals

Award to a large, established defense contractor like Lockheed Martin suggests a high level of trust and capability.
The contract addresses a long-term need within the Department of the Navy, indicating strategic importance.
The fixed fee component of the contract type provides some cost certainty for the government.

Sector Analysis

The IT services sector is a vast and critical component of government operations, encompassing a wide array of services from software development to network management. 'Other Computer Related Services' is a broad category within this sector. Government spending in this area is substantial, with agencies relying heavily on contractors to maintain and modernize their technological infrastructure. Benchmarking this $256 million contract requires comparison against other large, long-term IT support contracts, particularly those awarded by defense agencies. The market is often dominated by large prime contractors, but also includes a significant ecosystem of subcontractors.

Small Business Impact

This contract does not appear to have included specific small business set-asides, as indicated by the 'sb' field being false. This suggests that the primary award was made to a large prime contractor, Lockheed Martin Corporation. While large contracts can sometimes include subcontracting opportunities for small businesses, the absence of a direct set-aside means that small businesses were not specifically targeted for a portion of this prime contract value. The impact on the small business ecosystem is therefore indirect, relying on the prime contractor's subcontracting plans, which are not detailed here.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance standards, reporting requirements, and payment schedules tied to milestones. Transparency is often limited for sole-source contracts, especially regarding the justification for the award and detailed pricing breakdowns. Inspector General jurisdiction would apply if any allegations of fraud, waste, or abuse arise during the contract's performance.

Related Government Programs

Department of Defense IT Services Contracts
Navy IT Modernization Programs
Lockheed Martin Defense Contracts
Sole-Source IT Procurements
Cost-Plus-Fixed-Fee IT Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of publicly available performance data
Long contract duration without clear performance benchmarks

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $256.3 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 $256.3 million.

What is the period of performance?

Start: 2004-09-16. End: 2009-08-31.

What is Lockheed Martin Corporation's track record with the Department of Defense for similar IT services contracts?

Lockheed Martin Corporation is a major defense contractor with a long history of performing IT services for the Department of Defense (DoD) across various branches, including the Navy. Their track record typically involves large, complex systems integration, software development, and sustainment services. While specific performance data for individual contracts is often not public, their continued success in securing significant DoD contracts suggests a generally positive performance history and established capabilities. However, like any large contractor, they have likely faced scrutiny on specific projects regarding cost overruns or schedule delays. A deeper dive into contract performance databases and Inspector General reports would be needed for a comprehensive assessment of their specific track record on IT services.

How does the $256 million award compare to other 'Other Computer Related Services' contracts awarded by the DoD in the same period?

The $256 million award to Lockheed Martin for 'Other Computer Related Services' is a substantial sum, indicative of a significant, long-term engagement. To benchmark this value, one would compare it to other definitive contracts within the 'Other Computer Related Services' (NAICS 541519) category awarded by the DoD between 2004 and 2009. Given the sole-source nature and the duration (approx. 5 years), this contract likely represents a critical service. Comparable contracts would also be sole-source or limited competition, potentially with similar cost-plus-fixed-fee structures. The average value of such contracts, adjusted for scope and duration, would provide context. Without access to a comprehensive database of all comparable contracts from that period, a precise benchmark is difficult, but $256 million over five years for specialized IT services to a major defense agency is consistent with large-scale government IT procurements.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee IT contract of this magnitude?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract of this magnitude ($256 million) are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to innovate or optimize costs. The government bears the risk of paying for actual costs incurred, plus a fixed fee, which can lead to cost overruns if not meticulously managed. Secondly, the CPFF structure, while providing flexibility for evolving IT requirements, can incentivize the contractor to incur more costs to increase the fixed fee (though the fee is fixed, the total cost is variable). Effective oversight, rigorous auditing of costs, and clear performance metrics are crucial to mitigate these risks. Without strong government oversight, there's a risk of inefficiency and higher-than-necessary expenditure.

How effective are Inspector General (IG) investigations in overseeing contracts like this one?

Inspector General (IG) investigations play a critical role in overseeing federal contracts, including large IT service agreements like this one. The DoD IG, for instance, conducts audits, inspections, and investigations to prevent and detect waste, fraud, and abuse. For a contract of this size and duration, the IG's office would likely conduct periodic audits of costs and performance to ensure compliance with contract terms and identify any irregularities. While IGs provide a vital layer of accountability, their investigations are often reactive, triggered by specific concerns or data anomalies, rather than continuous, real-time oversight. Proactive program management and robust internal controls by the contracting agency remain the first line of defense.

What does the contract duration of 1810 days imply about the nature of the services provided?

A contract duration of 1810 days, approximately five years, strongly implies that the 'Other Computer Related Services' provided by Lockheed Martin are essential for the long-term operational needs of the Department of the Navy. Such extended periods are typically associated with services that require deep integration into existing systems, ongoing maintenance and sustainment, or strategic IT development projects that span multiple years. Short-term, easily replaceable services are usually procured under shorter contracts. This duration suggests a stable, ongoing requirement, potentially related to critical infrastructure, legacy system support, or a phased modernization effort where continuity of service is paramount.

What is the significance of the 'Other Computer Related Services' classification (NAICS 541519)?

The North American Industry Classification System (NAICS) code 541519, 'Other Computer Related Services,' is a broad category encompassing a wide range of IT services not specifically classified under other codes like custom software development (541511) or computer systems design (541512). This classification suggests the contract likely covers a diverse set of IT support functions. These could include IT consulting, IT project management, IT support services, data processing services, disaster recovery services, or IT infrastructure management. The breadth of this code means the specific deliverables could vary significantly, but it generally points to services focused on the operation, maintenance, and enhancement of computer systems and networks, rather than the creation of entirely new software or hardware.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Other Computer Related Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 199 BORTON LANDING ROAD, MOORESTOWN, NJ, 08057

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline