DoD's $1B contract for navigation systems awarded to Lockheed Martin, with a significant portion spent on research and development

Contract Overview

Contract Amount: $1,008,832,661 ($1.0B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2003-12-23

End Date: 2007-03-01

Contract Duration: 1,164 days

Daily Burn Rate: $866.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: MANASSAS, MANASSAS CITY County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $1.01 billion to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Value-for-money assessment is challenging due to the cost-plus incentive fee structure, which can lead to cost overruns. 2. Limited competition dynamics suggest potential for higher pricing than in a fully competed environment. 3. Risk indicators include the cost-plus fee type and the long duration of the contract. 4. Performance context shows a substantial investment in a critical defense capability. 5. Sector positioning places this contract within the advanced aerospace and defense manufacturing industry.

Value Assessment

Rating: fair

The total award amount of over $1 billion for navigation systems is substantial. Benchmarking this against similar contracts is difficult without more specific details on the systems procured and their intended use. The cost-plus incentive fee (CPIF) structure, while intended to incentivize performance, can also lead to higher final costs if not managed tightly. The initial obligation of $86.7 million suggests a phased approach to funding.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one bidder was deemed capable of fulfilling the requirement. This lack of competition means that the government did not benefit from a competitive bidding process, which typically drives down prices and encourages innovation among multiple vendors.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to ensure the most economical price.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, receiving advanced navigation systems. The services delivered include the manufacturing and development of search, detection, navigation, guidance, aeronautical, and nautical systems. The geographic impact is primarily within the United States, supporting defense operations globally. Workforce implications include employment in specialized engineering, manufacturing, and research roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus incentive fee contracts carry inherent risks of cost escalation if not rigorously monitored.
Sole-source awards limit opportunities for other capable businesses and may not yield the best value.
The long contract duration (over 3 years) increases exposure to potential scope changes or evolving technological needs.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to advanced technological capabilities.
The contract focuses on critical navigation systems essential for military operations.
The incentive fee structure, if managed effectively, could drive performance improvements.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on advanced navigation and guidance systems. This is a highly specialized and capital-intensive industry dominated by a few large prime contractors. The market for such systems is driven by government defense spending, with significant R&D investment required to maintain technological superiority. Comparable spending benchmarks would likely be within the billions of dollars annually for similar complex defense systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' flag is also false, suggesting no specific small business subcontracting goals were mandated in the provided data snippet. This means that opportunities for small businesses to participate in this contract as prime contractors or through subcontracting may be limited, potentially concentrating the economic benefits with the large prime contractor.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting officers and program managers. The cost-plus incentive fee structure necessitates close monitoring of costs, performance, and adherence to contract terms. Transparency is often limited in sole-source defense contracts, but reporting requirements would be defined within the contract itself. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Aviation Systems
Defense Research and Development
Aerospace Navigation Technology
Military Guidance Systems
Defense Electronics Manufacturing

Risk Flags

Sole-source award
Cost-plus incentive fee contract type
Long contract duration
Broad system classification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.01 billion 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 $1.01 billion.

What is the period of performance?

Start: 2003-12-23. End: 2007-03-01.

What specific navigation systems are being procured under this contract, and what is their intended operational use?

The contract data indicates the procurement of 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' for the Department of the Navy. While specific system names are not provided, this broad category suggests advanced technologies critical for naval operations. These could include radar systems, inertial navigation units, GPS receivers, flight control computers, or integrated sensor suites for aircraft, ships, and submarines. Their intended use is to enhance situational awareness, enable precise maneuvering, and support mission success in complex operational environments, ranging from reconnaissance and surveillance to combat operations.

How does the cost-plus incentive fee (CPIF) structure compare to other contract types used for similar defense procurements, and what are its implications for cost control?

Cost-Plus Incentive Fee (CPIF) contracts are common for complex defense procurements where the final costs and performance outcomes are uncertain at the outset. Unlike fixed-price contracts, CPIF allows for costs to be reimbursed plus a fee that is adjusted based on performance against targets (e.g., cost, schedule, or technical performance). Compared to Cost Plus Fixed Fee (CPFF), CPIF offers a stronger incentive for the contractor to control costs. However, it still carries a higher risk of cost overrun for the government than fixed-price contracts. Effective cost control under CPIF relies heavily on robust government oversight, well-defined performance metrics, and realistic target setting to ensure the incentive mechanism truly benefits the taxpayer.

Given the sole-source nature of this award, what mechanisms are in place to ensure fair pricing and prevent contractor overreach?

When a contract is awarded on a sole-source basis, the government relies on several mechanisms to ensure fair pricing and prevent overreach. These include detailed cost and technical analyses performed by government experts, negotiation of the contract terms and pricing, and potentially obtaining certified cost or pricing data from the contractor. The government may also conduct should-cost analyses to estimate the reasonable price for the work. Furthermore, contract clauses related to defective pricing and audit rights provide recourse if inflated costs are discovered post-award. However, the absence of competition inherently reduces the government's leverage in price negotiations.

What is Lockheed Martin's track record with the Department of Defense for similar navigation and guidance system contracts?

Lockheed Martin is a major defense contractor with an extensive history of supplying complex systems, including navigation and guidance technologies, to the Department of Defense. They are known for producing advanced platforms and components for various military branches. While specific performance metrics for past contracts are not detailed here, their long-standing relationship with the DoD and consistent receipt of large-value contracts suggest a generally satisfactory performance record in delivering sophisticated defense capabilities. However, like any large contractor, they have likely experienced contract challenges, cost variances, and performance issues on specific programs over their extensive history.

How does the $1.008 billion total award value compare to historical spending on similar navigation systems by the Department of the Navy?

The total award value of approximately $1.008 billion for navigation systems represents a significant investment. To contextualize this, one would need to examine historical spending patterns by the Department of the Navy on similar categories of systems over preceding years. This would involve analyzing procurement data for navigation, guidance, search, and detection systems. A comparison would reveal whether this contract represents a substantial increase, a decrease, or a steady level of investment in these capabilities. Without access to that historical data, it's difficult to definitively state if this amount is high or low relative to past expenditures, though it is clearly a large-value contract.

What are the potential risks associated with the long contract duration (1164 days) and the 'search, detection, navigation, guidance, aeronautical, and nautical system' classification?

The long contract duration of 1164 days (over three years) presents several risks. Firstly, it increases the likelihood of technological obsolescence, as advancements in navigation and guidance systems can occur rapidly. Secondly, it exposes the contract to potential economic fluctuations and changes in defense priorities or budgets over its life. For the broad classification of 'search, detection, navigation, guidance, aeronautical, and nautical systems,' the risk lies in the complexity and integration challenges. These systems often involve intricate hardware and software components that must work seamlessly, increasing the potential for integration issues, performance shortfalls, and development delays. The sole-source nature exacerbates these risks by limiting the government's options if problems arise.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

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

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline