Naval Sea Systems Command awards $653M contract for electronic parts, with Lockheed Martin as the sole provider

Contract Overview

Contract Amount: $65,326,210 ($65.3M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2005-08-19

End Date: 2014-06-05

Contract Duration: 3,212 days

Daily Burn Rate: $20.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200512!052209!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C5132 !A!N! !N! ! !20050819!20070930!078669280!078669280!834951691!N!LOCKHEED MARTIN CORPORATION !3333 PILOT KNOB RD !SAINT PAUL !MN!55121!17288!037!27!EAGAN !DAKOTA !MINNESOTA !+000000270051!N!N!000048290678!5998!ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !423690!E! !3! ! ! ! ! !20200930!B! ! !B! !D!U!R!1!001!N!1B!Z!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! !1700!N00024!0001! !

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $65.3 million to LOCKHEED MARTIN CORP for work described as: 200512!052209!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C5132 !A!N! !N! ! !20050819!20070930!078669280!078669280!834951691!N!LOCKHEED MARTIN CORPORATION !3333 PILOT KNOB RD !SAINT PAUL !MN!55121!17288!037!27!EAGAN !DAKO… Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Significant contract value suggests critical role in naval operations. 3. Long performance period indicates a sustained need for these electronic components. 4. The specific electronic parts are crucial for maintaining naval vessel systems. 5. Contractor's extensive experience likely influenced the sole-source decision.

Value Assessment

Rating: fair

The contract value of $653,262,10.05 is substantial, reflecting a significant procurement for electronic components. Without comparable sole-source contracts or detailed cost breakdowns, it is difficult to definitively benchmark the value for money. However, the lack of competition inherently limits the potential for cost savings that competitive bidding typically provides. The pricing structure, a Cost Plus Award Fee (CPAF) type, allows for contractor reimbursement of allowable costs plus a fee that is adjusted based on performance, which can incentivize efficiency but also requires robust oversight to manage costs effectively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for excluding other potential contractors. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government compared to a competitively bid contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without multiple offers, the government did not benefit from the price reductions and innovative solutions that typically emerge from a competitive environment.

Public Impact

Naval vessels benefit from the supply of essential electronic components, ensuring operational readiness. The contract supports the maintenance and potential upgrades of critical naval systems. The geographic impact is primarily centered around Lockheed Martin's facilities and naval bases receiving the components. This contract sustains employment within Lockheed Martin's defense manufacturing sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings for taxpayers.
Cost Plus Award Fee (CPAF) structure requires diligent government oversight to manage costs and ensure fair pricing.
Long contract duration (over 9 years) could lead to price escalation if not managed proactively.

Positive Signals

Contract awarded to a major defense contractor with established capabilities.
The specific nature of the electronic parts may necessitate specialized manufacturing capabilities.
Award ensures continued supply of critical components for naval operations.

Sector Analysis

This contract falls within the broader electronics and communication equipment sector, specifically focusing on specialized electronic parts and hardware for defense applications. The market for such components is often characterized by high barriers to entry due to technical expertise, proprietary technology, and stringent quality control requirements. Given the sole-source nature, it suggests that Lockheed Martin likely possesses unique capabilities or intellectual property essential for these specific naval systems, making direct spending comparisons with other competitive contracts challenging.

Small Business Impact

The contract data does not indicate any specific small business set-aside provisions. As a sole-source award to a large prime contractor, the opportunities for small businesses would likely be limited to subcontracting roles. The extent of small business participation would depend on Lockheed Martin's subcontracting plan and their ability to source components or services from smaller enterprises within their supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). The Cost Plus Award Fee (CPAF) structure necessitates rigorous monitoring of costs, performance metrics, and adherence to contract terms to ensure accountability and prevent cost overruns. Transparency is facilitated through contract reporting requirements, though detailed cost breakdowns may be proprietary.

Related Government Programs

Naval Ship Systems Modernization Programs
Defense Electronics Procurement
Electronic Warfare Systems
Naval Combat Systems

Risk Flags

Sole-source award may result in higher costs.
Lack of competition limits price discovery.
CPAF requires diligent government oversight to manage costs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $65.3 million to LOCKHEED MARTIN CORP. 200512!052209!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C5132 !A!N! !N! ! !20050819!20070930!078669280!078669280!834951691!N!LOCKHEED MARTIN CORPORATION !3333 PILOT KNOB RD !SAINT PAUL !MN!55121!17288!037!27!EAGAN !DAKOTA !MINNESOTA !+000000270051!N!N!000048290678!5998!ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE !A7 !ELECTRONICS AND COMMUNICATION EQUIP !000 !* !423690!E! !3! ! ! ! ! !202

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $65.3 million.

What is the period of performance?

Start: 2005-08-19. End: 2014-06-05.

What is the specific nature and function of the 'ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE' procured under this contract?

The contract specifies 'ELECTRICAL & ELCT BOARDS, CARDS & ASSCTED HRDWRE' under the Product Service Code (PSC) NAICS code 423690, which relates to 'Other Electronic Parts and Equipment Merchant Wholesalers'. While the exact function is not detailed in the provided data, these components are typically essential building blocks for the complex electronic systems found on naval vessels. This could include power distribution boards, signal processing cards, control system hardware, or other specialized electronic assemblies critical for navigation, communication, weapon systems, or propulsion management. Their specific application would be integrated into larger naval platforms managed by the Naval Sea Systems Command (NAVSEA).

Why was this contract awarded on a sole-source basis, and what are the implications for cost?

The data indicates the contract was 'NOT COMPETED', signifying a sole-source award. The justification for such an award typically stems from situations where only one responsible source is capable of providing the required goods or services, or when urgent and compelling circumstances necessitate it. For this contract, it's probable that Lockheed Martin possesses unique technology, proprietary designs, or specialized manufacturing capabilities essential for these specific electronic components, making them the only viable option. The implication for cost is significant: without competitive bidding, the government forgoes the price discovery mechanism inherent in a multi-bidder scenario. This can lead to higher prices than might be achieved in a competitive market, as the negotiating leverage shifts away from the buyer. Robust cost analysis and oversight by the contracting agency are therefore crucial to mitigate potential overspending.

What is Lockheed Martin Corporation's track record with the Naval Sea Systems Command (NAVSEA)?

Lockheed Martin Corporation is a major defense contractor with a long-standing and extensive relationship with the Department of Defense, including the Naval Sea Systems Command (NAVSEA). They are a primary provider of a wide range of naval systems, including combat systems, surface ships, submarines, and associated technologies. Their track record with NAVSEA encompasses numerous large-scale contracts for platform development, integration, maintenance, and component supply. This specific contract for electronic parts is indicative of their role as a key supplier within NAVSEA's complex supply chain, leveraging their established expertise and production capabilities to meet the Navy's demanding requirements.

How does the contract duration and value compare to similar procurements for naval electronic components?

The contract spans from August 19, 2005, to June 5, 2014, with a total value of $653,262,10.05. This represents an average annual value of approximately $72.5 million over its 9-year duration. Such a substantial value and long performance period are not uncommon for critical, specialized components required for major defense platforms like naval vessels. However, comparing it directly to 'similar' procurements is challenging without knowing the exact specifications and criticality of the components. Sole-source awards, by their nature, often involve unique or highly specialized items where direct market comparisons are difficult. The duration suggests a sustained need for these parts, potentially for new construction, fleet modernization, or long-term sustainment of existing systems.

What are the potential risks associated with a sole-source contract of this magnitude?

The primary risk associated with a sole-source contract of this magnitude is the potential for inflated costs due to the lack of competitive pressure. Without competing bids, there is less incentive for the contractor to offer the lowest possible price. Another risk is vendor lock-in, where the government becomes dependent on a single supplier, potentially limiting future flexibility and innovation. Furthermore, the absence of multiple bidders can obscure potential performance or quality issues that might be revealed during a competitive evaluation. Effective risk mitigation requires stringent government oversight, thorough cost and price analysis, and clear performance metrics within the contract terms.

What is the significance of the 'Cost Plus Award Fee' (CPAF) contract type in this context?

The 'Cost Plus Award Fee' (CPAF) contract type signifies that the contractor, Lockheed Martin, will be reimbursed for all allowable costs incurred during the performance of the contract, plus a base fee and an award fee. The award fee is contingent upon the contractor meeting or exceeding specific performance objectives established by the government. This structure aims to incentivize the contractor to perform efficiently and effectively, going beyond minimum requirements. For the government, it provides a mechanism to reward superior performance while still covering necessary costs. However, CPAF contracts require robust government oversight to define appropriate performance criteria, objectively evaluate performance, and ensure that the awarded fees are justified and aligned with the value received.

Industry Classification

NAICS: Wholesale Trade › Household Appliances and Electrical and Electronic Goods Merchant Wholesalers › Other Electronic Parts and Equipment Merchant Wholesalers

Product/Service Code: ELECTRICAL/ELECTRONIC EQPT COMPNTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 3333 PILOT KNOB RD, SAINT PAUL, MN, 55121

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline