DoD's $264.5M contract for SQQ-89A(V)15 system upgrades awarded to Lockheed Martin shows fair competition

Contract Overview

Contract Amount: $264,538,269 ($264.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-06-08

End Date: 2020-08-13

Contract Duration: 4,815 days

Daily Burn Rate: $54.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: NON-RECURRING ENGINEERING AND UPGRADE KITS FOR THE SQQ-89A(V)15 SYSTEMS.

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $264.5 million to LOCKHEED MARTIN CORPORATION for work described as: NON-RECURRING ENGINEERING AND UPGRADE KITS FOR THE SQQ-89A(V)15 SYSTEMS. Key points: 1. The contract value of $264.5 million over its period of performance suggests significant investment in naval defense systems. 2. Awarded to a single large contractor, Lockheed Martin, this contract highlights the concentration of specialized defense manufacturing. 3. The duration of the contract (over 13 years) indicates a long-term need for system sustainment and upgrades. 4. The use of a Firm Fixed Price contract type aims to control costs for the Department of Defense. 5. The contract's focus on Non-Recurring Engineering and upgrade kits points to modernization efforts for critical naval technology. 6. The absence of small business set-asides suggests the specialized nature of the work may not lend itself to broad subcontracting opportunities.

Value Assessment

Rating: fair

The total contract value of $264.5 million for Non-Recurring Engineering and upgrade kits for the SQQ-89A(V)15 systems appears substantial. Benchmarking this against similar complex defense system upgrade contracts is challenging without more specific details on the scope of work and the technological advancements involved. However, the firm fixed-price nature of the contract suggests an attempt to manage cost predictability for the Department of Defense. The value is consistent with large-scale, long-term defense modernization programs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. While the specific number of bidders is not provided, this procurement method is generally preferred for ensuring a competitive marketplace and potentially achieving better pricing. The award to Lockheed Martin suggests they were the most competitive offeror based on the criteria set forth in the solicitation.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages multiple companies to bid, driving down prices and fostering innovation, ultimately leading to better value for public funds.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving modernized and upgraded sonar systems essential for maritime security and operations. The contract delivers critical upgrades and engineering services for the SQQ-89A(V)15 acoustic detection systems. The geographic impact is primarily within naval operations globally, enhancing the capabilities of deployed vessels. The workforce implications are likely concentrated within Lockheed Martin's specialized engineering and manufacturing divisions, supporting high-skilled jobs in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to cost overruns if not managed effectively.
Reliance on a single large contractor may limit future competition or innovation from smaller firms.
The specialized nature of the technology might create barriers to entry for new suppliers.
Potential for scope creep in long-term engineering and upgrade projects.
The significant dollar amount warrants close oversight to ensure value for money.

Positive Signals

Firm Fixed Price contract type helps control costs and provides budget certainty.
Full and open competition suggests a robust bidding process was utilized.
Award to an established defense contractor like Lockheed Martin implies a level of proven capability.
Focus on system upgrades indicates a commitment to maintaining and improving critical defense assets.
The contract duration reflects a long-term strategic investment in naval capabilities.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on the manufacturing and sustainment of advanced naval combat systems. The SQQ-89A(V)15 is a critical component of naval warfare, involving sophisticated sonar technology. Spending in this area is driven by national security requirements and the need to maintain technological superiority. Comparable spending benchmarks would involve other major defense platform upgrades and sustainment contracts, which often run into hundreds of millions or billions of dollars over their lifecycles.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). Given the specialized nature of Non-Recurring Engineering and upgrade kits for advanced naval systems, it is common for prime contracts to be awarded to large defense contractors. While there may be opportunities for small businesses to participate as subcontractors to Lockheed Martin, the primary award mechanism did not prioritize small business participation directly.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the contract terms, including performance metrics and reporting requirements. Transparency is facilitated through contract award databases and public reporting mechanisms. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Naval Combat Systems
Sonar Systems
Defense Electronics Manufacturing
Aerospace and Defense
Military Hardware Procurement
System Modernization Programs

Risk Flags

Long contract duration may increase risk of cost overruns or obsolescence.
Sole-source nature of specific upgrade components could limit future competition.
Complexity of NRE requires robust government oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $264.5 million to LOCKHEED MARTIN CORPORATION. NON-RECURRING ENGINEERING AND UPGRADE KITS FOR THE SQQ-89A(V)15 SYSTEMS.

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 $264.5 million.

What is the period of performance?

Start: 2007-06-08. End: 2020-08-13.

What is the specific nature of the "Non-Recurring Engineering" (NRE) and "Upgrade Kits" for the SQQ-89A(V)15 system?

Non-Recurring Engineering (NRE) refers to the design, development, and testing costs associated with creating a new product or significantly modifying an existing one. For the SQQ-89A(V)15 system, this likely involves research and development to enhance its acoustic detection capabilities, integrate new technologies, or adapt it to evolving threats. Upgrade kits are physical or software components designed to be installed on existing systems to improve performance, add new functionalities, or extend their service life. The $264.5 million contract value suggests substantial NRE effort and the production of numerous upgrade kits over the contract's extended period, indicating a significant modernization initiative for the Navy's sonar capabilities.

How does the $264.5 million contract value compare to historical spending on the SQQ-89A(V)15 program?

Without access to historical spending data specifically for the SQQ-89A(V)15 program prior to this contract, a direct comparison is difficult. However, the $264.5 million awarded to Lockheed Martin represents a significant investment. The contract's duration (2007-2020) suggests this was a major, long-term effort for system sustainment and upgrades. To provide context, major defense platform upgrades and sustainment contracts often span many years and involve hundreds of millions of dollars. This contract's value is consistent with the lifecycle costs associated with maintaining and modernizing critical, complex defense systems like advanced sonar suites.

What are the key performance indicators (KPIs) or metrics used to assess the success of this contract?

Specific Key Performance Indicators (KPIs) for this contract are not detailed in the provided data. However, for defense contracts involving engineering and upgrade kits, success is typically measured by factors such as: timely delivery of NRE milestones and upgrade kits; adherence to technical specifications and performance requirements (e.g., improved detection range, reduced false alarms, enhanced processing power); system reliability and maintainability post-upgrade; and cost control within the firm fixed-price framework. The Department of the Navy would likely have established acceptance criteria and testing protocols to validate the effectiveness of the upgrades before final payment.

What is Lockheed Martin's track record with the SQQ-89A(V)15 system and similar naval defense contracts?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing, manufacturing, and sustaining complex defense systems, including naval combat systems. They have been a primary contractor for the SQQ-89A(V)15 program, which is a long-standing sonar system. Their track record with this specific system likely involves continuous upgrades and support over many years. Given their position as a leading defense prime contractor, they possess the technical expertise, manufacturing capacity, and security clearances necessary for such critical programs. Their broader portfolio includes a wide range of naval platforms, sensors, and combat management systems, indicating a strong capability in this domain.

What are the potential risks associated with a long-duration contract like this for system upgrades?

Long-duration contracts for system upgrades, such as this $264.5 million award spanning over 13 years, carry several potential risks. Firstly, technological obsolescence: the technology landscape can change rapidly, potentially making the upgrades less effective or requiring further modifications before the contract concludes. Secondly, cost escalation: despite the firm fixed-price structure, unforeseen challenges in NRE or manufacturing can lead to pressure for contract modifications or claims, potentially increasing costs. Thirdly, contractor performance degradation: over a long period, a contractor's focus or resources might shift, impacting the quality or timeliness of deliverables. Finally, integration challenges: ensuring the upgraded systems seamlessly integrate with existing naval infrastructure and other platforms can be complex and prone to delays or performance issues.

How does the 'firm fixed price' contract type influence the value and risk for the government and the contractor?

A Firm Fixed Price (FFP) contract type places the primary risk of cost overruns on the contractor, while the government benefits from price certainty. For the government, this means the total cost of the contract is known upfront, simplifying budgeting and financial planning. It incentivizes the contractor to manage costs efficiently and perform the work within the agreed-upon price. For the contractor, FFP contracts offer the potential for higher profit margins if they can complete the work under budget, but they also bear the risk of losses if costs exceed estimates due to unforeseen issues, poor performance, or scope creep. In this case, for NRE and upgrade kits, the FFP structure aims to ensure the government receives the defined upgrades at a predictable cost.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002407R5201

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 497 ELECTRONICS PKWY # 5 # BLD, LIVERPOOL, NY, 13088

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $676,070,297

Exercised Options: $264,562,392

Current Obligation: $264,538,269

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline