DoD's $135.7M Combat Systems Engineering contract awarded to Lockheed Martin raises value and competition concerns

Contract Overview

Contract Amount: $135,706,433 ($135.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-09-26

End Date: 2013-12-31

Contract Duration: 1,922 days

Daily Burn Rate: $70.6K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: COMBAT SYSTEMS ENGINEERING

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $135.7 million to LOCKHEED MARTIN CORPORATION for work described as: COMBAT SYSTEMS ENGINEERING Key points: 1. The contract's cost-plus award fee structure can incentivize cost overruns. 2. Lack of competition suggests potential for inflated pricing and reduced innovation. 3. The long duration of the contract (over 5 years) increases long-term risk. 4. Engineering services are critical but require robust oversight to ensure value. 5. The contract's focus on combat systems highlights its strategic importance. 6. Performance context is limited without specific award fee details.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable data for similar large-scale combat systems engineering efforts. The cost-plus award fee (CPAF) pricing structure, while common for complex R&D, carries inherent risks of cost escalation if not meticulously managed and overseen. Without detailed performance metrics and award fee payouts, it's difficult to definitively assess if the government received excellent value for the funds expended. The absence of competitive bidding further complicates a direct value assessment.

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 approach is typically justified when only one responsible source can provide the required services, often due to proprietary technology, unique expertise, or urgent national security needs. However, the lack of competition limits the government's ability to leverage market forces to drive down costs and encourage innovation.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the contractor faces less pressure to offer competitive pricing. It also reduces transparency in pricing and potentially limits the government's access to a broader range of solutions.

Public Impact

The primary beneficiary is the Department of the Navy, receiving critical engineering support for combat systems. Services delivered include advanced engineering and technical support for complex weapon systems. The contract's geographic impact is centered in New Jersey, where Lockheed Martin's operations are located. Workforce implications include the employment of highly skilled engineers and technical specialists.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure may incentivize higher costs.
Sole-source award limits price discovery and potential savings.
Long contract duration increases exposure to evolving threats and technologies.
Lack of detailed performance metrics hinders value assessment.

Positive Signals

Awarded to a major defense contractor with extensive experience.
Focus on critical combat systems development is essential for national security.
Engineering services are vital for maintaining technological superiority.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense applications. The defense engineering market is characterized by high barriers to entry, significant R&D investment, and long-term relationships between contractors and government agencies. Spending in this area is driven by the need for technological advancement and maintaining a strategic advantage. Comparable spending benchmarks are difficult to establish due to the specialized nature of combat systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the sole-source nature of the award limits opportunities for small businesses to participate as prime contractors. Subcontracting opportunities for small businesses may exist, but these are not explicitly detailed in the provided data and would depend on Lockheed Martin's subcontracting plan.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The cost-plus award fee structure necessitates rigorous monitoring of performance and costs to ensure the contractor meets objectives and earns award fees appropriately. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse. Transparency is limited by the sole-source nature and the proprietary aspects of combat systems development.

Related Government Programs

Naval Combat Systems
Defense Engineering Services
Weapon Systems Development
Lockheed Martin Contracts
Cost-Plus Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of detailed performance metrics

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $135.7 million to LOCKHEED MARTIN CORPORATION. COMBAT SYSTEMS ENGINEERING

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 $135.7 million.

What is the period of performance?

Start: 2008-09-26. End: 2013-12-31.

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

Lockheed Martin Corporation, as one of the largest defense contractors globally, has a long history of receiving sole-source and competitively awarded contracts for complex engineering services, including those related to combat systems. Their track record often involves large, multi-year programs requiring specialized expertise and significant R&D investment. While specific details on past sole-source combat systems engineering contracts are not provided here, their extensive experience suggests a capacity to deliver on such requirements. However, the nature of sole-source awards means that direct comparisons of performance and cost-effectiveness against competitors are inherently limited. Scrutiny often focuses on program execution, adherence to budget, and delivery timelines, with past performance reviews being critical for future sole-source justifications.

How does the cost-plus award fee (CPAF) structure compare to other contract types for this type of service, and what are the implications for value?

The Cost-Plus Award Fee (CPAF) structure is often employed for research and development or complex services where the scope of work is not precisely defined at the outset, or where innovation and performance quality are paramount. Unlike fixed-price contracts, CPAF allows the contractor to recover allowable costs plus a fee that is composed of a base fee and an award amount determined by the government based on performance against defined criteria. This structure incentivizes the contractor to meet or exceed performance targets. However, it also carries a risk of cost growth if the government's oversight and performance evaluation are insufficient, as the contractor is reimbursed for costs incurred. Compared to firm-fixed-price contracts, CPAF offers more flexibility but potentially less cost certainty for the government. Its effectiveness hinges on robust performance metrics and diligent government oversight to ensure value for money.

What are the primary risks associated with a sole-source award for critical defense engineering services?

The primary risks associated with a sole-source award for critical defense engineering services include a lack of price competition, which can lead to higher costs for the government compared to a competitive procurement. This can result in taxpayers paying a premium for the services. Additionally, sole-source awards may stifle innovation, as the contractor faces less pressure to develop novel or more cost-effective solutions. There's also a risk of complacency, where the incumbent contractor may not feel the same urgency to perform at peak efficiency or to proactively identify cost-saving measures. Furthermore, it can limit the government's access to a broader range of technological solutions or alternative approaches that might be offered by other qualified firms in a competitive environment.

What historical spending patterns exist for combat systems engineering within the Department of the Navy, and how does this contract fit?

Historical spending patterns for combat systems engineering within the Department of the Navy typically show consistent, significant investment due to the critical nature of naval warfare capabilities. These expenditures are driven by the need to develop, maintain, and upgrade complex weapon systems, sensors, and platforms. Contracts in this domain are often long-term, high-value, and awarded to major defense contractors with specialized expertise, frequently involving sole-source or limited competition due to the unique requirements and existing platform integration. This particular $135.7 million contract, awarded to Lockheed Martin, aligns with these historical patterns by representing a substantial investment in engineering services for combat systems. Its duration and sole-source nature are also consistent with the characteristics of major defense procurement in this specialized sector.

What are the potential implications of the contract's duration (1922 days) on technological relevance and cost-effectiveness?

A contract duration of 1922 days (approximately 5.26 years) for combat systems engineering presents both opportunities and risks. On the positive side, it allows for long-term planning, stability for the contractor's workforce, and the potential for deep integration and understanding of complex systems, which can lead to more effective solutions and potentially lower overall lifecycle costs through sustained development. However, a long duration also increases the risk of technological obsolescence. The pace of technological advancement, particularly in defense, is rapid. Systems developed or engineered early in the contract might be outdated by its end, requiring costly modifications or replacements. Furthermore, extended periods without re-competition can reduce pressure on the contractor to innovate or control costs, potentially diminishing cost-effectiveness over time if not managed with stringent oversight and performance incentives.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $139,542,343

Exercised Options: $136,595,185

Current Obligation: $135,706,433

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline