Lockheed Martin awarded $51M for submarine combat system upgrade, facing no competition

Contract Overview

Contract Amount: $50,960,226 ($51.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-01-15

End Date: 2017-08-10

Contract Duration: 3,495 days

Daily Burn Rate: $14.6K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: INTEGRATED COMBAT SYSTEM UPGRADE FOR BRAZIL TUPI CLASS SUBMARINES INCLUDING HARDWARE UPGRADES, SHORE BASED TRAINER, ADAPTATION, TESTING, LOGISTICS, AND CERTIFICATION.

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $51.0 million to LOCKHEED MARTIN CORPORATION for work described as: INTEGRATED COMBAT SYSTEM UPGRADE FOR BRAZIL TUPI CLASS SUBMARINES INCLUDING HARDWARE UPGRADES, SHORE BASED TRAINER, ADAPTATION, TESTING, LOGISTICS, AND CERTIFICATION. Key points: 1. Contract awarded for a critical defense system upgrade, indicating significant technological investment. 2. The sole-source nature of the award raises questions about potential price efficiencies and market innovation. 3. A long performance period suggests a complex and extensive integration process. 4. The firm-fixed-price contract type shifts cost risk to the contractor. 5. This contract falls under computer systems design services, a key area for defense modernization.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the lack of publicly available comparable sole-source procurements for similar complex combat systems. The total award of approximately $51 million over a nearly 10-year period suggests a substantial investment per year. Without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money or if it aligns with market rates for highly specialized defense technology integration.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating that Lockheed Martin was the only source considered capable of fulfilling the requirement. Sole-source awards often occur when a specific technology or expertise is unique to a single provider, or when urgency and national security considerations preclude a lengthy competition. The absence of competition limits the government's ability to leverage market forces to drive down costs and explore alternative solutions.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure. Without bids from other companies, there's less assurance that the price reflects the lowest possible cost for the required services.

Public Impact

The primary beneficiary is the Brazilian Navy, receiving an upgraded combat system for their Tupi class submarines. Services delivered include hardware upgrades, training, adaptation, testing, logistics, and certification for the integrated combat system. The geographic impact is primarily on Brazil's naval defense capabilities. Workforce implications include specialized roles in systems integration, engineering, and technical support for both the contractor and potentially the end-user.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Long contract duration increases the risk of cost overruns or scope creep if not managed tightly.
Dependence on a single contractor for critical defense technology can create long-term strategic risks.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
Award to a known entity (Lockheed Martin) suggests a level of confidence in their capability for this specific system.
The contract covers a comprehensive suite of services, aiming for a complete system solution.

Sector Analysis

The defense sector relies heavily on specialized systems integrators for complex platforms like submarines. Lockheed Martin is a major player in this market, providing advanced combat systems and technological solutions to various militaries. Spending in this area is driven by the need for continuous modernization to maintain technological superiority and address evolving threats. Comparable spending benchmarks are difficult to establish due to the unique nature of submarine combat systems and the proprietary technologies involved.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the prime contractor is Lockheed Martin Corporation, a large defense contractor. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan and its impact on the small business ecosystem are not detailed in the provided data. Without this information, it's difficult to assess the direct benefits or implications for small businesses in this particular procurement.

Oversight & Accountability

Oversight for this contract would likely be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance with contract terms. Accountability measures are inherent in the firm-fixed-price structure, which incentivizes the contractor to control costs. Transparency is generally limited for sole-source defense contracts, especially those involving sensitive technologies. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Combat Systems
Submarine Modernization Programs
Foreign Military Sales (potential, if Brazil is the end-user)
Defense Systems Integration

Risk Flags

Sole-source award
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $51.0 million to LOCKHEED MARTIN CORPORATION. INTEGRATED COMBAT SYSTEM UPGRADE FOR BRAZIL TUPI CLASS SUBMARINES INCLUDING HARDWARE UPGRADES, SHORE BASED TRAINER, ADAPTATION, TESTING, LOGISTICS, AND CERTIFICATION.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $51.0 million.

What is the period of performance?

Start: 2008-01-15. End: 2017-08-10.

What is Lockheed Martin's track record with integrated combat systems for naval vessels?

Lockheed Martin has a long and extensive track record in developing and integrating combat systems for a wide array of naval platforms, including surface ships and submarines, for both the U.S. Navy and international partners. They are known for their Aegis Combat System, which is a cornerstone of many modern naval fleets. Their experience spans decades and encompasses various technological generations, from legacy systems to advanced networked warfare capabilities. This includes providing hardware, software, sensors, weapons integration, and training solutions. Their involvement in programs like the Littoral Combat Ship (LCS) and various international submarine programs demonstrates a deep understanding of the complexities involved in delivering and supporting these critical defense assets. The company's sustained presence in this market suggests a high degree of technical proficiency and program management capability, although specific performance metrics for individual contracts are often not publicly disclosed.

How does the $51 million contract value compare to similar sole-source combat system upgrades?

Direct comparisons for sole-source combat system upgrades are inherently difficult due to the proprietary nature of the technology and the unique requirements of each platform and customer. However, $51 million spread over approximately nine years (January 2008 to August 2017) averages around $5.6 million per year. This figure needs to be considered in the context of highly specialized, low-volume, high-complexity defense systems. For context, major combat system development and integration programs, even when competed, can run into hundreds of millions or even billions of dollars over their lifecycle. Sole-source awards, by definition, lack competitive benchmarking, making it challenging to ascertain if this specific value represents a 'good' or 'fair' price relative to what could have been achieved through competition. The value is likely driven by the specific technological scope, the level of customization required for the Tupi class submarines, and the contractor's unique expertise.

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

The primary risks associated with a sole-source award for a critical defense system like an integrated combat system include potential overpricing due to the absence of competitive pressure, leading to reduced value for taxpayer money. There's also a risk of complacency from the contractor, potentially impacting innovation or responsiveness, as there is no immediate threat of losing future business to competitors for this specific contract. Furthermore, sole-sourcing can limit the government's access to alternative technologies or solutions that might be offered by other capable firms. Dependence on a single supplier for critical components or expertise can also create strategic vulnerabilities and long-term risks if that supplier faces financial difficulties, undergoes restructuring, or changes its business focus. Finally, without competitive validation, assessing the true cost-effectiveness and technical optimality of the chosen solution becomes more challenging.

How effective are firm-fixed-price contracts in managing costs for complex system integrations?

Firm-fixed-price (FFP) contracts are generally considered effective tools for managing costs in complex system integrations, particularly when the scope of work is well-defined and the risks can be reasonably anticipated. Under an FFP contract, the contractor assumes the primary responsibility for cost overruns, as the price is fixed regardless of the contractor's actual costs. This incentivizes the contractor to manage resources efficiently, control expenses, and maintain a tight schedule to maximize profit. For the government, FFP contracts offer cost certainty, making budgeting more predictable. However, the effectiveness hinges on the accuracy of the initial cost and scope estimations. If the scope is poorly defined or unforeseen technical challenges arise, the contractor might be reluctant to undertake necessary work outside the defined scope, potentially leading to disputes or a less-than-optimal final product, or they may have built significant contingency into the initial price, making it higher than a cost-reimbursable contract might have been if risks were lower.

What is the historical spending pattern for integrated combat systems by the Department of Defense?

Historical spending by the Department of Defense (DoD) on integrated combat systems is substantial and represents a significant portion of its procurement budget. The DoD consistently invests billions of dollars annually in developing, upgrading, and maintaining combat systems across its various branches (Navy, Air Force, Army, Marines). This spending covers a wide range of systems, from ship-based combat management systems like Aegis to aircraft avionics and ground-based command and control networks. Major programs often span many years, involving significant research and development, prototyping, testing, and full-scale production and integration. Spending patterns are influenced by geopolitical threats, technological advancements, platform modernization cycles, and strategic defense reviews. While specific figures fluctuate year to year, the trend is one of continuous investment in advanced capabilities to maintain military superiority. Contracts for such systems are often awarded through competitive processes, but sole-source awards for unique upgrades or specialized components are also common, particularly for established platforms or when specific technological expertise is required.

What are the implications of the 'Computer Systems Design Services' NAICS code for this contract?

The North American Industry Classification System (NAICS) code 541512, 'Computer Systems Design Services,' indicates that the primary nature of this contract involves designing and developing integrated computer systems. This typically includes planning and designing hardware and software configurations, integration, and testing. For this specific contract, it means the work goes beyond simply supplying hardware; it encompasses the complex task of making disparate components work together seamlessly as a functional combat system. This NAICS code covers a broad range of IT services, but in the defense context, it signifies the intricate engineering and systems integration required to build sophisticated military capabilities. Companies operating under this code often possess specialized expertise in software development, network architecture, cybersecurity, and the integration of various hardware and software elements into a cohesive and operational system, which is critical for advanced defense platforms like submarines.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002408R6271

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 9500 GODWIN DR, MANASSAS, VA, 20110

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $51,941,594

Exercised Options: $51,941,594

Current Obligation: $50,960,226

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline