DoD's $693M Lockheed Martin contract for submarine imaging systems shows long-term support needs

Contract Overview

Contract Amount: $693,325,213 ($693.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2009-07-17

End Date: 2024-03-09

Contract Duration: 5,349 days

Daily Burn Rate: $129.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PROCUREMENT OF ENGINEERING SERVICES AND SUPPORT OF THE AN/BVY-1 INTEGRATED SUBMARINE IMAGING SYSTEM (ISIS) AND FOR THE PRODUCTION OF TEN (10) AN/BVY-1(V)1 INTEGRATED CONTROL AND DISPLAY (IC&D) CABINETS. SERVICES WILL INCLUDE DESIGN, DEVELOPMENT, TESTING, REVERSE ENGINEERING, TECHNOLOGY INSERTION/ REFRESHMENT, ENGINEERING SERVICES, FIELD ENGINEERING SERVICES, AND SYSTEM SUPPORT.

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $693.3 million to LOCKHEED MARTIN CORPORATION for work described as: PROCUREMENT OF ENGINEERING SERVICES AND SUPPORT OF THE AN/BVY-1 INTEGRATED SUBMARINE IMAGING SYSTEM (ISIS) AND FOR THE PRODUCTION OF TEN (10) AN/BVY-1(V)1 INTEGRATED CONTROL AND DISPLAY (IC&D) CABINETS. SERVICES WILL INCLUDE DESIGN, DEVELOPMENT, TESTING, REVERSE ENGINEERING, TECH… Key points: 1. Contract awarded to a single, large defense contractor suggests specialized capabilities are required. 2. The extensive duration of the contract (over 14 years) indicates a long-term sustainment requirement for critical defense technology. 3. Cost-plus incentive fee structure may incentivize contractor efficiency but also carries inherent cost escalation risks. 4. The contract's focus on engineering services, including reverse engineering and technology insertion, points to the evolving nature of defense systems. 5. The absence of small business set-asides suggests the scope and complexity are beyond typical small business capabilities. 6. The significant dollar value highlights the substantial investment in maintaining and upgrading naval imaging technology.

Value Assessment

Rating: fair

The total contract value of approximately $693 million over more than 14 years represents a significant investment in specialized naval technology. Benchmarking this against similar long-term, sole-source or limited-competition contracts for complex defense systems is challenging due to the unique nature of the AN/BVY-1 system. The cost-plus incentive fee (CPIF) pricing structure, while common for R&D and complex systems, can lead to higher final costs if not managed rigorously, as the government shares in cost savings and overruns. Without detailed cost breakdowns and performance metrics, a precise value-for-money assessment is difficult, but the extended duration and specialized nature suggest a high degree of necessity.

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 had the opportunity to submit proposals. However, the fact that Lockheed Martin Corporation was the awarded contractor suggests they possessed the most advantageous offer based on technical capabilities, price, or other factors. The number of bidders is not specified, but full and open competition is generally the most effective mechanism for price discovery and ensuring fair market value.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it theoretically drives down prices through market forces and encourages innovation among potential bidders, leading to better value.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical intelligence, surveillance, and reconnaissance capabilities for its submarine fleet. The contract delivers essential engineering services, including design, development, testing, and sustainment for the AN/BVY-1 Integrated Submarine Imaging System (ISIS). The geographic impact is primarily within naval operations globally, supporting submarine missions. The contract supports a highly specialized workforce within Lockheed Martin, likely including engineers, technicians, and program managers in Virginia and potentially other locations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration increases risk of cost overruns and potential for scope creep.
Cost-plus incentive fee contracts can incentivize higher spending if not closely monitored.
Reliance on a single contractor for critical systems can create vendor lock-in and limit future flexibility.
The specialized nature of the technology may limit the pool of qualified personnel, potentially impacting future sustainment.
Technological obsolescence is a risk for systems with such long development and sustainment cycles.

Positive Signals

Awarded through full and open competition, suggesting a competitive process initially.
The contract includes provisions for technology insertion, indicating a commitment to modernization.
The extensive scope of services ensures comprehensive support for a critical defense system.
Lockheed Martin is a well-established defense contractor with a proven track record in complex systems integration.
The contract's focus on engineering services supports the development and maintenance of advanced capabilities.

Sector Analysis

This contract falls within the defense industrial sector, specifically focusing on advanced electronic and imaging systems for naval applications. The market for such specialized defense technology is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. Comparable spending benchmarks would likely involve other major defense platforms and their associated sustainment contracts, which often run into hundreds of millions or billions of dollars over extended periods. The NAICS code 334513 (Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables) indicates a focus on precision instrumentation, a key component of modern military systems.

Small Business Impact

The contract data indicates that small business participation was not a primary consideration, as the 'ss' (small business set-aside) field is false and the prime contractor is a large corporation. This suggests the scope and technical requirements of the AN/BVY-1 ISIS system are highly specialized and likely beyond the typical capabilities or capacity of small businesses for direct prime contracting. There is no explicit information on subcontracting plans for small businesses, but given the nature of the work, it's possible that specialized components or services might be subcontracted, though this is not guaranteed.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a Cost Plus Incentive Fee (CPIF) contract, there are built-in incentives and cost controls, but rigorous oversight is crucial to manage performance and expenditures. Transparency is typically managed through contract reporting requirements and program reviews. The Department of Defense's Inspector General (IG) would have jurisdiction to investigate potential fraud, waste, or abuse related to this contract, especially given its significant value and long duration.

Related Government Programs

AN/BVY-1 Integrated Submarine Imaging System (ISIS)
Naval Intelligence, Surveillance, and Reconnaissance (ISR) Systems
Submarine Combat Systems
Defense Electronics Manufacturing
Aerospace and Defense Engineering Services

Risk Flags

Long contract duration
Cost-plus contract type
Specialized technology
Single prime contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $693.3 million to LOCKHEED MARTIN CORPORATION. PROCUREMENT OF ENGINEERING SERVICES AND SUPPORT OF THE AN/BVY-1 INTEGRATED SUBMARINE IMAGING SYSTEM (ISIS) AND FOR THE PRODUCTION OF TEN (10) AN/BVY-1(V)1 INTEGRATED CONTROL AND DISPLAY (IC&D) CABINETS. SERVICES WILL INCLUDE DESIGN, DEVELOPMENT, TESTING, REVERSE ENGINEERING, TECHNOLOGY INSERTION/ REFRESHMENT, ENGINEERING SERVICES, FIELD ENGINEERING SERVICES, AND SYSTEM SUPPORT.

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 $693.3 million.

What is the period of performance?

Start: 2009-07-17. End: 2024-03-09.

What is the historical spending trend for the AN/BVY-1 ISIS program prior to this contract award?

Detailed historical spending data specifically for the AN/BVY-1 ISIS program prior to the July 2009 award is not directly available in the provided data snippet. However, the contract's start date (2009) and end date (2024) suggest this definitive contract represents a significant, long-term commitment to the system's development and sustainment. The initial award value and subsequent modifications would dictate the spending trajectory. Given the system's criticality for submarine operations, it's reasonable to infer that prior investment in its research, development, and initial procurement phases would have been substantial, likely spanning several years and potentially involving multiple smaller contracts or phases before this large definitive contract was established.

How does the per-unit cost of the AN/BVY-1(V)1 IC&D Cabinets compare to similar naval display or control systems?

A direct per-unit cost comparison for the ten AN/BVY-1(V)1 Integrated Control and Display (IC&D) Cabinets is not feasible with the provided data. The total contract value of $693 million encompasses a broad range of engineering services, development, testing, and production over a long period, making it difficult to isolate the cost of these ten cabinets. Furthermore, the specialized nature of submarine-specific control and display systems, designed for harsh environments and high reliability, means they are unlikely to have direct commercial off-the-shelf (COTS) equivalents for comparison. Benchmarking would require access to classified cost data or detailed breakdowns of the production costs versus the extensive engineering and support services included in the overall contract.

What are the key performance indicators (KPIs) used to measure Lockheed Martin's performance under this contract?

The provided data does not specify the Key Performance Indicators (KPIs) for this contract. However, for a Cost Plus Incentive Fee (CPIF) contract involving complex engineering services and production, typical KPIs would likely focus on technical performance (e.g., system reliability, accuracy, operational readiness), schedule adherence (meeting development milestones and delivery dates), and cost control (managing expenses within target ranges to achieve incentive fees). Specific metrics might include Mean Time Between Failures (MTBF) for system components, successful completion of integration and testing phases, and adherence to budget targets. The incentive fee structure implies that achieving or exceeding certain performance thresholds would result in higher profits for Lockheed Martin.

What is the risk associated with the long duration (over 14 years) of this contract regarding technological obsolescence?

The extended duration of over 14 years presents a significant risk of technological obsolescence for the AN/BVY-1 Integrated Submarine Imaging System (ISIS) and its components. Submarine technology, particularly in areas like sensors and data processing, evolves rapidly. By the time the contract concludes in 2024, the system's core technology could be a decade or more old relative to emerging advancements. This necessitates robust 'technology insertion' and 'refreshment' clauses within the contract, as mentioned in the description, to mitigate obsolescence. However, the effectiveness of these provisions depends on continuous investment, proactive system architecture design, and the government's ability to adapt requirements to incorporate newer technologies without incurring prohibitive costs or delays.

How has the competition level for this specific type of submarine imaging system evolved over time?

The provided data indicates this specific contract was awarded under 'Full and Open Competition'. However, the nature of highly specialized defense systems like the AN/BVY-1 ISIS often leads to limited competition in practice, even if initially competed broadly. Over time, as systems mature and require specialized sustainment and upgrades, the number of capable contractors may decrease due to high entry barriers, proprietary knowledge, and existing investments. While the initial award was competitive, the long-term nature and specific requirements might consolidate expertise within a few key players, potentially leading to future sole-source or limited-source procurements for sustainment and upgrades if competition is not actively fostered.

What is the potential impact of this contract on Lockheed Martin's overall business and the broader defense electronics market?

This contract represents a substantial, long-term revenue stream for Lockheed Martin, reinforcing its position as a key provider of advanced naval systems. The $693 million value over 14+ years signifies a significant portion of their defense electronics portfolio, likely requiring dedicated program management and engineering resources. For the broader defense electronics market, this contract highlights the ongoing demand for sophisticated ISR capabilities in submarines and the substantial investment required for their development and sustainment. It underscores the trend towards complex, integrated systems and the importance of established prime contractors capable of managing such large-scale, technologically advanced programs.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Instruments and Related Products Manufacturing for Measuring, Displaying, and Controlling Industrial Process Variables

Product/Service Code: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002408R6274

Offers Received: 3

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $5,529,636,997

Exercised Options: $1,206,516,653

Current Obligation: $693,325,213

Actual Outlays: $67,102,613

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline