DoD's $216.6M combat systems engineering contract awarded to Lockheed Martin shows limited competition

Contract Overview

Contract Amount: $216,557,803 ($216.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2010-09-17

End Date: 2020-03-31

Contract Duration: 3,483 days

Daily Burn Rate: $62.2K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED 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 $216.6 million to LOCKHEED MARTIN CORPORATION for work described as: COMBAT SYSTEMS ENGINEERING Key points: 1. The contract's value of over $216 million over nearly a decade suggests significant long-term investment in combat systems. 2. Awarded as 'not available for competition,' this indicates a lack of broader market engagement for these specific engineering services. 3. The 'Cost Plus Fixed Fee' pricing structure can incentivize cost overruns if not closely monitored. 4. The duration of the contract (over 9 years) implies a stable, ongoing need for these specialized engineering capabilities. 5. The absence of small business set-asides or reported subcontracting suggests limited direct impact on the small business ecosystem for this specific award. 6. The contract's focus on 'Combat Systems Engineering' places it within a critical, high-stakes sector of defense procurement.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without more specific details on the scope of 'Combat Systems Engineering.' However, a nearly decade-long award exceeding $200 million indicates a substantial investment. The 'Cost Plus Fixed Fee' (CPFF) contract type, while common for complex R&D, carries inherent risks of cost escalation if not managed rigorously. Without comparable contracts for similar specialized engineering services, it's difficult to definitively assess if the pricing represents excellent value for money. The fixed fee component aims to provide some cost control, but the overall cost efficiency depends heavily on the contractor's performance and the government's oversight.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'not available for competition' basis, indicating that the government determined only one source, Lockheed Martin Corporation, could provide the required combat systems engineering services. This typically occurs when services are highly specialized, proprietary, or require unique expertise or existing infrastructure that only one contractor possesses. The lack of competition means there was no opportunity for other qualified firms to bid, potentially limiting price discovery and innovation that could arise from a competitive bidding process.

Taxpayer Impact: For taxpayers, a sole-source award means there is no direct price competition to drive down costs. The government must rely on negotiation and robust oversight to ensure a fair price and prevent potential overspending.

Public Impact

The primary beneficiaries are the Department of the Navy and the broader U.S. Department of Defense, receiving specialized engineering services for critical combat systems. The services delivered likely involve the design, development, integration, and testing of advanced combat systems, crucial for national security. The geographic impact is primarily centered around New Jersey (SN), where the contractor is located, but the ultimate impact is on naval readiness globally. The contract supports a highly skilled engineering workforce within Lockheed Martin, contributing to specialized technical expertise in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not managed effectively.
Sole-source award limits competitive pressure, potentially impacting price efficiency and innovation.
Long contract duration (nearly 10 years) requires sustained oversight to ensure continued value.
Lack of transparency on specific deliverables makes it hard to benchmark performance.
No indication of small business subcontracting limits broader economic benefit.

Positive Signals

Award to a major defense contractor (Lockheed Martin) suggests access to significant expertise and established capabilities.
Long-term nature of the contract indicates a stable and critical need for these services within the Navy's operations.
Focus on 'Combat Systems Engineering' addresses a core, high-priority defense requirement.
Definitive contract type provides a clear framework for the relationship and deliverables over its term.

Sector Analysis

Combat Systems Engineering falls under the broader Engineering Services (NAICS 541330) sector, which is a significant component of the defense industrial base. This sector is characterized by high barriers to entry due to specialized knowledge, security clearances, and long-standing relationships with government agencies. The market is dominated by a few large prime contractors, like Lockheed Martin, who possess the scale and expertise to handle complex, multi-year defense programs. Spending in this area is directly tied to national defense priorities and technological advancements in military hardware and systems.

Small Business Impact

This contract does not appear to have included small business set-asides, as indicated by 'sb: false'. Furthermore, there is no explicit mention of subcontracting goals or achievements related to small businesses. This suggests that the primary awardee, Lockheed Martin, is expected to perform the majority of the work internally or with other large business partners. Consequently, the direct impact on the small business defense contracting ecosystem for this specific award may be minimal, although Lockheed Martin may engage small businesses indirectly through its supply chain.

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 Fixed Fee contract, rigorous financial oversight is crucial to monitor expenditures against the estimated costs and ensure the fixed fee remains justified. Transparency is limited by the 'not available for competition' nature and the proprietary aspects of combat systems engineering. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Combat Systems
Defense Engineering Services
Lockheed Martin Defense Contracts
Department of Defense Procurement
Advanced Weapons Systems Development

Risk Flags

Sole-source award limits competition.
Cost Plus Fixed Fee pricing carries risk of cost overruns.
Long contract duration requires sustained oversight.
Lack of small business subcontracting noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $216.6 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 $216.6 million.

What is the period of performance?

Start: 2010-09-17. End: 2020-03-31.

What is the specific scope of 'Combat Systems Engineering' covered under this contract?

The provided data abbreviates the scope as 'COMBAT SYSTEMS ENGINEERING.' This typically encompasses a wide range of activities related to the design, development, integration, testing, and sustainment of military hardware and software systems used in combat. For the Department of the Navy, this could include everything from naval gun systems, missile launchers, fire control systems, electronic warfare suites, and command and control systems for ships, submarines, and aircraft. The exact deliverables would be detailed in the contract's Statement of Work (SOW), which is not publicly available in this data snippet. Without the SOW, it's difficult to ascertain the precise technical areas and performance metrics.

How does the 'Cost Plus Fixed Fee' (CPFF) pricing structure compare to other contract types for similar defense engineering services?

The CPFF structure is common for research, development, and complex engineering projects where the final costs are uncertain at the outset. The government agrees to pay the contractor's actual costs plus a fixed fee representing profit. This differs from Fixed-Price contracts, where the price is set upfront, and Cost-Reimbursement contracts (without a fixed fee), where profit is negotiated separately. CPFF aims to provide the contractor with an incentive to control costs because the fee is fixed, but it also carries the risk of cost overruns if the initial cost estimates are inaccurate or if the contractor's efficiency is low. For highly specialized engineering like combat systems, CPFF is often chosen to allow flexibility while providing some cost predictability compared to pure cost-reimbursement.

What are the potential risks associated with a sole-source award for critical defense systems?

Sole-source awards, like this one designated 'not available for competition,' carry several risks for the government and taxpayers. Primarily, the lack of competition removes the downward price pressure that multiple bidders would typically exert, potentially leading to higher costs. It can also stifle innovation, as there's less incentive for the sole provider to develop novel or more cost-effective solutions if they are guaranteed the contract regardless. Furthermore, it can create vendor lock-in, making it difficult and expensive to switch providers in the future. Robust government oversight, negotiation, and market research are essential to mitigate these risks and ensure fair pricing and adequate performance.

What is Lockheed Martin's track record with the Department of the Navy for combat systems engineering?

Lockheed Martin Corporation is a major defense contractor with an extensive and long-standing relationship with the Department of the Navy and the U.S. Department of Defense overall. They are a primary provider of numerous complex defense systems, including naval combat systems, aircraft, and other platforms. Their track record includes delivering major programs, though like any large contractor, they have also faced scrutiny over cost, schedule, and performance on specific projects. For combat systems engineering, their deep involvement suggests a high level of technical expertise and institutional knowledge, making them a logical, albeit sole-source, choice for specialized requirements.

How has spending on 'Combat Systems Engineering' by the Department of the Navy evolved over the past decade?

The provided data only covers a single contract from 2010-2020. To analyze the evolution of spending on 'Combat Systems Engineering' by the Department of the Navy over the past decade, one would need to examine aggregate spending data across multiple contracts and fiscal years. This would involve querying federal procurement databases (like USASpending.gov) for contracts categorized under relevant NAICS codes (e.g., 541330 - Engineering Services) and keywords related to combat systems, naval warfare, and specific platforms. Such an analysis would likely show significant, sustained investment driven by modernization efforts, geopolitical threats, and the lifecycle management of existing naval assets.

What are the implications of the contract's duration (3483 days) on performance and cost?

A contract duration of 3483 days (approximately 9.5 years) signifies a long-term commitment to the services provided. For performance, this extended period allows for deep integration and sustained development of complex combat systems, potentially leading to more refined and effective capabilities. It also implies a stable requirement from the Navy. From a cost perspective, such a long duration necessitates robust contract management and oversight to ensure costs remain controlled and performance doesn't degrade over time. It also allows for potential economies of scale and learning curve efficiencies for the contractor, which could translate to better value if managed properly. However, it also increases the risk of cost escalation due to unforeseen factors over such an extended period.

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 FIXED FEE (U)

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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $253,170,978

Exercised Options: $253,170,978

Current Obligation: $216,557,803

Subaward Activity

Number of Subawards: 56

Total Subaward Amount: $10,078,370

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline