DoD awards $899M for submarine systems, with Lockheed Martin as sole contractor

Contract Overview

Contract Amount: $899,175,953 ($899.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2010-04-12

End Date: 2016-08-01

Contract Duration: 2,303 days

Daily Burn Rate: $390.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THE CONTRACT IS FOR THE PROCUREMENT OF HARDWARE AND SOFTWARE SYSTEMS, TECHNICAL INSERTION KITS, ASSOCIATED SPARES FOR SSN 688/688I, SSBN, SEAWOLF, AND SSGN CLASS SUBMARINES, AND MODERNIZATION KITS, HARDWARE AND SOFTWARE SYSTEMS FOR NEW CONSTRUCTION, AND HARDWARE AND SOFTWARE SYSTEMS UPGRADES FOR VIRGINIA CLASS SUBMARINES.

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $899.2 million to LOCKHEED MARTIN CORPORATION for work described as: THE CONTRACT IS FOR THE PROCUREMENT OF HARDWARE AND SOFTWARE SYSTEMS, TECHNICAL INSERTION KITS, ASSOCIATED SPARES FOR SSN 688/688I, SSBN, SEAWOLF, AND SSGN CLASS SUBMARINES, AND MODERNIZATION KITS, HARDWARE AND SOFTWARE SYSTEMS FOR NEW CONSTRUCTION, AND HARDWARE AND SOFTWARE SYST… Key points: 1. This contract represents a significant investment in maintaining and modernizing the U.S. submarine fleet. 2. The sole-source nature raises questions about potential price inflation and limited innovation. 3. Performance risk is moderate, given the specialized nature of submarine systems and the contractor's experience. 4. The contract spans several years, indicating a long-term commitment to these critical platforms. 5. This spending falls within the broader defense sector, specifically focusing on naval systems. 6. The absence of small business participation is noted, potentially limiting broader economic impact.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and highly specialized requirements for submarine systems. Without competitive bids, it's difficult to assess if the $899 million represents optimal value for money. The cost-plus-incentive-fee structure suggests an attempt to control costs, but the lack of competition inherently limits price discovery. Comparisons to similar, competitively awarded contracts for complex defense systems would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often taken for highly specialized or proprietary systems where only one contractor possesses the necessary expertise or technology. The lack of competition means there were no alternative bidders, which can lead to higher prices and reduced pressure on the contractor to innovate or offer cost savings. This limits the government's ability to explore different solutions or leverage market competition.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. The government has limited leverage to negotiate lower prices or ensure the most cost-effective solution is chosen.

Public Impact

The primary beneficiaries are the U.S. Navy and its submarine fleet, ensuring operational readiness and modernization. Services delivered include hardware and software systems, technical insertion kits, spares, and modernization kits for various submarine classes. The geographic impact is national, supporting naval bases and operations across the globe. Workforce implications include specialized engineering, manufacturing, and technical support roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential cost savings.
Lack of small business participation may reduce broader economic benefits.
Long contract duration could lead to cost overruns if not managed tightly.

Positive Signals

Contract addresses critical national security needs for submarine modernization.
Lockheed Martin has extensive experience with these submarine platforms.
Cost-plus-incentive-fee structure aims to align contractor and government interests on cost and performance.

Sector Analysis

This contract falls within the defense industrial base, specifically the segment focused on naval systems and submarine technology. The market for such specialized components is inherently limited, often dominated by a few large prime contractors. Spending in this area is driven by the need to maintain and upgrade aging fleets and develop next-generation platforms, reflecting significant, long-term government investment in national security capabilities.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no small business participation (ss: false, sb: false). As a sole-source award to a large prime contractor, it offers limited direct opportunities for small businesses unless they are part of Lockheed Martin's supply chain. This approach does not actively foster the small business ecosystem within this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The cost-plus-incentive-fee (CPIF) structure implies performance metrics and cost targets that are monitored. Transparency may be limited due to the sole-source nature. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems
Submarine Modernization Programs
Defense Hardware Procurement
Advanced Weapons Systems
Department of the Navy Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $899.2 million to LOCKHEED MARTIN CORPORATION. THE CONTRACT IS FOR THE PROCUREMENT OF HARDWARE AND SOFTWARE SYSTEMS, TECHNICAL INSERTION KITS, ASSOCIATED SPARES FOR SSN 688/688I, SSBN, SEAWOLF, AND SSGN CLASS SUBMARINES, AND MODERNIZATION KITS, HARDWARE AND SOFTWARE SYSTEMS FOR NEW CONSTRUCTION, AND HARDWARE AND SOFTWARE SYSTEMS UPGRADES FOR VIRGINIA CLASS SUBMARINES.

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 $899.2 million.

What is the period of performance?

Start: 2010-04-12. End: 2016-08-01.

What is Lockheed Martin's track record with the SSN 688/688i, SSBN, SEAWOLF, and SSGN class submarines?

Lockheed Martin Corporation has a long and established history as a prime contractor for the U.S. Navy's submarine programs. They are the primary developer and integrator of combat systems, sonar systems, and other critical technologies for these classes of submarines. Their experience spans decades, including the original construction and subsequent upgrades and maintenance of these platforms. This deep institutional knowledge and existing infrastructure are likely key factors contributing to the sole-source nature of this contract, as transitioning to a new provider would involve significant risks and costs related to knowledge transfer, system integration, and personnel training.

How does the $899 million contract value compare to historical spending on similar submarine systems?

Directly comparing the $899 million value is difficult without knowing the specific scope and duration of comparable contracts. However, given the complexity and critical nature of submarine systems, this figure represents a substantial investment. Historical spending on submarine modernization and new construction by the Department of the Navy has consistently been in the billions of dollars annually. This particular contract, covering hardware, software, and modernization kits over its period of performance (2010-2016), appears to be a significant component of the overall sustainment and upgrade budget for these specific submarine classes during that timeframe. The lack of competition makes a precise value-for-money comparison challenging.

What are the primary risks associated with a sole-source award for critical submarine systems?

The primary risks associated with a sole-source award for critical submarine systems include potential price inflation due to the absence of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of alternative solutions should the incumbent contractor face performance issues or financial instability. Furthermore, the government may have less leverage in negotiating terms and conditions. For highly specialized systems like those on submarines, the risk of vendor lock-in is also significant, making future transitions costly and complex. This necessitates robust oversight and performance management by the procuring agency.

How effective is the Cost Plus Incentive Fee (CPIF) contract type in managing costs for complex defense systems?

The Cost Plus Incentive Fee (CPIF) contract type is designed to manage costs for complex defense systems by establishing target costs and sharing mechanisms for cost savings or overruns between the government and the contractor. It incentivizes the contractor to control costs and meet performance targets. While CPIF can be effective in aligning interests and encouraging efficiency, its success heavily depends on the accuracy of the initial cost estimates and the clarity of the performance metrics. In a sole-source environment, the baseline target cost is crucial, and the government must diligently monitor performance and costs to ensure the incentive structure truly benefits taxpayers and achieves the desired outcomes without excessive profit for the contractor.

What is the historical spending trend for submarine hardware and software procurements by the Department of the Navy?

Historical spending by the Department of the Navy on submarine hardware and software procurements has been substantial and consistent, reflecting the strategic importance of the submarine force. Annual budgets often run into the tens of billions of dollars when considering new construction, modernization, maintenance, and associated systems. Procurements for specific components like those in this contract, while significant individually, are part of a larger, sustained investment strategy. Trends show a continuous need for upgrades to maintain technological superiority and address aging platforms, indicating ongoing, high-value procurements in this category over multiple fiscal years.

What are the implications of awarding this contract to Lockheed Martin for the future of submarine system development?

Awarding this contract solely to Lockheed Martin reinforces their dominant position in the submarine systems market. This can foster deep expertise and streamlined development for the specific platforms covered. However, it may also create barriers to entry for potential competitors, potentially stifling broader innovation across the industry. The government's reliance on a single provider for critical systems necessitates strong, ongoing oversight to ensure continued technological advancement, competitive pricing in future sole-source negotiations, and robust supply chain management to mitigate risks associated with vendor dependency.

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: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002409R6251

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 9500 GODWIN DR, MANASSAS, VA, 20110

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,369,430,306

Exercised Options: $1,271,210,942

Current Obligation: $899,175,953

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline