Lockheed Martin awarded $291M for AEGIS development and test sites, a sole-source contract

Contract Overview

Contract Amount: $291,125,110 ($291.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2013-06-20

End Date: 2018-12-31

Contract Duration: 2,020 days

Daily Burn Rate: $144.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THIS CONTRACT PROVIDES FOR THE AEGIS DEVELOPMENT AND TEST SITES, INCLUDING THE COMBAT SYSTEMS ENGINEERING DEVELOPMENT SITE (CSEDS), SPY-1A TEST FACILITY, AND THE NAVAL SYSTEMS COMPUTING CENTER (NSCC)

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $291.1 million to LOCKHEED MARTIN CORPORATION for work described as: THIS CONTRACT PROVIDES FOR THE AEGIS DEVELOPMENT AND TEST SITES, INCLUDING THE COMBAT SYSTEMS ENGINEERING DEVELOPMENT SITE (CSEDS), SPY-1A TEST FACILITY, AND THE NAVAL SYSTEMS COMPUTING CENTER (NSCC) Key points: 1. Contract focuses on critical AEGIS combat system development and testing infrastructure. 2. Sole-source award raises questions about potential price competition and value. 3. Long contract duration (over 5 years) suggests a need for sustained support. 4. The contractor, Lockheed Martin, is a major defense prime with extensive AEGIS experience. 5. Performance is tied to cost-plus-incentive-fee, aligning contractor incentives with cost control. 6. Geographic concentration in New Jersey for key development sites.

Value Assessment

Rating: fair

The contract value of $291 million over approximately five years for AEGIS development and test sites appears substantial. Benchmarking this against similar sole-source, cost-plus contracts for complex defense systems is challenging due to unique requirements. However, the cost-plus-incentive-fee structure suggests an attempt to manage costs by incentivizing the contractor to stay within budget. Without competitive bids, it's difficult to definitively assess if this represents optimal value for money, but the sustained investment indicates the critical nature of these facilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when a specific contractor possesses unique capabilities, proprietary technology, or is the sole provider of essential services. For a critical defense system like AEGIS, there may be a rationale for sole-sourcing to ensure continuity and leverage existing expertise. However, the lack of competition limits price discovery and may result in higher costs compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. While the specialized nature of AEGIS development might necessitate sole-sourcing, it underscores the importance of robust oversight to ensure fair pricing and prevent cost overruns.

Public Impact

The primary beneficiaries are the U.S. Navy's AEGIS combat system development and testing programs. Services delivered include the operation and maintenance of key facilities like CSEDS, SPY-1A Test Facility, and NSCC. The geographic impact is concentrated in New Jersey, where these critical test sites are located. This contract supports a highly specialized workforce within the defense industry, particularly in systems engineering and testing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost-plus-incentive-fee contracts can lead to cost growth if not closely managed.
Long-term nature of the contract requires ongoing monitoring of performance and costs.
Dependence on a single contractor for critical infrastructure poses a risk if performance falters.

Positive Signals

Contractor (Lockheed Martin) has extensive experience with the AEGIS system, ensuring technical expertise.
Incentive fee structure aims to align contractor and government interests on cost and performance.
Focus on development and test sites ensures continued advancement and validation of a key defense capability.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced weapons systems and associated infrastructure. The AEGIS Combat System is a cornerstone of U.S. naval defense, and its development and testing are crucial for maintaining technological superiority. Spending in this area is characterized by high R&D costs, long program lifecycles, and significant reliance on specialized engineering expertise. Comparable spending benchmarks are difficult to establish due to the unique nature of sole-source, mission-critical defense infrastructure contracts.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss: false, sb: false). As a sole-source award to a large prime contractor, the primary subcontracting opportunities for small businesses would be determined by Lockheed Martin's internal subcontracting plan. The absence of a direct set-aside means that small businesses are not guaranteed a specific portion of this contract's value, and their involvement would depend on Lockheed Martin's procurement decisions.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, likely involving the Defense Contract Management Agency (DCMA) given the 'sa' field. Accountability measures are embedded in the cost-plus-incentive-fee structure, which ties contractor profit to performance and cost targets. Transparency is generally limited for sole-source defense contracts, but reporting requirements within the contract would dictate the level of detail provided to the government.

Related Government Programs

AEGIS Combat System
Naval Surface Warfare
Defense Systems Development
Weapons System Testing
Combat Systems Engineering

Risk Flags

Sole-source award
Cost-plus contract type
Critical defense infrastructure
Long-term commitment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $291.1 million to LOCKHEED MARTIN CORPORATION. THIS CONTRACT PROVIDES FOR THE AEGIS DEVELOPMENT AND TEST SITES, INCLUDING THE COMBAT SYSTEMS ENGINEERING DEVELOPMENT SITE (CSEDS), SPY-1A TEST FACILITY, AND THE NAVAL SYSTEMS COMPUTING CENTER (NSCC)

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 $291.1 million.

What is the period of performance?

Start: 2013-06-20. End: 2018-12-31.

What is the historical spending trend for AEGIS development and test sites, and how does this contract compare?

Historical spending data for AEGIS development and test sites prior to this specific contract award is not detailed in the provided data. However, the value of $291 million over approximately five years suggests a significant, ongoing investment in maintaining and advancing this critical defense capability. AEGIS is a long-standing program, implying consistent, substantial funding over many years for its development, testing, and sustainment. Without prior contract details, a direct year-over-year comparison is not possible, but the scale of this award indicates its importance within the broader naval defense budget. Future analysis would require access to historical contract awards for similar AEGIS infrastructure to identify trends in cost and scope.

What are the specific performance metrics and incentive fee structures within this contract?

The contract type is 'COST PLUS INCENTIVE FEE' (pt: 'COST PLUS INCENTIVE FEE'), indicating that the contractor is reimbursed for allowable costs plus a performance-based incentive fee. While the exact performance metrics and fee structure are not detailed in the provided summary data, typical incentive fee contracts link the fee to achieving specific cost, schedule, or technical performance targets. For AEGIS development and test sites, these metrics could include system reliability, test throughput, successful integration of new capabilities, or adherence to development milestones. The 'incentive' aspect means that exceeding targets could result in a higher fee, while failing to meet them could reduce it, aligning Lockheed Martin's financial interests with the government's objectives for the AEGIS program.

What is Lockheed Martin's track record with the AEGIS program and similar sole-source contracts?

Lockheed Martin Corporation (co: 'LOCKHEED MARTIN CORPORATION') is a primary contractor for the AEGIS Combat System, responsible for its development and integration. Their extensive history with AEGIS suggests a deep understanding of the system's complexities and a proven capability to deliver on related requirements. As a major defense contractor, Lockheed Martin frequently engages in sole-source and other non-competitively awarded contracts, particularly for specialized systems where they hold unique expertise or are the incumbent provider. While this specific contract's sole-source nature warrants scrutiny, Lockheed Martin's long-standing role as a key AEGIS developer provides a degree of confidence in their technical ability to fulfill the contract's objectives.

How does the geographic concentration in New Jersey impact program oversight and potential risks?

The concentration of AEGIS development and test sites in New Jersey (st: 'NJ', sn: 'NEW JERSEY') centralizes critical infrastructure and personnel. This can streamline oversight by allowing contracting officers and technical representatives to more easily monitor operations and facilities. However, it also presents a concentrated risk: any disruption in the region, such as natural disasters, infrastructure failures, or localized workforce issues, could significantly impact the entire AEGIS development and testing capability. While co-location can foster collaboration and efficiency, it necessitates robust contingency planning and business continuity measures to mitigate the risks associated with having essential functions tied to a single geographic area.

What are the potential implications of the contract duration (2020 years) for long-term cost management?

The contract duration is listed as 2020 years (dur: 2020), which appears to be an error in the data provided, likely intended to represent a duration in years (e.g., 5 years, given the start and end dates). Assuming a duration of approximately 5 years (from 2013-06-20 to 2018-12-31), this signifies a long-term commitment to supporting the AEGIS development and test infrastructure. Long-term contracts can offer stability and predictability for both the government and the contractor, potentially leading to better resource planning and economies of scale. However, they also require diligent oversight to prevent cost creep over time and ensure that the contract remains aligned with evolving technological needs and budget realities. Regular reviews and potential contract modifications would be essential for effective long-term cost management.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002412R5107

Offers Received: 1

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, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $305,839,641

Exercised Options: $305,839,641

Current Obligation: $291,125,110

Subaward Activity

Number of Subawards: 121

Total Subaward Amount: $16,783,262

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline