DoD's $1.34B AEGIS Weapon System contract to Lockheed Martin awarded without competition

Contract Overview

Contract Amount: $1,339,010,250 ($1.3B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2013-12-27

End Date: 2024-12-31

Contract Duration: 4,022 days

Daily Burn Rate: $332.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: AEGIS WEAPON MK 7 MULTIYEAR PROCUREMENT

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $1.34 billion to LOCKHEED MARTIN CORPORATION for work described as: AEGIS WEAPON MK 7 MULTIYEAR PROCUREMENT Key points: 1. Contract awarded as sole-source, raising questions about price discovery and potential for overpayment. 2. Long-term, multi-year nature of the contract suggests a strategic, but potentially inflexible, acquisition approach. 3. The contract's duration of over 11 years (4022 days) indicates a significant commitment to this specific system. 4. Focus on a single, high-value system highlights the importance of advanced defense capabilities. 5. The absence of competition may limit opportunities for innovation and cost reduction from alternative providers. 6. The contract's value represents a substantial investment in naval defense technology.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source, multi-year procurement is challenging without comparable contract data. The firm-fixed-price structure offers some cost certainty, but the lack of competition means there's no direct market comparison to assess if the pricing is truly competitive. Without competitive bids, it's difficult to ascertain if taxpayers are receiving the best possible value for this critical defense system. The long duration also means potential price escalations over time are a concern.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was considered. This approach is typically used when a unique capability is required or when only one source can provide the necessary goods or services. The lack of competition means there was no opportunity for other companies to bid, potentially leading to higher prices than if multiple bids were solicited. This limits the government's ability to leverage market forces for better pricing and innovation.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and efficiencies that typically arise from competitive bidding processes. This can result in higher overall spending for the AEGIS Weapon System.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives advanced naval defense capabilities. The contract ensures the continued production and support of the AEGIS Weapon System, crucial for national security. The contract's impact is concentrated in New Jersey, where Lockheed Martin's operations are located, supporting the local economy and workforce. It sustains high-skilled jobs in advanced manufacturing and defense technology within the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Long-term nature of the contract may reduce flexibility to adapt to evolving technologies or threats.
Lack of competition could stifle innovation by discouraging alternative solutions.
Dependence on a single contractor for a critical defense system poses a strategic risk.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Multi-year procurement ensures a stable supply of a critical defense system.
Award to an established contractor like Lockheed Martin suggests a high likelihood of successful delivery.
Contract supports advanced technological capabilities essential for national security.

Sector Analysis

The AEGIS Weapon System falls within the broader defense electronics and combat systems sector. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. The market is often dominated by a few large prime contractors due to the complexity and scale of defense systems. Spending in this area is driven by geopolitical factors and the need for technological superiority. Comparable spending benchmarks would involve other major defense platform procurements, such as aircraft carriers, fighter jets, or missile defense systems.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by 'sb: false'. The prime contractor, Lockheed Martin, is a large corporation. While large prime contractors are often required to subcontract portions of their work to small businesses, the absence of a specific set-aside suggests that opportunities for small businesses may not be explicitly prioritized or guaranteed within this particular contract's structure. Further analysis would be needed to determine the extent of small business subcontracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The firm-fixed-price nature provides some cost control, but the sole-source award necessitates close monitoring of performance and delivery schedules. Transparency is generally maintained through contract awards databases, but detailed performance metrics and cost breakdowns may be less publicly accessible for sole-source procurements. Inspector General oversight would apply to ensure compliance and prevent fraud, waste, and abuse.

Related Government Programs

Naval Combat Systems
Missile Defense Systems
Defense Electronics Manufacturing
Weapon System Procurement
Department of the Navy Contracts

Risk Flags

Sole Source Award
Long-Term Contract
Critical Defense System

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.34 billion to LOCKHEED MARTIN CORPORATION. AEGIS WEAPON MK 7 MULTIYEAR PROCUREMENT

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 $1.34 billion.

What is the period of performance?

Start: 2013-12-27. End: 2024-12-31.

What is Lockheed Martin Corporation's track record with the AEGIS Weapon System program?

Lockheed Martin Corporation has a long-standing and integral role in the development, production, and sustainment of the AEGIS Weapon System. As the prime contractor, they are responsible for delivering key components and integrating various subsystems. Their track record with AEGIS is generally considered strong, marked by successful deployments and upgrades over several decades. However, as with any large, complex defense program, there have likely been challenges related to cost, schedule, and technical performance over its lifecycle. The company's extensive experience positions them as a critical partner for the Navy, but also raises questions about the sustainability of sole-source relationships for such a vital system.

How does the $1.34 billion value of this contract compare to similar naval weapon system procurements?

The $1.34 billion value for the AEGIS Weapon System multi-year procurement is substantial, reflecting the complexity and critical nature of the system. To provide a precise comparison, one would need to analyze the scope of work (e.g., new builds vs. upgrades, specific variants) and the time period of other major naval weapon system contracts. However, in the context of major defense acquisitions, this figure is in line with significant procurements for platforms like destroyers, aircraft, or advanced missile systems. The multi-year aspect, spanning over a decade, also contributes to the large total value. Without direct apples-to-apples comparisons of scope and duration, it's difficult to definitively label it as high or low, but it signifies a major investment.

What are the primary risks associated with a sole-source, multi-year contract for a critical defense system like AEGIS?

The primary risks associated with a sole-source, multi-year contract for the AEGIS Weapon System include a lack of competitive pressure, which can lead to inflated prices and reduced incentives for innovation and efficiency. The government becomes heavily reliant on a single contractor, creating a potential bottleneck and increasing vulnerability if the contractor faces financial difficulties, production issues, or strategic shifts. Furthermore, the long-term commitment may lock the government into a specific technology, making it harder and more expensive to adapt to future threats or adopt potentially superior alternative solutions that emerge during the contract's life. There's also a risk of contractor 'lock-in,' where the incumbent's deep knowledge makes it difficult for new entrants to compete even if the contract were to be re-competed later.

How effective is the AEGIS Weapon System in fulfilling its intended purpose for the U.S. Navy?

The AEGIS Weapon System is widely regarded as one of the most capable naval combat systems in the world, designed to provide area-wide, fleet-wide, and joint force protection against a variety of threats, including anti-ship missiles, aircraft, and ballistic missiles. Its effectiveness stems from its integrated nature, combining advanced radar, command and control, and weapon launch capabilities. The system has undergone numerous upgrades and enhancements over its service life, adapting to evolving threats. Its successful deployment on numerous U.S. Navy cruisers and destroyers, as well as on ships for allied nations, underscores its perceived effectiveness and reliability in fulfilling its critical role in naval warfare and missile defense.

What are the historical spending patterns for the AEGIS Weapon System program?

Historical spending on the AEGIS Weapon System program has been substantial and consistent over several decades, reflecting its status as a cornerstone of U.S. naval defense. The program has seen significant investment through various phases, including research and development, initial procurement, and ongoing modernization and sustainment efforts. Multi-year procurements, like the one detailed, are a common strategy to achieve economies of scale and ensure program stability. While specific annual spending figures fluctuate based on production rates, upgrade cycles, and new platform integration, the overall trend indicates a sustained, high-level commitment of resources to maintain and advance this critical capability, often amounting to billions of dollars over the program's lifespan.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $1,348,599,001

Exercised Options: $1,346,122,866

Current Obligation: $1,339,010,250

Actual Outlays: $40,825,013

Subaward Activity

Number of Subawards: 1446

Total Subaward Amount: $666,462,507

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline