Lockheed Martin awarded $493.7M contract for ship integration and engineering by the Department of the Navy

Contract Overview

Contract Amount: $493,667,853 ($493.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2015-09-04

End Date: 2027-04-30

Contract Duration: 4,256 days

Daily Burn Rate: $116.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: BASE YEAR - SHIP INTEGRATION AND ENG.

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $493.7 million to LOCKHEED MARTIN CORPORATION for work described as: BASE YEAR - SHIP INTEGRATION AND ENG. Key points: 1. Contract value represents a significant investment in naval defense systems. 2. Full and open competition suggests a potentially competitive bidding process. 3. The contract duration of over 3 years indicates a long-term need for these services. 4. The use of a Cost Plus Incentive Fee (CPIF) contract type aims to balance contractor incentives with cost control. 5. The specific NAICS code (334511) points to a specialized manufacturing sector. 6. The award to a single contractor, Lockheed Martin, highlights their established role in this domain. 7. The contract's geographic focus on New Jersey may indicate key operational or manufacturing hubs.

Value Assessment

Rating: good

The base year value of $493.7 million for ship integration and engineering is substantial. Benchmarking this against similar large-scale defense integration contracts is challenging without more specific service details. However, the CPIF contract type suggests an effort to manage costs effectively by incentivizing the contractor to stay within target costs. The fact that it was awarded after full and open competition implies that pricing was likely scrutinized against multiple proposals, potentially leading to a fair market value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The data shows two bids were received. While the number of bidders is relatively low for a contract of this magnitude, full and open competition generally promotes price discovery and allows the government to select the best value offering. The specific details of the bidding process and the evaluation criteria would provide further insight into the effectiveness of the competition.

Taxpayer Impact: Full and open competition, even with a limited number of bidders, generally benefits taxpayers by encouraging multiple companies to offer their best pricing and technical solutions, leading to a more cost-effective outcome.

Public Impact

The Department of the Navy benefits from advanced ship integration and engineering capabilities, crucial for maintaining naval superiority. This contract supports the development and maintenance of sophisticated search, detection, navigation, and guidance systems for naval vessels. The primary geographic impact is likely within New Jersey, where Lockheed Martin's operations or key subcontractors may be located. The contract supports a highly skilled workforce in specialized engineering and manufacturing roles within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in CPIF contracts if cost targets are not met.
Limited competition (2 bidders) may reduce pressure on pricing compared to a more robust bidding environment.
Long-term nature of the contract could lead to vendor lock-in if not managed carefully.

Positive Signals

Full and open competition provides a baseline for fair pricing and best value.
CPIF contract structure incentivizes cost efficiency and performance.
Award to a major defense contractor like Lockheed Martin suggests access to significant expertise and established supply chains.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced systems manufacturing and integration for naval applications. The NAICS code 334511 covers Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing. This is a highly specialized and capital-intensive segment of the defense industry, characterized by long development cycles and significant R&D investment. Spending in this area is critical for maintaining technological superiority in naval warfare.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale defense contract awarded to a major prime contractor, there may be opportunities for small businesses to participate as subcontractors. However, the extent of small business subcontracting is not detailed in this summary. The prime contractor's subcontracting plan would be crucial in determining the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the significant value and duration, regular performance reviews, audits, and milestone tracking are expected. The contract type (CPIF) necessitates close monitoring of costs and performance against established targets. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Combat Systems
Defense Electronics Manufacturing
Shipbuilding and Repair
Aerospace and Defense Systems Integration
Naval Navigation and Guidance Systems

Risk Flags

Potential for cost growth due to CPIF contract type.
Limited number of bidders may reduce competitive pressure.
Long contract duration requires sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $493.7 million to LOCKHEED MARTIN CORPORATION. BASE YEAR - SHIP INTEGRATION AND ENG.

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 $493.7 million.

What is the period of performance?

Start: 2015-09-04. End: 2027-04-30.

What is Lockheed Martin's track record with similar naval integration contracts?

Lockheed Martin is a major defense contractor with extensive experience in naval systems integration. They have a long history of developing and producing complex systems for the U.S. Navy and other military branches, including radar, sonar, combat management systems, and navigation equipment. Their track record includes numerous large-scale contracts for aircraft carriers, submarines, and surface combatants, often involving sophisticated integration of electronics, weapons, and communication systems. While specific performance metrics for past contracts are not detailed here, their consistent selection for high-value, complex programs suggests a generally positive performance history and strong capabilities in this domain. However, like any large contractor, they may have faced challenges or criticisms on specific projects regarding cost, schedule, or technical performance, which would require a deeper dive into individual contract histories.

How does the $493.7 million base year cost compare to industry benchmarks for ship integration?

Benchmarking the $493.7 million base year cost for ship integration and engineering requires a detailed understanding of the specific systems and services included. This figure represents a significant investment, typical for major defense platforms. Comparable contracts often involve integrating advanced combat systems, sensors, communication suites, and propulsion controls onto naval vessels. The cost is influenced by factors such as the complexity of the platform (e.g., aircraft carrier vs. destroyer), the level of technological advancement required, and the scope of engineering and testing involved. Without specific details on the scope of work, a precise benchmark is difficult. However, for large-scale naval integration projects, costs can range from hundreds of millions to billions of dollars over the life of a program. The Cost Plus Incentive Fee (CPIF) structure suggests an effort to align costs with performance, aiming for value.

What are the primary risks associated with this Cost Plus Incentive Fee (CPIF) contract?

The primary risks associated with a CPIF contract revolve around cost control and performance management. While CPIF aims to incentivize efficiency by sharing cost savings or overruns between the government and contractor, it still carries inherent risks. If the target cost is set too high, the government may end up paying more than necessary. Conversely, if the target cost is too low, the contractor may struggle to meet performance requirements while staying within budget, potentially leading to quality issues or disputes. There's also a risk that the incentive structure might inadvertently encourage the contractor to prioritize cost reduction over optimal technical solutions or long-term system reliability. Effective oversight and clear definition of performance metrics are crucial to mitigate these risks and ensure the government receives the best value.

How effective is the 'full and open competition' with only two bidders likely to be in ensuring optimal pricing?

The effectiveness of 'full and open competition' with only two bidders in ensuring optimal pricing is debatable and context-dependent. While the process itself allows all responsible sources to compete, a low number of bidders can limit the competitive pressure. If only two companies possess the highly specialized capabilities required for this type of naval integration, the government may not achieve the aggressive pricing that could result from a larger pool of competitors. However, if those two bidders are significant players with strong incentives to win the contract, they may still offer competitive pricing. The government's negotiation strategy and the clarity of the evaluation criteria also play a crucial role. A thorough evaluation of technical merit alongside price is essential to determine if the selected bid truly represents the best value, even with limited competition.

What are the potential long-term implications of this contract for naval system modernization?

This contract signifies a substantial investment in the modernization of naval systems, specifically focusing on integration and engineering. By awarding this to Lockheed Martin, the Navy is leveraging established expertise to enhance its fleet's capabilities, likely involving advanced sensors, communication, and combat systems. The long-term implications include improved operational effectiveness, enhanced situational awareness, and potentially greater interoperability between different naval assets. Furthermore, it supports the ongoing development and sustainment of critical technologies, ensuring the Navy maintains a technological edge. The success of this integration effort could pave the way for future modernization initiatives and influence the design and capabilities of upcoming naval platforms.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002413R5100

Offers Received: 2

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: $563,881,743

Exercised Options: $523,979,668

Current Obligation: $493,667,853

Actual Outlays: $15,628,269

Subaward Activity

Number of Subawards: 233

Total Subaward Amount: $105,667,552

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline