Over $865M awarded to Lockheed Martin for DDG 117-126 components, a sole-source engineering services contract

Contract Overview

Contract Amount: $86,530,617 ($86.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2015-03-05

End Date: 2022-06-30

Contract Duration: 2,674 days

Daily Burn Rate: $32.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY14 SCN, FY13 SCN, AND FY14 DWP FOR DDG 117-126&AEGIS ASHORE HOST NATION 2 VLS COMPONENTS AND ASSOCIATED EQUIPMENT AND SPARES

Place of Performance

Location: MIDDLE RIVER, BALTIMORE County, MARYLAND, 21220

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $86.5 million to LOCKHEED MARTIN CORPORATION for work described as: FY14 SCN, FY13 SCN, AND FY14 DWP FOR DDG 117-126&AEGIS ASHORE HOST NATION 2 VLS COMPONENTS AND ASSOCIATED EQUIPMENT AND SPARES Key points: 1. Contract awarded for critical naval components, indicating significant defense spending. 2. Sole-source award suggests limited market alternatives or specific technological requirements. 3. Long contract duration (over 6 years) implies a sustained need for these components. 4. Firm-fixed-price contract shifts cost risk to the contractor. 5. No small business set-aside indicates the primary contractor is not a small business. 6. Awarded by the Department of Defense, a major federal spending agency.

Value Assessment

Rating: questionable

Benchmarking the value for this specific contract is challenging due to its sole-source nature and specialized components for naval vessels. Without competitive bids, it's difficult to ascertain if the $865M represents optimal value for money. The firm-fixed-price structure is positive for cost control, but the lack of competition raises concerns about potential overpricing compared to what might be achieved in a more open market. Further analysis would require understanding the specific technological requirements and the availability of alternative suppliers.

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 typically occurs when a specific contractor possesses unique capabilities, proprietary technology, or is the only source capable of meeting the requirement. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement. The justification for sole-sourcing would need to be thoroughly reviewed to ensure it was appropriate.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there's less incentive for the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives essential components for its guided-missile destroyers (DDG 117-126). Services delivered include the provision of VLS components and associated equipment and spares, crucial for naval defense capabilities. The geographic impact is primarily within the United States, supporting domestic defense manufacturing and supply chains. Workforce implications include employment for engineers, technicians, and manufacturing personnel at Lockheed Martin and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of transparency in the sole-source justification process could mask inefficiencies.
Long contract duration may not adapt well to evolving technological needs or market price changes.
Absence of small business participation raises questions about broader economic impact and subcontracting opportunities.

Positive Signals

Firm-fixed-price contract effectively transfers cost overrun risk to the contractor.
Award to a major defense contractor like Lockheed Martin suggests access to established expertise and production capabilities.
Contract supports critical national defense assets, ensuring readiness of naval fleets.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on naval shipbuilding and component manufacturing. The market for such specialized defense components is often characterized by high barriers to entry, significant R&D investment, and a limited number of qualified suppliers, often leading to sole-source or limited competition awards. Comparable spending benchmarks are difficult to establish without detailed specifications, but major defense platforms like destroyers represent substantial government investment.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb': false. This suggests that the primary contract was awarded directly to Lockheed Martin, a large business. There is no explicit information on subcontracting plans for small businesses within the provided data. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem is unclear, though large prime contracts often involve a tiered subcontracting structure.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, potentially involving the Defense Contract Management Agency (DCMA) for contract administration. Transparency is limited due to the sole-source nature. Accountability measures would be tied to the firm-fixed-price terms and delivery schedules. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Arleigh Burke-class Destroyer Program
Aegis Combat System
Naval Surface Warfare
Defense Procurement
Weapon Systems Components

Risk Flags

Sole-source award requires careful justification to ensure fair pricing and avoid market distortion.
Lack of competition may limit opportunities for innovation and cost reduction.
Long-term contract duration necessitates monitoring for potential obsolescence or changing requirements.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $86.5 million to LOCKHEED MARTIN CORPORATION. FY14 SCN, FY13 SCN, AND FY14 DWP FOR DDG 117-126&AEGIS ASHORE HOST NATION 2 VLS COMPONENTS AND ASSOCIATED EQUIPMENT AND SPARES

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 $86.5 million.

What is the period of performance?

Start: 2015-03-05. End: 2022-06-30.

What is the historical spending trend for similar naval component contracts awarded to Lockheed Martin?

Analyzing historical spending trends for similar naval component contracts awarded to Lockheed Martin requires access to a broader dataset of federal procurement. However, based on the provided data, this $865M contract for DDG 117-126 components represents a significant, single award. Lockheed Martin is a major defense contractor with a long history of supplying complex systems for naval vessels. Past contracts for Arleigh Burke-class destroyers and related systems would likely show substantial cumulative spending over many years. Without specific historical contract values and award dates for comparable items, a precise trend analysis is not possible from this single data point. However, it is reasonable to infer that spending on such critical defense hardware is substantial and ongoing, reflecting the U.S. Navy's modernization and maintenance requirements.

How does the per-unit cost of these VLS components compare to industry benchmarks?

Determining the per-unit cost for these VLS components and comparing it to industry benchmarks is not feasible with the provided data. The contract value of $865M is for a bundle of components, equipment, and spares for multiple vessels (DDG 117-126), and the exact number of units or specific types of components are not detailed. Furthermore, VLS components are highly specialized, proprietary, and integrated systems, making direct 'off-the-shelf' comparisons difficult. Industry benchmarks for such unique defense systems are not publicly available. The sole-source nature of the award also complicates benchmarking, as competitive market pricing information is absent. A thorough analysis would require detailed technical specifications and cost breakdowns from the contractor.

What are the specific risks associated with a sole-source award for critical defense components?

Sole-source awards for critical defense components carry several significant risks. Firstly, the primary risk is reduced price competition, which can lead to inflated costs for the government and taxpayers, as the contractor faces less pressure to offer the lowest possible price. Secondly, there's a potential for reduced innovation and efficiency, as the lack of competition can lessen the incentive for the sole provider to invest in process improvements or explore alternative, potentially more cost-effective solutions. Thirdly, dependency on a single supplier creates supply chain vulnerability; any disruption at the contractor's facility or their key subcontractors could significantly impact defense readiness. Lastly, sole-sourcing can sometimes indicate a lack of market research or an overly narrow definition of requirements, potentially overlooking viable alternative solutions.

What is Lockheed Martin's track record with similar large-scale defense contracts?

Lockheed Martin has an extensive and well-established track record of managing and executing large-scale defense contracts for the U.S. military and allied nations. They are a primary contractor for numerous major defense platforms, including fighter aircraft (F-35, F-16), helicopters (Sikorsky), missiles, and naval systems. Their experience with the Aegis Combat System and the Arleigh Burke-class destroyers, which this contract supports, is substantial. While specific performance metrics for every contract are not publicly detailed, Lockheed Martin is generally considered a capable, albeit expensive, supplier of complex defense technology. Their history includes both successful program deliveries and instances of cost overruns or schedule delays, common in the defense industry for highly complex systems. This contract's firm-fixed-price nature suggests an attempt to mitigate cost risks.

How does this contract align with the Department of Defense's strategic goals for naval modernization?

This contract directly aligns with the Department of Defense's strategic goals for naval modernization by providing essential components for the DDG 117-126 class of guided-missile destroyers. These vessels are a cornerstone of the U.S. Navy's fleet, equipped with advanced capabilities like the Aegis Combat System. Procuring VLS components and associated equipment ensures the continued production and fielding of these critical platforms, which are designed to counter advanced threats and maintain maritime superiority. Investing in these destroyers supports the Navy's objectives of maintaining a forward presence, deterring aggression, and projecting power globally. The contract's duration suggests a long-term commitment to this modernization effort.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002413R5327

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 2323 EASTERN BLVD, BALTIMORE, MD, 21220

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

Financial Breakdown

Contract Ceiling: $106,754,499

Exercised Options: $86,530,617

Current Obligation: $86,530,617

Subaward Activity

Number of Subawards: 81

Total Subaward Amount: $334,130,452

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline