DoD's $519M Lockheed Martin contract for navigation systems lacks competition, raising value concerns

Contract Overview

Contract Amount: $519,180,675 ($519.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2015-02-03

End Date: 2024-11-15

Contract Duration: 3,573 days

Daily Burn Rate: $145.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: A-RCI TI18&TI20

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $519.2 million to LOCKHEED MARTIN CORPORATION for work described as: A-RCI TI18&TI20 Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. A high duration of over 3,500 days suggests a long-term, potentially entrenched relationship. 3. The cost-plus incentive fee structure can incentivize cost increases if not carefully managed. 4. Limited public data on performance metrics makes a comprehensive value assessment challenging. 5. The significant award value indicates a critical role in naval operations. 6. The absence of small business participation is noted, with no set-aside provisions.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is difficult due to its sole-source nature and the lack of publicly available performance data. The cost-plus incentive fee (CPIF) pricing structure, while allowing for flexibility, can lead to higher costs if the contractor's cost projections are inaccurate or if incentives are not aligned with taxpayer interests. Without comparable sole-source contracts for similar advanced navigation systems, it's hard to definitively state if the pricing is competitive. The total award of $519 million over its extended period suggests a substantial investment, but the value for money is uncertain without clearer performance metrics and competitive pressure.

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 only one vendor possesses the necessary technology, expertise, or security clearances. However, the lack of competition means there was no opportunity for other companies to bid, potentially leading to higher prices than if a competitive bidding process had been employed. The absence of multiple bidders limits the government's ability to negotiate the best possible terms and pricing.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding. This can result in a higher overall expenditure for the government on this critical defense system.

Public Impact

Naval forces benefit from advanced search, detection, and navigation systems essential for operational effectiveness. The contract supports the development and sustainment of critical aeronautical and nautical instruments for the U.S. Navy. Operations are primarily based in Virginia, impacting the local economy and workforce. The contract likely supports a specialized workforce within Lockheed Martin, including engineers and technicians.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to suboptimal pricing.
CPIF contract type requires rigorous oversight to manage costs effectively.
Long contract duration could indicate potential for cost overruns or scope creep.
Limited transparency on performance metrics hinders full value assessment.

Positive Signals

Awarded to a major defense contractor with extensive experience.
Contract addresses critical national defense needs for naval operations.
CPIF structure allows for flexibility in adapting to evolving technological requirements.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector, a specialized area within the broader aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality requirements, and often involves long product development cycles. The market is dominated by a few large, established players like Lockheed Martin due to the complexity and capital intensity. Comparable spending in this niche often involves significant sums for advanced military systems, with contracts frequently being sole-sourced or limited competition due to proprietary technology or specific defense needs.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, as indicated by 'sb': false. Given the sole-source nature and the prime contractor being Lockheed Martin, it is unlikely that significant subcontracting opportunities for small businesses are mandated within this specific award. The absence of set-asides means that the direct economic benefit to the small business ecosystem from this particular contract is likely minimal, though the prime contractor may engage small businesses through its broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a Cost Plus Incentive Fee (CPIF) contract, rigorous financial and performance monitoring is crucial to ensure costs are controlled and incentives are met. Transparency is limited by the sole-source nature and the classification of defense-related systems. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Aviation Systems
Defense Navigation Systems
Aerospace Manufacturing
DoD Information Technology
Military Sensor Technology

Risk Flags

Lack of Competition
Cost-Plus Contract Type
Long Contract Duration
Sole Source Award

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $519.2 million to LOCKHEED MARTIN CORPORATION. A-RCI TI18&TI20

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 $519.2 million.

What is the period of performance?

Start: 2015-02-03. End: 2024-11-15.

What is Lockheed Martin Corporation's track record with the Department of Defense for similar navigation systems?

Lockheed Martin Corporation has a long and extensive history of providing complex systems and technologies to the Department of Defense, including navigation, guidance, and sensor systems. Their track record with the Navy specifically includes numerous large-scale contracts for aircraft, ships, and associated electronic warfare and navigation equipment. While specific performance data for this particular contract is limited, Lockheed Martin is generally considered a major, experienced defense contractor capable of delivering sophisticated solutions. However, like any large contractor, they have also faced scrutiny over contract costs and performance on various programs throughout their history. A detailed review of past performance evaluations and any contract disputes related to similar navigation systems would provide a more granular understanding of their specific performance on this type of work.

How does the $519 million award compare to other sole-source contracts for navigation systems?

Comparing this $519 million sole-source award to other similar contracts is challenging due to the proprietary nature of defense technologies and the limited number of sole-source procurements for highly specialized systems. However, the magnitude of the award suggests it is for a significant, long-term program involving advanced capabilities. Sole-source contracts, by definition, lack direct price competition, making direct value-for-money comparisons difficult. Generally, sole-source awards for complex defense systems can be expected to be substantial, reflecting the high research, development, and manufacturing costs involved. Without access to a database of comparable sole-source navigation system contracts, it's hard to definitively benchmark this award, but its size indicates a critical and costly capability for the Navy.

What are the primary risks associated with a sole-source, cost-plus incentive fee contract for navigation systems?

The primary risks associated with a sole-source, Cost Plus Incentive Fee (CPIF) contract for navigation systems are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs and reduced innovation as the contractor faces no direct market alternatives. Secondly, the CPIF structure, while designed to incentivize cost control and performance, carries inherent risks. If the target costs are set too high or the incentive structure is poorly designed, it can inadvertently encourage the contractor to incur higher costs to achieve higher profits, rather than focusing on efficiency. Rigorous government oversight is essential to manage these risks, including accurate cost estimation, effective performance monitoring, and fair negotiation of incentive targets. Without such oversight, there's a risk of cost overruns and suboptimal value for the taxpayer.

What are the implications of the contract's long duration (over 3,500 days) for program effectiveness?

The contract's extended duration of over 3,500 days (approximately 9.8 years) has several implications for program effectiveness. On the positive side, it suggests a long-term commitment to developing and sustaining a critical capability, allowing for thorough development, testing, and integration. This extended timeline can be beneficial for complex systems that require iterative refinement and adaptation to evolving threats or technologies. However, a long duration also increases the risk of technological obsolescence if the system's underlying technology becomes outdated before the contract concludes. It also presents challenges in maintaining cost control over such an extended period and requires sustained program management attention. Furthermore, a lengthy contract can sometimes indicate a lack of modularity or a difficulty in breaking down the requirement into smaller, more manageable, and potentially competitively re-awarded segments.

How has spending on 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' evolved over the past five years?

Analyzing the evolution of spending within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' (NAICS 334511) sector requires access to comprehensive federal procurement data. Generally, spending in defense-related manufacturing sectors tends to fluctuate based on geopolitical conditions, military modernization priorities, and specific platform acquisition programs. For advanced navigation and detection systems, consistent investment is typically required to maintain technological superiority. Trends might show increased spending on systems incorporating AI, advanced sensor fusion, or cyber resilience, reflecting evolving military needs. Without specific historical data for this NAICS code, it's difficult to provide precise figures, but it's reasonable to assume sustained, significant government investment in this critical area, often characterized by large, long-term contracts with major defense contractors.

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: N0002415R6222

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: $630,086,675

Exercised Options: $599,929,832

Current Obligation: $519,180,675

Actual Outlays: $3,180

Subaward Activity

Number of Subawards: 518

Total Subaward Amount: $349,101,391

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline