DoD awards $43.9M for Frigate CMS Software Development to Lockheed Martin, a sole-source contract

Contract Overview

Contract Amount: $43,890,575 ($43.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2016-08-22

End Date: 2021-12-31

Contract Duration: 1,957 days

Daily Burn Rate: $22.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: FRIGATE CMS SOFTWARE DEVELOPMENT

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $43.9 million to LOCKHEED MARTIN CORPORATION for work described as: FRIGATE CMS SOFTWARE DEVELOPMENT Key points: 1. Contract awarded to a single vendor, raising questions about price competitiveness. 2. The contract type is Cost Plus Incentive Fee, which can lead to cost overruns. 3. Performance period spans over 5 years, indicating a long-term need for these services. 4. The North American Industry Classification System (NAICS) code 334511 points to a specialized manufacturing sector. 5. The contract's value is significant within its specific domain of system development. 6. No small business set-aside was utilized for this procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this Cost Plus Incentive Fee contract is challenging without detailed cost breakdowns and comparisons to similar sole-source procurements. The lack of competition inherently limits the government's ability to secure the best possible price. While the contract aims for incentive-based cost control, the overall value proposition is weakened by the absence of a competitive bidding process. Further analysis would require understanding the specific incentives and the contractor's historical performance on similar projects to assess if the final cost represents a fair market value.

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 capabilities, technology, or proprietary information. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs than if multiple offers had been solicited.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing bids, there is less assurance that the negotiated price reflects the lowest possible cost for the required software development services.

Public Impact

The Department of Defense benefits from the development of critical software for its frigate systems. This contract supports the modernization and operational readiness of naval assets. The services delivered are highly specialized, focusing on advanced system integration and software engineering. The primary geographic impact is likely within the defense industrial base, with potential for ripple effects in related technology sectors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost Plus Incentive Fee contract type carries inherent risks of cost overruns if not managed stringently.
Lack of transparency in the sole-source justification requires careful review to ensure necessity.
Long performance duration (1957 days) increases exposure to potential scope creep or evolving requirements.
Absence of small business participation may limit opportunities for smaller innovative firms in this domain.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to established expertise and resources.
The incentive fee structure, if well-defined, can motivate the contractor to achieve specific performance targets.
The contract addresses a critical need within the Department of Defense's naval capabilities.
The specific NAICS code indicates a focus on advanced technological systems, potentially leading to innovation.

Sector Analysis

This contract falls within the defense industrial base, specifically in the area of advanced systems manufacturing and software development. The market for such specialized defense software is characterized by high barriers to entry, proprietary technologies, and long development cycles. Comparable spending benchmarks would typically involve other major defense system development contracts, often awarded through sole-source or limited competition due to unique requirements and contractor capabilities. The overall sector is driven by government procurement and technological advancement.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. This means that opportunities for small businesses to participate in this significant defense contract are likely limited. The absence of a small business focus in this procurement could mean that a substantial portion of the contract value does not flow down to the small business ecosystem, potentially impacting their growth and participation in the defense supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are embedded within the Cost Plus Incentive Fee structure, which aims to align contractor performance with cost and schedule objectives. Transparency is a concern given the sole-source nature; detailed justifications and performance reports would be crucial for assessing accountability. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Combat Systems
Frigate Modernization Programs
Defense Software Development Contracts
Lockheed Martin Defense Contracts
Cost Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Long contract duration
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.9 million to LOCKHEED MARTIN CORPORATION. FRIGATE CMS SOFTWARE DEVELOPMENT

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 $43.9 million.

What is the period of performance?

Start: 2016-08-22. End: 2021-12-31.

What is Lockheed Martin Corporation's track record with Cost Plus Incentive Fee (CPIF) contracts, particularly within the Department of Defense?

Lockheed Martin Corporation, as a major defense contractor, has extensive experience with various contract types, including Cost Plus Incentive Fee (CPIF). CPIF contracts are common in complex defense programs where costs are difficult to estimate precisely and where performance incentives are desired. Lockheed Martin's track record with CPIF contracts generally involves managing large-scale, long-term projects. However, the success of CPIF contracts is highly dependent on the specific terms, the clarity of the incentive metrics, and the effectiveness of government oversight. While CPIF can incentivize efficiency and performance, it also carries the risk of cost overruns if incentives are not structured appropriately or if unforeseen technical challenges arise. Analyzing Lockheed Martin's specific performance on similar CPIF contracts, including their ability to meet cost targets and performance milestones, would be necessary for a comprehensive assessment of their reliability in this instance.

How does the $43.9 million contract value for Frigate CMS Software Development compare to similar sole-source procurements for naval systems?

Comparing the $43.9 million value of this sole-source Frigate CMS Software Development contract to similar procurements requires access to a broader dataset of defense contracts, specifically those that are sole-source and related to naval combat management systems or similar software development efforts. Sole-source contracts inherently lack direct price comparison points from competing bids. However, general benchmarks for complex software development in the defense sector can be established. For major naval systems, software development costs can range significantly based on complexity, integration requirements, and the maturity of the technology. A $43.9 million award for a 5-year development effort might be considered moderate to high depending on the scope. Without specific details on the system's complexity and the scope of work, a definitive comparison is difficult. However, the sole-source nature suggests that the government may have paid a premium compared to a competitively bid contract for equivalent services.

What are the primary risks associated with a sole-source Cost Plus Incentive Fee (CPIF) contract for critical defense software development?

The primary risks associated with a sole-source CPIF contract for critical defense software development are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to offer the most cost-effective solution. The government has less leverage to negotiate favorable terms. Secondly, the CPIF structure, while designed to incentivize performance, carries inherent risks. If the cost targets are not well-defined or achievable, or if the incentive structure is flawed, it can lead to cost overruns as the contractor pursues higher fees. For critical software, technical risks such as integration challenges, cybersecurity vulnerabilities, and evolving requirements are also significant. The long duration of the contract (1957 days) exacerbates these risks, increasing the potential for scope creep and the need for contract modifications. Effective government oversight and robust contract management are crucial to mitigate these risks.

What does the duration of the contract (1957 days) imply about the nature of the Frigate CMS software development?

A contract duration of 1957 days, approximately 5.3 years, implies that the Frigate CMS software development is a complex, long-term undertaking. This extended timeline suggests that the project likely involves significant research, design, development, integration, testing, and potentially initial deployment phases. It indicates that the software is not a simple off-the-shelf solution but rather a sophisticated system requiring substantial engineering effort. Such durations are typical for major defense acquisition programs where requirements may evolve, and the technology itself is cutting-edge or requires extensive validation. The long period also necessitates robust program management to control scope, maintain schedule, and manage costs effectively over the contract's life, as well as to adapt to potential changes in operational needs or technological advancements.

What is the significance of the NAICS code 334511 (Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing) in the context of this contract?

The NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' is highly significant as it precisely defines the specialized industry sector to which this contract belongs. It indicates that the Frigate CMS software development is integral to the manufacturing and functionality of advanced systems used for navigation, detection, and guidance, particularly within naval and aeronautical contexts. This classification suggests that the software being developed is not general-purpose but is deeply embedded within the hardware and operational capabilities of sophisticated defense equipment, likely related to the frigate's core functions. This specialization often implies a need for highly skilled engineers, adherence to stringent defense standards, and a limited pool of contractors with the requisite expertise, which can influence procurement strategies and market dynamics.

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

Solicitation ID: N0002416R5136

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: $58,746,194

Exercised Options: $58,746,194

Current Obligation: $43,890,575

Actual Outlays: $5,647,850

Subaward Activity

Number of Subawards: 26

Total Subaward Amount: $5,052,080

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline