DoD's $72.6M engineering services contract to Lockheed Martin saw significant cost growth over its 6-year term

Contract Overview

Contract Amount: $72,578,782 ($72.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2015-12-11

End Date: 2021-12-15

Contract Duration: 2,196 days

Daily Burn Rate: $33.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: IGF::CT::IGF ENGINEERING AND TECHNICAL SERVICES

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $72.6 million to LOCKHEED MARTIN CORPORATION for work described as: IGF::CT::IGF ENGINEERING AND TECHNICAL SERVICES Key points: 1. The contract experienced substantial cost increases from its initial award value, indicating potential underestimation or scope creep. 2. As a sole-source award, the lack of competition limits price discovery and may have led to suboptimal value for taxpayer funds. 3. The Cost Plus Incentive Fee (CPIF) structure, while incentivizing performance, can also lead to higher costs if not tightly managed. 4. The contract's duration of nearly six years suggests a long-term need for these engineering services. 5. The absence of small business set-asides means opportunities for smaller firms were not explicitly pursued. 6. Performance context is limited without specific metrics on the engineering services delivered and their impact.

Value Assessment

Rating: questionable

Benchmarking this contract's value is challenging without detailed performance data and comparable sole-source engineering service contracts. The significant duration and cost growth suggest that the initial pricing may not have accurately reflected the eventual scope or effort required. The CPIF contract type, while offering flexibility, inherently carries a higher risk of cost overruns compared to fixed-price contracts if not rigorously overseen. Further analysis would be needed to determine if the final cost was justified by the services rendered and their effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition to solicit bids from multiple offerors. This approach is typically used when a specific contractor possesses unique capabilities or when circumstances preclude a competitive process. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding environment. This raises concerns about whether the most cost-effective solution was secured.

Taxpayer Impact: Sole-source awards limit the government's ability to negotiate the best possible price, potentially resulting in higher costs for taxpayers. Without competition, there is less pressure on the contractor to offer competitive pricing.

Public Impact

The primary beneficiaries are likely the Department of Defense's engineering and technical operations, ensuring continued support for defense systems. The services delivered encompass a broad range of engineering expertise crucial for defense readiness and development. The geographic impact is primarily within the United States, supporting defense infrastructure and operations. Workforce implications include the employment of engineers and technical specialists by Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition for a large-value contract raises concerns about price reasonableness.
Cost growth over the contract's life suggests potential issues with initial cost estimation or scope management.
The sole-source nature limits opportunities for small businesses to participate in this significant defense contract.
CPIF contract type can incentivize higher spending if not managed with strict oversight.

Positive Signals

Award to a large, established defense contractor like Lockheed Martin suggests access to specialized expertise.
The long duration indicates a sustained need for critical engineering services within the DoD.
The CPIF structure, if managed effectively, can align contractor incentives with government objectives.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for defense engineering services is substantial, driven by the continuous need for research, development, sustainment, and modernization of military platforms and systems. Large defense contractors like Lockheed Martin are key players, often holding significant portions of government contracts due to their established capabilities and security clearances. Spending in this sector is heavily influenced by defense budgets and strategic priorities.

Small Business Impact

This contract did not include small business set-asides, nor is there an indication of significant subcontracting to small businesses. The sole-source nature of the award inherently limits opportunities for small businesses to compete for prime contract roles. While large prime contractors may engage small businesses for specific components or services, the absence of a formal set-aside suggests that the primary focus was on securing specialized capabilities from the incumbent or sole-source provider. This limits the direct economic benefit to the small business ecosystem from this specific contract.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The CPIF contract type necessitates robust financial oversight to monitor costs and ensure that incentive targets are met appropriately. Transparency is generally limited for sole-source awards, but contract modifications and performance reports would be subject to internal DoD review and potentially Inspector General audits if specific concerns arise.

Related Government Programs

Department of Defense Engineering Services
Aerospace and Defense Contracting
Cost Plus Incentive Fee Contracts
Sole Source Defense Procurements
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Cost growth potential
Lack of competition
CPIF contract type risks

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.6 million to LOCKHEED MARTIN CORPORATION. IGF::CT::IGF ENGINEERING AND TECHNICAL SERVICES

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 $72.6 million.

What is the period of performance?

Start: 2015-12-11. End: 2021-12-15.

What was the initial estimated cost of the contract, and how did the final cost compare?

The provided data does not include the initial estimated cost of the contract. It only shows the awarded amount of $72,578,781.56. Without the initial estimate, it is impossible to directly quantify the cost growth in percentage terms. However, the fact that the contract ran for nearly six years (2196 days) and was a Cost Plus Incentive Fee (CPIF) type suggests that the final cost could have significantly exceeded the initial award value due to the nature of cost-reimbursement contracts and potential scope adjustments over time. Further investigation into contract modifications and expenditure reports would be necessary to determine the total expenditure and compare it to any initial baseline.

What specific engineering services were provided under this contract?

The contract is classified under NAICS code 541330, which denotes Engineering Services. While the specific details of the services rendered are not provided in the abbreviated data, this category typically encompasses a wide array of activities such as design, development, testing, analysis, and consultation related to various engineering disciplines. For a defense contract of this magnitude awarded to Lockheed Martin, these services likely supported complex defense systems, platforms, or technologies, potentially including areas like aerospace engineering, systems engineering, mechanical engineering, or electrical engineering, crucial for maintaining and advancing military capabilities.

What is the typical cost structure for Cost Plus Incentive Fee (CPIF) contracts, and what are the associated risks?

Cost Plus Incentive Fee (CPIF) contracts are a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on performance against predetermined targets (e.g., cost, schedule, or technical performance). The target cost is established, and if the final cost is below the target, the contractor's fee increases; if it's above, the fee decreases, up to a ceiling. The primary risk for the government is that CPIF contracts can incentivize contractors to incur higher costs to achieve performance targets, potentially leading to a higher final price than initially anticipated, especially if the targets are not well-defined or if oversight is insufficient. However, they can also align contractor and government interests towards achieving specific performance goals.

How does the sole-source nature of this contract impact potential innovation and cost savings?

The sole-source nature of this contract significantly limits the potential for innovation and cost savings. In a competitive bidding process, multiple companies vie to offer the best solution at the lowest price, driving innovation and efficiency. Without competition, the government relies on the capabilities and pricing proposed by a single contractor. This can lead to higher prices than might be achieved through competition and reduces the incentive for the contractor to explore novel or more cost-effective approaches, as they are guaranteed the award regardless of competitive alternatives. It also bypasses the market's natural price discovery mechanism.

What is the significance of the contract duration (2196 days) in relation to the services provided?

A contract duration of 2196 days, approximately six years, indicates a long-term, sustained requirement for the engineering services provided. This lengthy period suggests that the services are critical to ongoing defense operations, development programs, or sustainment efforts that are not short-term in nature. Such long-term engagements often involve complex projects requiring deep institutional knowledge and continuity. For the contractor, it provides a stable revenue stream. For the government, it implies a strategic reliance on the contractor's expertise over an extended period, underscoring the importance of robust performance management and relationship oversight throughout the contract's life.

Are there any indications of contractor performance issues or successes based on the available data?

The provided abbreviated data does not contain specific metrics or qualitative assessments of contractor performance. We know the contract type was Cost Plus Incentive Fee (CPIF), which implies that performance targets were set and that the fee could be adjusted based on achieving those targets. However, without access to performance reports, award fee determinations, or any potential contract modifications related to performance, it is impossible to definitively assess whether Lockheed Martin met or exceeded expectations, or if there were any issues. The significant duration and value suggest a level of sustained capability, but not necessarily optimal performance or value.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002415R6287

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

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: $72,658,665

Exercised Options: $72,658,665

Current Obligation: $72,578,782

Subaward Activity

Number of Subawards: 28

Total Subaward Amount: $34,371,423

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline