DoD's $1.05B contract for engineering services awarded to Lockheed Martin Corporation shows strong competition

Contract Overview

Contract Amount: $1,054,196,287 ($1.1B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-06-22

End Date: 2028-10-11

Contract Duration: 4,129 days

Daily Burn Rate: $255.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ENGINEERING SERVICES (USN)

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $1.05 billion to LOCKHEED MARTIN CORPORATION for work described as: ENGINEERING SERVICES (USN) Key points: 1. The contract value of over $1 billion indicates a significant investment in critical defense systems. 2. Full and open competition suggests a robust market for these specialized engineering services. 3. The long duration of the contract (over 10 years) implies a need for sustained support and development. 4. The cost-plus incentive fee pricing structure aims to balance contractor performance with cost control. 5. The primary contractor, Lockheed Martin, is a major defense industry player, suggesting established capabilities. 6. The contract's focus on search, detection, navigation, guidance, and related systems highlights its strategic importance.

Value Assessment

Rating: good

Benchmarking the value of this $1.05 billion contract is challenging without specific service details, but its scale suggests it aligns with major defense system development and sustainment efforts. The cost-plus incentive fee (CPIF) structure is common for complex, long-term projects where costs are not fully predictable, aiming to incentivize efficiency. While CPIF can lead to higher final costs than fixed-price contracts, it is often deemed appropriate for R&D-intensive or evolving requirements where scope is difficult to define upfront. The contract's duration and value indicate a substantial commitment, likely reflecting the complexity and criticality of the systems involved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of a competitive bidding process is a positive sign for price discovery and ensuring the government receives the best value. The specific number of bidders is not provided, but the 'full and open' designation implies a significant level of market engagement. This approach is generally preferred for large, complex contracts to leverage the full range of industry capabilities and drive innovation.

Taxpayer Impact: Full and open competition helps ensure that taxpayer dollars are used efficiently by fostering a competitive environment that can lead to more favorable pricing and better service offerings.

Public Impact

The primary beneficiaries are the U.S. Navy and potentially other Department of Defense branches requiring advanced navigation and detection systems. The contract supports the development, integration, and sustainment of critical search, detection, navigation, and guidance systems for naval platforms. Geographic impact is likely concentrated around Lockheed Martin facilities and Navy operational bases, but the systems deployed have a global reach. Workforce implications include employment for highly skilled engineers, technicians, and program managers within Lockheed Martin and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus incentive fee contracts can sometimes lead to cost overruns if not managed diligently.
The long contract duration increases the risk of scope creep or evolving technological requirements not being fully met.
Reliance on a single primary contractor for such a critical system warrants close monitoring of performance and financial health.

Positive Signals

Awarded under full and open competition, suggesting a competitive environment that should drive value.
Lockheed Martin is a well-established defense contractor with a proven track record in complex systems.
The incentive fee structure provides a mechanism to reward contractor performance and efficiency.
The contract's focus on critical navigation and detection systems aligns with national security priorities.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on advanced electronic systems manufacturing and engineering services. The market for such specialized defense technology is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Comparable spending benchmarks would typically involve other large-scale defense system development contracts, often in the hundreds of millions to billions of dollars, awarded to major prime contractors for platforms or critical subsystems.

Small Business Impact

The provided data indicates that small business participation (sb) is false, and there is no explicit small business set-aside (ss) noted. This suggests the contract was not specifically targeted towards small businesses. While Lockheed Martin is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors, depending on the specific needs and subcontracting plans outlined in the contract. The absence of a set-aside does not preclude small business involvement but means it was not a primary objective of the contract's initial award structure.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting officers and program management teams. The Cost-Plus Incentive Fee (CPIF) structure necessitates rigorous oversight of costs incurred and performance achieved to ensure the incentive targets are met fairly. Transparency is typically managed through contract reporting requirements, performance reviews, and potentially audits. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Combat Systems
Defense Electronics Manufacturing
Aerospace Engineering Services
Navigation and Guidance Systems
Search and Detection Systems

Risk Flags

Long contract duration increases risk of technological obsolescence.
Cost-plus incentive fee contracts require diligent oversight to manage cost growth.
Potential for scope creep over the extended contract period.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.05 billion to LOCKHEED MARTIN CORPORATION. ENGINEERING SERVICES (USN)

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 $1.05 billion.

What is the period of performance?

Start: 2017-06-22. End: 2028-10-11.

What is Lockheed Martin's track record with similar large-scale engineering services contracts for the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with extensive experience in delivering complex engineering services and systems for the Department of Defense across various branches. They have a long history of managing large, multi-year contracts involving research, development, production, and sustainment of advanced platforms and technologies, including radar, sonar, navigation, and guidance systems. Their track record includes numerous high-value contracts similar in scale and complexity to this one, often involving cost-plus incentive fee structures. While specific performance metrics for past contracts are not detailed here, their continued success in securing such significant awards suggests a generally positive performance history and strong capabilities in meeting DoD requirements.

How does the $1.05 billion value compare to typical spending on similar engineering services for naval systems?

A contract valued at $1.05 billion for engineering services related to search, detection, navigation, and guidance systems is substantial and aligns with the significant investments required for major defense platforms. Such figures are typical for the development, integration, and long-term sustainment of critical systems for naval vessels or aircraft. Comparable contracts often span multiple years and involve complex technological integration. While exact benchmarks depend on the specific systems and scope, this value suggests a comprehensive, long-term commitment rather than a short-term or narrowly focused service agreement. It reflects the high cost associated with advanced defense technology and the ongoing need for specialized engineering expertise within the Department of the Navy.

What are the primary risks associated with a Cost Plus Incentive Fee (CPIF) contract of this magnitude and duration?

The primary risks associated with a CPIF contract of this magnitude ($1.05 billion) and long duration (over 10 years) revolve around cost control and performance management. For the government, there's a risk that the final cost could exceed initial estimates if the contractor is not effectively incentivized or if unforeseen technical challenges arise, leading to cost growth. Scope creep is another significant risk; as the project evolves, requirements may expand, potentially increasing costs beyond the original intent. For the contractor, the risk lies in achieving the performance targets necessary to earn the incentive fees while managing costs within acceptable bounds. Effective government oversight is crucial to mitigate these risks by closely monitoring expenditures, validating progress, and ensuring adherence to contract terms and performance metrics.

How does the 'full and open competition' award method impact the overall value and innovation for this contract?

Awarding this contract through 'full and open competition' is intended to maximize value and foster innovation by allowing any responsible source to submit a bid. This broad competitive landscape encourages multiple companies to offer their best solutions and pricing, potentially driving down costs and improving the quality of services. It also provides the government with a wider range of technological approaches and expertise to choose from, increasing the likelihood of selecting the most innovative and effective solution. The competitive pressure incentivizes bidders to propose efficient methodologies and cutting-edge technologies to win the contract. Ultimately, this process aims to ensure the Department of the Navy receives the best possible engineering services at a fair price, leveraging the full capabilities of the defense industrial base.

What are the potential implications of the contract's long duration (2017-2028) on technological relevance and contractor performance?

The extended duration of this contract, spanning over a decade, presents both opportunities and challenges. On the positive side, it allows for sustained development, integration, and refinement of complex systems, ensuring long-term support and technological evolution. It provides stability for the contractor, enabling significant investment in specialized resources and personnel. However, a long duration also increases the risk of technological obsolescence if the systems do not keep pace with rapid advancements in the field. It necessitates robust contract management to adapt to changing requirements and emerging technologies. For contractor performance, the extended timeline requires consistent execution, proactive risk management, and sustained focus to maintain quality and efficiency throughout the contract's life cycle, potentially leading to performance fatigue if not managed well.

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: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002415R6267

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: $1,525,597,640

Exercised Options: $1,249,610,508

Current Obligation: $1,054,196,287

Actual Outlays: $165,615,096

Subaward Activity

Number of Subawards: 1609

Total Subaward Amount: $1,047,943,425

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline