DoD's $390M AEGIS contract with Lockheed Martin for Japan Maritime Self-Defense Force development

Contract Overview

Contract Amount: $390,089,306 ($390.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-12-15

End Date: 2024-08-02

Contract Duration: 2,422 days

Daily Burn Rate: $161.1K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: AEGIS WEAPON SYSTEM J7 BASELINE DEVELOPMENT AND INTEGRATION IN SUPPORT OF THE JAPAN MARITIME SELF DEFENSE FORCE (JMSDF)

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $390.1 million to LOCKHEED MARTIN CORPORATION for work described as: AEGIS WEAPON SYSTEM J7 BASELINE DEVELOPMENT AND INTEGRATION IN SUPPORT OF THE JAPAN MARITIME SELF DEFENSE FORCE (JMSDF) Key points: 1. Contract awarded to a single, established prime contractor, suggesting a reliance on specialized expertise. 2. The contract's cost-plus-incentive-fee structure aims to balance contractor performance with cost control. 3. Long duration indicates a complex, multi-year project requiring sustained effort and integration. 4. Focus on system development and integration highlights the critical nature of the AEGIS platform. 5. The contract supports a key foreign military sale, underscoring international defense cooperation. 6. Limited competition raises questions about potential price efficiencies and alternative solutions.

Value Assessment

Rating: fair

Benchmarking the value of this specific AEGIS system development and integration for a foreign military sale is challenging due to its unique nature and the limited public data on comparable international contracts. The cost-plus-incentive-fee (CPIF) pricing structure suggests an effort to manage costs, but the ultimate value depends heavily on the achievement of performance incentives and the effective control of indirect costs. Without detailed cost breakdowns or comparisons to similar international AEGIS procurements, a definitive value assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often taken for highly specialized systems where only one contractor possesses the necessary intellectual property, technology, or integration expertise. While efficient for leveraging existing capabilities, it limits the potential for price discovery through competitive bidding and may result in higher costs compared to a competed procurement.

Taxpayer Impact: The lack of competition means taxpayers do not benefit from the cost savings typically achieved through a bidding process, potentially leading to a higher overall expenditure for this system.

Public Impact

The primary beneficiaries are the Japan Maritime Self-Defense Force (JMSDF), receiving advanced AEGIS capabilities. The contract delivers critical capabilities in search, detection, navigation, and guidance systems. Geographic impact is primarily in Japan, with potential ripple effects on regional security. Workforce implications include specialized engineering, integration, and technical support roles, likely concentrated with the prime contractor and its key subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Long contract duration increases exposure to cost overruns and scope creep.
Complexity of integrating advanced weapon systems carries inherent technical and performance risks.
Reliance on a single prime contractor can create dependency and reduce leverage.

Positive Signals

Award to a prime contractor with established expertise in AEGIS systems.
CPIF contract structure incentivizes contractor performance and cost management.
Supports a key foreign military sale, strengthening alliances and interoperability.
Long-term nature allows for sustained development and integration of complex technology.

Sector Analysis

The AEGIS Weapon System is a cornerstone of modern naval defense, particularly for anti-air warfare and ballistic missile defense. This contract falls within the broader defense electronics and systems manufacturing sector, which is characterized by high R&D investment, long product cycles, and significant government procurement. The market is dominated by a few large prime contractors capable of managing such complex, integrated systems. Spending in this area is driven by national security requirements and international partnerships.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the nature of AEGIS system development and integration, the prime contractor, Lockheed Martin, likely relies on a complex supply chain. While the prime contract itself is not set aside, there may be opportunities for small businesses to participate as subcontractors, particularly in specialized component manufacturing or support services. However, the primary awardee is a large business, and the overall impact on the small business ecosystem for this specific contract is likely indirect.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with potential involvement from the Naval Sea Systems Command (NAVSEA). The cost-plus-incentive-fee structure implies performance metrics and financial reviews to ensure accountability. Inspector General oversight may be exercised to investigate fraud, waste, or abuse. Transparency is generally limited for foreign military sales contracts, but internal reporting and audits would be conducted.

Related Government Programs

AEGIS Ballistic Missile Defense System
Foreign Military Sales (FMS)
Naval Surface Warfare Systems
Defense Contract Management Agency (DCMA) oversight
Lockheed Martin Aeronautics Company contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Foreign military sale complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $390.1 million to LOCKHEED MARTIN CORPORATION. AEGIS WEAPON SYSTEM J7 BASELINE DEVELOPMENT AND INTEGRATION IN SUPPORT OF THE JAPAN MARITIME SELF DEFENSE FORCE (JMSDF)

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 $390.1 million.

What is the period of performance?

Start: 2017-12-15. End: 2024-08-02.

What is the historical spending trend for AEGIS Weapon System development and integration contracts awarded by the Department of Defense?

Historical spending on AEGIS Weapon System development and integration has been substantial, reflecting its critical role in naval defense. The Department of Defense, particularly the Department of the Navy, has consistently invested in the AEGIS program for decades, encompassing baseline upgrades, new platform integration, and foreign military sales. While specific figures for 'development and integration' can vary based on contract scope (e.g., new builds vs. upgrades), total AEGIS-related spending often runs into billions of dollars annually across all its variants and support functions. This particular $390 million contract represents a significant, but not unprecedented, investment for a specific baseline development and integration effort, especially when supporting a major international partner like Japan.

How does the pricing structure (Cost Plus Incentive Fee) typically perform in terms of cost control for complex defense systems like AEGIS?

The Cost Plus Incentive Fee (CPIF) pricing structure is designed to incentivize the contractor to meet or exceed certain performance targets while also controlling costs. Under CPIF, the final negotiated fee is adjusted based on the relationship between the final negotiated total cost and the target cost. If the final cost is below the target, the contractor receives a larger share of the cost savings. Conversely, if the cost exceeds the target, the contractor's fee is reduced. For complex systems like AEGIS, CPIF aims to balance the inherent uncertainties of development and integration with the need for cost efficiency. However, its effectiveness hinges on well-defined targets, robust oversight, and the contractor's genuine commitment to achieving efficiencies rather than simply maximizing fee through cost escalation.

What are the primary risks associated with a sole-source award for a critical defense system like AEGIS?

The primary risks associated with a sole-source award for a critical defense system like AEGIS include a lack of competitive pressure, which can lead to inflated prices and reduced innovation. Without competing bids, the government has less leverage to negotiate favorable terms and costs. There's also a risk of contractor complacency or reduced efficiency, as the absence of competition diminishes the incentive to optimize processes or explore cost-saving alternatives. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers or adopt alternative technologies in the future. Dependence on a single supplier also increases vulnerability to supply chain disruptions or the contractor's business decisions.

What is Lockheed Martin's track record with AEGIS system development and integration contracts?

Lockheed Martin Corporation has a long and extensive track record as the prime contractor for the AEGIS Weapon System, including its development, integration, and sustainment. They have been instrumental in evolving the system from its inception through numerous baseline upgrades and deployments on U.S. Navy and allied nation vessels. Their experience spans decades and encompasses a wide range of complexities, from initial system design to integrating new capabilities like ballistic missile defense. While specific performance metrics for every contract are not publicly detailed, Lockheed Martin's continued selection as the prime contractor for AEGIS programs, including this foreign military sale, indicates a generally positive performance history and established expertise in delivering these sophisticated systems.

How does this contract align with broader U.S. foreign policy and defense cooperation objectives?

This contract directly aligns with U.S. foreign policy and defense cooperation objectives by strengthening the capabilities of a key regional ally, the Japan Maritime Self-Defense Force (JMSDF). Providing advanced defense systems like AEGIS enhances Japan's ability to contribute to regional security, deter potential adversaries, and participate effectively in joint operations with U.S. forces. Such foreign military sales foster interoperability, deepen strategic partnerships, and promote burden-sharing in maintaining a stable Indo-Pacific region. By equipping allies with state-of-the-art technology, the U.S. aims to bolster collective security and advance shared interests in maritime domain awareness and defense.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002417R5119

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $409,594,768

Exercised Options: $409,594,768

Current Obligation: $390,089,306

Actual Outlays: $272,910

Subaward Activity

Number of Subawards: 173

Total Subaward Amount: $455,329,838

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline