DoD's $965.6M contract with Lockheed Martin for navigation systems shows strong competition and long-term performance

Contract Overview

Contract Amount: $965,650,960 ($965.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-03-15

End Date: 2029-08-01

Contract Duration: 4,157 days

Daily Burn Rate: $232.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ENGINEERING SERVICES, HARDWARE PRODUCTION, ODC/TRAVEL/MATERIAL

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $965.7 million to LOCKHEED MARTIN CORPORATION for work described as: ENGINEERING SERVICES, HARDWARE PRODUCTION, ODC/TRAVEL/MATERIAL Key points: 1. Contract value of over $965 million indicates significant investment in critical defense capabilities. 2. Full and open competition suggests a robust bidding process, potentially leading to better pricing. 3. The contract's duration of over 10 years points to a long-term need for these specialized services. 4. Performance-based contract type (Cost Plus Incentive Fee) incentivizes contractor efficiency and cost control. 5. The primary contractor, Lockheed Martin, is a major defense industry player with extensive experience. 6. The contract supports the Department of the Navy, highlighting its role in maritime defense systems.

Value Assessment

Rating: good

The contract's total value of $965.6 million over its lifespan is substantial. Benchmarking this against similar long-term, complex system development contracts is challenging without more specific data on the scope of 'ENGINEERING SERVICES, HARDWARE PRODUCTION, ODC/TRAVEL/MATERIAL'. However, the Cost Plus Incentive Fee (CPIF) structure suggests an effort to align contractor performance with cost objectives, which is a positive sign for value. The relatively low number of bids (implied by 'no': 1, though this might refer to contract actions rather than unique bidders) could warrant further investigation into price reasonableness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. While the data indicates only one contract action ('no': 1), this typically refers to the number of individual awards or modifications under the base contract, not the number of initial bidders. A full and open competition generally fosters a competitive environment, which should theoretically drive down prices and encourage innovation. The specific number of bidders would provide a clearer picture of the actual competitive intensity.

Taxpayer Impact: A full and open competition is favorable for taxpayers as it maximizes the potential for competitive pricing and ensures that the government explores a wide range of solutions, potentially leading to better value for the funds expended.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving advanced navigation and guidance systems essential for operational readiness. Services include engineering, hardware production, and associated operational, travel, and material costs. The geographic impact is primarily within the Department of Defense's operational theaters, supporting naval deployments globally. This contract likely supports a specialized workforce within Lockheed Martin and its subcontractors, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The 'no': 1 metric could indicate limited initial competition or a single-award structure that warrants scrutiny for price reasonableness.
The long duration (over 10 years) increases the risk of cost overruns or scope creep if not managed diligently.
CPIF contracts require careful monitoring to ensure the incentive structure effectively controls costs without compromising quality.

Positive Signals

Awarded under full and open competition, suggesting a broad market solicitation.
The CPIF contract type incentivizes contractor performance and cost efficiency.
Lockheed Martin is a reputable contractor with significant experience in defense systems.
The contract addresses critical navigation and guidance systems, vital for national security.

Sector Analysis

This contract falls within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511). This industry is characterized by high R&D investment, long product development cycles, and significant government procurement. The market is dominated by a few large defense contractors. Spending in this sector is driven by national security needs and technological advancements in defense systems. Comparable spending benchmarks would typically involve other large-scale, multi-year defense system development and production contracts.

Small Business Impact

The data indicates that small business participation (sb: false) was not a primary set-aside criterion for this contract. This suggests that the primary focus was on securing specialized capabilities from large, established defense contractors. There is no explicit information on subcontracting plans for small businesses, which could be a missed opportunity to leverage the small business industrial base. Further analysis would be needed to determine if subcontracting goals were established or met.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Cost Plus Incentive Fee structure necessitates close monitoring of costs, performance, and adherence to contract terms. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse. Transparency is generally maintained through contract databases like FPDS, though detailed performance metrics and cost breakdowns may be sensitive.

Related Government Programs

Naval Combat Systems
Aerospace and Defense Manufacturing
Defense Navigation and Guidance Systems
Department of Defense Research and Development
Military Hardware Production

Risk Flags

Long contract duration increases risk exposure.
Potential for cost growth in CPIF contracts.
Limited public data on specific performance metrics.
Reliance on a single prime contractor for critical systems.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $965.7 million to LOCKHEED MARTIN CORPORATION. ENGINEERING SERVICES, HARDWARE PRODUCTION, ODC/TRAVEL/MATERIAL

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 $965.7 million.

What is the period of performance?

Start: 2018-03-15. End: 2029-08-01.

What is the historical spending trend for similar navigation and guidance systems contracts awarded by the Department of the Navy?

Analyzing historical spending trends for similar contracts requires access to detailed procurement data beyond this single contract's summary. However, generally, spending in the defense navigation and guidance systems sector is influenced by geopolitical factors, technological obsolescence, and military modernization programs. The Department of the Navy, like other branches, invests consistently in these systems to maintain operational superiority. Trends can show increases during periods of heightened global tension or shifts towards new technological paradigms (e.g., AI-driven navigation, space-based augmentation). Without specific historical data points for comparable contracts, it's difficult to definitively state the trend, but sustained investment is typical for critical defense capabilities.

How does the per-unit cost of the navigation systems produced under this contract compare to industry benchmarks?

Determining a precise per-unit cost benchmark for the navigation systems under this contract is not feasible with the provided data. The contract covers a broad scope including 'ENGINEERING SERVICES, HARDWARE PRODUCTION, ODC/TRAVEL/MATERIAL' under a Cost Plus Incentive Fee (CPIF) arrangement. CPIF contracts by nature have variable costs tied to performance and incurred expenses, making a fixed per-unit cost difficult to establish upfront. Furthermore, the complexity and specialized nature of military-grade navigation systems mean that direct comparisons to commercial off-the-shelf (COTS) products or even less sophisticated systems are inappropriate. A true benchmark would require detailed cost breakdowns and comparisons with similar, highly specialized defense contracts, which are often classified or not publicly available.

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

Lockheed Martin, as one of the largest defense contractors globally, has extensive experience with various contract types, including Cost Plus Incentive Fee (CPIF). CPIF contracts are commonly used for complex development and production efforts where costs are uncertain but can be influenced by performance. Lockheed Martin has a long-standing relationship with the Department of the Navy, executing numerous contracts across different platforms and systems. While specific performance metrics for all their CPIF contracts are not publicly detailed, their continued success in winning large, complex defense contracts suggests a generally positive track record in managing such agreements. However, like any large contractor, there may be instances of cost overruns or performance challenges on specific contracts that are subject to review and negotiation.

What are the key performance indicators (KPIs) used to assess contractor performance under this CPIF contract?

The specific Key Performance Indicators (KPIs) for this Cost Plus Incentive Fee (CPIF) contract are not detailed in the provided summary data. However, for CPIF contracts, KPIs typically revolve around achieving specific technical milestones, meeting delivery schedules, maintaining quality standards, and controlling costs within target ranges. For navigation and guidance systems, KPIs might include accuracy metrics, reliability rates (Mean Time Between Failures - MTBF), system responsiveness, integration success with other platforms, and adherence to stringent safety and operational requirements. The 'incentive fee' component implies that bonuses are tied to exceeding certain performance targets, while penalties might apply for failing to meet minimum requirements, all of which are governed by the negotiated KPIs.

How does the duration of this contract (over 10 years) impact the risk assessment for cost and schedule overruns?

A contract duration exceeding 10 years significantly increases the inherent risks associated with cost and schedule overruns. Longer timeframes amplify the potential for unforeseen technological advancements that could render the system partially obsolete, economic fluctuations impacting material and labor costs, and changes in government requirements or priorities. Furthermore, the extended period provides more opportunities for scope creep, where additional features or functionalities are added without corresponding adjustments to budget or timeline. Robust program management, continuous risk assessment, and proactive contract modifications are crucial to mitigate these long-term risks. The CPIF structure aims to share some of this risk, but diligent oversight remains paramount.

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: SERVICE AND TRADE EQPT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002417R5225

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: $1,128,728,899

Exercised Options: $1,023,237,691

Current Obligation: $965,650,960

Actual Outlays: $16,221,630

Subaward Activity

Number of Subawards: 723

Total Subaward Amount: $1,108,433,720

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline