DoD's $341M submarine imaging contract to Lockheed Martin shows strong competition and long-term commitment

Contract Overview

Contract Amount: $341,455,617 ($341.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-09-20

End Date: 2030-02-13

Contract Duration: 4,164 days

Daily Burn Rate: $82.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ENGINEERING AND TECHNICAL SERVICES FOR INTEGRATED SUBMARINE IMAGING SYSTEMS TECHNICAL INSERTION 20-24

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $341.5 million to LOCKHEED MARTIN CORPORATION for work described as: ENGINEERING AND TECHNICAL SERVICES FOR INTEGRATED SUBMARINE IMAGING SYSTEMS TECHNICAL INSERTION 20-24 Key points: 1. This contract represents a significant, long-term investment in critical defense technology. 2. The use of a Cost Plus Incentive Fee (CPIF) structure suggests a focus on performance and cost control. 3. Full and open competition indicates a robust bidding process, potentially leading to better value. 4. The extended duration of the contract points to the enduring need for these specialized imaging systems. 5. Lockheed Martin's established presence in defense contracting suggests a high level of technical capability. 6. The contract's value places it among substantial procurements within the defense sector.

Value Assessment

Rating: good

The contract's value of over $341 million over its 12-year period suggests a substantial investment. Benchmarking this against similar long-term, complex defense system development contracts is challenging without more specific data on the scope of 'Integrated Submarine Imaging Systems Technical Insertion'. However, the CPIF contract type implies that the government aims to incentivize cost efficiency and performance, which is a positive sign for value. The pricing will be heavily influenced by the incentive structure and the actual performance achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. This approach is generally favored for complex procurements as it allows for a wider range of solutions and potentially more competitive pricing. The presence of multiple bidders suggests a healthy market for these specialized engineering and technical services.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down costs through market forces and ensures the government receives the best possible value for its investment in advanced defense systems.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet, which will receive upgraded imaging systems. This contract delivers advanced engineering and technical services for the development and integration of critical submarine imaging technology. The geographic impact is primarily national, supporting naval operations, with potential benefits to shipbuilding hubs. The contract supports a highly skilled technical workforce in specialized engineering and systems integration roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to vendor lock-in if not managed carefully.
CPIF contracts require diligent oversight to ensure incentives are effectively driving desired outcomes.
Reliance on a single prime contractor for such a critical system warrants close monitoring of subcontractor performance.

Positive Signals

Full and open competition suggests a competitive environment that should benefit cost control.
The extended period allows for sustained development and integration, potentially leading to more robust systems.
Lockheed Martin's extensive experience in defense systems indicates a strong capability to deliver on complex requirements.

Sector Analysis

This contract falls within the defense sector, specifically focusing on advanced sensor and imaging technology for naval platforms. The market for such specialized systems is characterized by high barriers to entry due to technical complexity and security requirements. Spending in this area is driven by national security needs and technological advancements in surveillance and detection. Comparable spending benchmarks would typically be found within major defense acquisition programs for naval systems.

Small Business Impact

The contract details do not indicate a specific small business set-aside. Given the specialized nature and large value of this contract, it is likely that any small business involvement would be through subcontracting opportunities. The prime contractor, Lockheed Martin, will likely be responsible for managing its supply chain, which may include opportunities for small businesses to provide components or specialized services.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy, likely through contracting officers and program managers. The Cost Plus Incentive Fee structure necessitates close monitoring of performance metrics and cost expenditures to ensure the incentive clauses are effective. Transparency is generally maintained through contract reporting requirements, and the Inspector General's office within the Department of Defense would have jurisdiction for audits and investigations.

Related Government Programs

Naval Combat Systems
Submarine Technology Development
Advanced Sensor Systems
Defense Engineering Services
Department of Defense IT and Electronics Procurement

Risk Flags

Long contract duration increases risk of technological obsolescence.
CPIF requires careful monitoring of performance metrics and cost targets.
Sole reliance on a major prime contractor necessitates robust oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $341.5 million to LOCKHEED MARTIN CORPORATION. ENGINEERING AND TECHNICAL SERVICES FOR INTEGRATED SUBMARINE IMAGING SYSTEMS TECHNICAL INSERTION 20-24

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 $341.5 million.

What is the period of performance?

Start: 2018-09-20. End: 2030-02-13.

What is the historical spending trend for Integrated Submarine Imaging Systems by the Department of the Navy?

Analyzing historical spending trends for 'Integrated Submarine Imaging Systems' specifically is challenging without direct historical contract data for this precise system. However, broader trends in naval modernization and sensor technology procurement by the Department of the Navy show consistent, significant investment. Over the past decade, the Navy has prioritized upgrades to its submarine fleet's combat systems, including sonar, periscopes, and other imaging technologies, to maintain a technological edge. This has translated into substantial contract awards for research, development, and integration of advanced systems. The current $341 million contract, spanning over a decade, aligns with this pattern of sustained, high-value investment in critical submarine capabilities, reflecting the ongoing need for state-of-the-art surveillance and targeting technology.

How does the Cost Plus Incentive Fee (CPIF) structure typically impact contractor performance and cost control in defense contracts?

A Cost Plus Incentive Fee (CPIF) contract is designed to encourage the contractor to control costs and achieve specific performance targets. In this structure, the final fee (profit) is adjusted based on the contractor's performance relative to target cost and target performance objectives. If the contractor performs better than the target (e.g., lower cost, higher performance), their fee increases, up to a ceiling. Conversely, if they perform worse, their fee decreases, down to a floor. This incentivizes the contractor to be efficient and innovative in managing project costs and meeting or exceeding technical specifications. For the government, it offers a mechanism to share in cost savings or performance improvements, while still maintaining cost control through the fee structure and target setting. Effective implementation requires clear definition of performance metrics and cost targets.

What are the potential risks associated with a long-duration contract (over 10 years) for complex technology development?

Long-duration contracts, such as this 12-year agreement, present several potential risks for complex technology development. Firstly, technological obsolescence is a significant concern; the technology landscape can change rapidly, potentially rendering the initially specified system outdated before the contract's end. Secondly, cost escalation beyond initial projections can occur due to unforeseen technical challenges, inflation, or changes in material costs over such an extended period. Thirdly, contractor performance can degrade over time, especially if incentives are not continuously aligned with evolving needs or if institutional knowledge is lost. Finally, there's a risk of 'vendor lock-in,' where the government becomes heavily reliant on a single provider, limiting future flexibility and potentially reducing competitive pressure in subsequent procurements. Robust contract management, including regular reviews and potential for contract modifications, is crucial to mitigate these risks.

What is Lockheed Martin's track record with similar submarine technology or complex defense system integration contracts?

Lockheed Martin Corporation has an extensive and well-established track record in developing and integrating complex defense systems, including those for naval platforms and submarines. The company is a major prime contractor for numerous U.S. Department of Defense programs, encompassing areas like combat systems, sonar, missile systems, and electronic warfare. They have been involved in various submarine modernization programs and the development of advanced sensor technologies. Their experience includes managing large-scale, multi-year contracts with complex technical requirements and significant budgets. While specific details on past 'Integrated Submarine Imaging Systems' contracts are proprietary, Lockheed Martin's overall portfolio demonstrates a deep capability in systems engineering, integration, and lifecycle support for critical defense assets, suggesting a strong foundation for executing this current contract.

How does the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code relate to the contract's scope?

The North American Industry Classification System (NAICS) code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' accurately reflects the core nature of this contract. This code encompasses establishments primarily engaged in manufacturing instruments and related equipment for detecting, measuring, and displaying physical, environmental, or operational conditions. Specifically for this contract, it covers the development and integration of systems used for searching, detecting, and navigating within a submarine environment, which are critical for situational awareness and mission success. This includes advanced sonar, imaging, and guidance systems essential for submarine operations. The code signifies the high-tech, specialized nature of the products and services being procured.

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: N0002417R6258

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

Financial Breakdown

Contract Ceiling: $779,569,358

Exercised Options: $421,445,952

Current Obligation: $341,455,617

Actual Outlays: $10,986,309

Subaward Activity

Number of Subawards: 528

Total Subaward Amount: $199,288,981

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline