DoD's $222M Engineering Services Contract Awarded to Lockheed Martin Raises Value Concerns

Contract Overview

Contract Amount: $222,461,662 ($222.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-04-15

End Date: 2025-08-29

Contract Duration: 2,328 days

Daily Burn Rate: $95.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: 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 $222.5 million to LOCKHEED MARTIN CORPORATION for work described as: ENGINEERING AND TECHNICAL SERVICES Key points: 1. The contract's value-for-money is questionable given the lack of competition and cost-plus contract type. 2. Competition dynamics are severely limited, with a sole-source award to Lockheed Martin. 3. Risk indicators include the cost-plus contract type, which can incentivize higher spending. 4. Performance context is broad, covering general engineering and technical services. 5. The contract falls within the professional services sector, specifically engineering. 6. The significant duration of the contract (over 6 years) warrants close monitoring.

Value Assessment

Rating: questionable

Benchmarking the value of this $222 million contract is challenging due to its sole-source nature and cost-plus fixed fee structure. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The lack of transparency inherent in cost-plus contracts can lead to cost overruns and reduced incentive for efficiency. Comparing it to similar sole-source engineering services contracts awarded by the Department of the Navy would be necessary for a more robust assessment, but such data is not readily available in this context.

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. The Department of the Navy did not solicit bids from multiple vendors. This approach significantly limits price discovery and may result in a higher cost to the government than if the contract had been competed. The rationale for a sole-source award typically involves unique capabilities or urgent needs, but these justifications are not detailed here.

Taxpayer Impact: Taxpayers may be paying a premium for these engineering services due to the absence of competitive pressure. The government's ability to negotiate favorable terms is diminished in a sole-source scenario.

Public Impact

The Department of the Navy benefits from specialized engineering and technical services. These services likely support critical defense systems and infrastructure. The geographic impact is primarily within Virginia, where the contractor is located. The contract supports a workforce of engineers and technical specialists.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost-plus contract type can lead to cost overruns and reduced contractor efficiency incentives.
Long contract duration (over 6 years) increases exposure to potential cost increases and performance issues.
Lack of transparency in cost-plus contracts makes value assessment difficult.
Absence of small business set-aside raises questions about opportunities for smaller firms in this large contract.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise.
The contract supports critical engineering and technical services for the Department of the Navy.
The contract is for a significant duration, implying a stable and ongoing need for these services.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader professional services industry. The market for defense engineering services is substantial, driven by the ongoing need for advanced technological development and maintenance of military systems. Comparable spending benchmarks for large-scale engineering support contracts within the Department of Defense are typically in the hundreds of millions of dollars, aligning with this award's magnitude. The industry is characterized by a few large prime contractors and a network of subcontractors.

Small Business Impact

This contract does not appear to have a small business set-aside, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false. This suggests that opportunities for small businesses to participate in this contract, either as prime contractors or through subcontracting, may be limited. Large sole-source contracts awarded to major prime contractors often do not prioritize small business participation unless specifically mandated.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the terms and conditions of the Cost Plus Fixed Fee contract, including cost reporting and performance milestones. Transparency is generally limited with cost-plus contracts, making detailed public oversight challenging. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Department of Defense Engineering Services
Naval Sea Systems Command Contracts
Lockheed Martin Defense Contracts
Cost-Plus Fixed Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost-plus contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $222.5 million to LOCKHEED MARTIN CORPORATION. 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 (Department of the Navy).

What is the total obligated amount?

The obligated amount is $222.5 million.

What is the period of performance?

Start: 2019-04-15. End: 2025-08-29.

What specific engineering and technical services are being provided under this contract?

The data provided indicates the contract is for 'ENGINEERING AND TECHNICAL SERVICES' (d). While the specific nature of these services is not detailed, it generally encompasses a broad range of activities including design, development, testing, analysis, and integration of systems and technologies. For the Department of the Navy, these services could relate to naval platforms, weapons systems, cybersecurity, or other critical defense infrastructure. The 'nd' field specifies 'Engineering Services', further narrowing the scope. Without more granular information, the exact deliverables remain general.

How does the $222 million contract value compare to similar engineering services contracts awarded by the Department of the Navy?

Comparing this $222 million contract value requires access to a broader dataset of similar contracts. However, given that it is a sole-source award to a major contractor like Lockheed Martin, it is likely within the range of significant, long-term engineering support contracts. The Department of the Navy procures numerous large-scale engineering services contracts, many exceeding this value, particularly for major platform development or sustainment. The key differentiator here is the sole-source nature, which makes direct value comparison to competitively bid contracts less meaningful without further analysis of scope and duration.

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

The primary risks associated with a CPFF contract of this magnitude ($222 million) and duration (over 6 years) include potential cost overruns and reduced contractor efficiency. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This can disincentivize cost control, as the contractor is guaranteed their costs will be covered. Furthermore, the fixed fee does not increase with cost overruns, but the government bears the risk of escalating costs. The long duration amplifies these risks, as market conditions, labor rates, and material costs can fluctuate significantly over time, potentially increasing the total contract cost beyond initial estimates.

What is the justification for awarding this contract as sole-source to Lockheed Martin?

The provided data does not include the specific justification for this sole-source award. Typically, sole-source contracts are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, there is a public exigency, or the contract is a follow-on to a previous competition where only one source is deemed capable. For a large defense contractor like Lockheed Martin, justifications often relate to unique technological capabilities, proprietary data, or the need for seamless integration with existing systems they developed. A formal Justification for Other Than Full and Open Competition (JOFOC) would normally be required and publicly available.

What is the historical spending pattern for engineering and technical services by the Department of the Navy with Lockheed Martin?

The provided data only pertains to this single contract awarded on April 15, 2019, with an end date of August 29, 2025. It does not offer historical spending patterns. To assess historical spending, one would need to query federal procurement databases for all contracts awarded to Lockheed Martin by the Department of the Navy for engineering and technical services over a relevant period (e.g., the last 5-10 years). This would reveal trends in contract values, types (competitive vs. sole-source), and specific service areas.

Industry Classification

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

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002418R6400

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $222,812,223

Exercised Options: $222,812,223

Current Obligation: $222,461,662

Subaward Activity

Number of Subawards: 355

Total Subaward Amount: $140,464,295

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline