DoD's $298M contract for land-based test site support awarded to Lockheed Martin raises value and competition concerns

Contract Overview

Contract Amount: $297,801,985 ($297.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2021-09-30

End Date: 2031-09-30

Contract Duration: 3,652 days

Daily Burn Rate: $81.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: LAND BASED TEST SITES SUPPORT

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $297.8 million to LOCKHEED MARTIN CORPORATION for work described as: LAND BASED TEST SITES SUPPORT Key points: 1. The contract's significant value warrants scrutiny for cost-effectiveness and potential for competitive bidding. 2. A sole-source award limits price discovery and may not reflect market-driven rates. 3. The long duration of the contract (10 years) increases long-term financial exposure. 4. Performance context is limited without specific metrics on test site operational efficiency. 5. This contract falls within the Defense sector, specifically supporting navigation and guidance systems. 6. The absence of small business participation is noted, with no set-aside or subcontracting requirements. 7. Oversight mechanisms need to be robust given the sole-source nature and extended period.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar sole-source awards. The 'COST PLUS FIXED FEE' structure can lead to cost overruns if not managed tightly. Given the lack of competition, it's difficult to ascertain if the pricing reflects optimal value for the taxpayer. The fixed fee component provides some incentive for the contractor to control costs, but the overall cost-plus nature requires diligent oversight to ensure efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities or when urgency dictates a rapid award. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces. The number of bidders was effectively one, limiting the government's leverage in negotiations.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the potential for competitive pricing is eliminated. Without a competitive process, there is less pressure on the contractor to offer the most cost-effective solution.

Public Impact

The Department of Defense benefits through the continued operation and support of critical land-based test sites. Services delivered include essential support for search, detection, navigation, guidance, aeronautical, and nautical systems. The geographic impact is primarily in New Jersey, where the test sites are located. Workforce implications include the potential for continued employment for personnel supporting these test sites, likely within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential taxpayer savings.
Long contract duration (10 years) increases long-term financial risk and commitment.
Cost-plus contract type can lead to cost overruns if not rigorously managed.
Lack of small business involvement means missed opportunities for economic inclusion and diverse solutions.
Absence of specific performance metrics makes it difficult to assess efficiency and value.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise and established infrastructure.
The contract ensures continuity of essential support for critical defense systems testing.
Fixed fee component provides some cost control incentive for the contractor.
Long-term nature of the contract offers stability for both the government and the contractor.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically supporting the manufacturing and testing of advanced navigation and guidance systems. The market for such specialized testing and support services is often concentrated among a few large defense contractors due to the high technical requirements and security clearances involved. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of land-based test sites, but overall defense spending on system development and testing runs into billions annually.

Small Business Impact

This contract does not appear to include any small business set-aside provisions, nor are there explicit requirements for subcontracting to small businesses. This means that opportunities for small businesses to participate in this significant contract are likely limited. The absence of such provisions may indicate a focus on specialized capabilities held by larger prime contractors, potentially overlooking the innovative capacity and cost efficiencies that small businesses can offer.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Given the sole-source and cost-plus nature, rigorous oversight of expenditures, performance milestones, and adherence to the fixed fee structure will be crucial. Transparency may be limited due to the non-competitive award, but contract performance reviews and audits by relevant oversight bodies, potentially including the Inspector General, should be in place to ensure accountability.

Related Government Programs

Department of Defense Research, Development, Test, and Evaluation
Naval Air Systems Command (NAVAIR) Contracts
Defense Logistics Agency Support Contracts
Aerospace System Testing and Evaluation Services

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of competition
Potential for cost overruns
No small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $297.8 million to LOCKHEED MARTIN CORPORATION. LAND BASED TEST SITES SUPPORT

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 $297.8 million.

What is the period of performance?

Start: 2021-09-30. End: 2031-09-30.

What is Lockheed Martin's track record with similar sole-source, cost-plus contracts for test site support within the Department of Defense?

Lockheed Martin Corporation has a long history of performing complex defense-related services, including test and evaluation support, for the Department of Defense. While specific data on all sole-source, cost-plus contracts for test site support is not publicly itemized, the company routinely engages in large-scale, long-duration contracts across various defense platforms. Their extensive experience suggests a capacity to manage such agreements. However, the effectiveness and value derived from past sole-source, cost-plus arrangements can vary significantly, often depending on the specific program, the clarity of requirements, and the robustness of government oversight. Analyzing past performance would require delving into specific contract histories, including any reported cost overruns, schedule delays, or performance deficiencies, which are not readily available in this summary data.

How does the estimated annual cost of this contract compare to industry benchmarks for similar land-based test site operations?

The total contract value is approximately $298 million over 10 years, averaging around $29.8 million per year. Benchmarking this figure is challenging because 'land-based test sites' encompass a wide range of facilities and support functions, from basic infrastructure maintenance to highly specialized testing of advanced systems. The specific nature of the systems supported (search, detection, navigation, guidance, aeronautical, and nautical) suggests a high degree of technical complexity. Without knowing the exact scope of services, personnel required, equipment utilized, and the specific testing protocols, a direct comparison to industry benchmarks is difficult. However, for specialized, high-security defense testing facilities, annual operating costs can indeed run into the tens of millions, particularly when encompassing advanced technology support and long-term sustainment.

What are the primary risks associated with a 10-year 'COST PLUS FIXED FEE' contract awarded on a sole-source basis?

The primary risks associated with a 10-year 'COST PLUS FIXED FEE' (CPFF) contract awarded on a sole-source basis are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated costs as the contractor faces no market-driven incentive to reduce prices. Secondly, the CPFF structure, while providing a fixed profit margin, means the government bears the risk of cost overruns. If the contractor's actual costs exceed estimates, the government pays them, plus the agreed-upon fixed fee. This can be exacerbated over a long 10-year period, during which unforeseen technical challenges, inflation, or scope creep can significantly increase the total cost. The extended duration also locks the government into a single provider, limiting flexibility to adapt to changing technological needs or to seek more cost-effective solutions that might emerge over time. Robust government oversight is critical to mitigate these risks.

What specific performance metrics or deliverables are expected under this contract to ensure accountability?

The provided data does not specify the exact performance metrics or deliverables for this contract. Typically, for a contract of this nature, performance metrics would be detailed in the contract's Statement of Work (SOW) or Performance Work Statement (PWS). These could include metrics related to the operational availability of test equipment, turnaround times for test setups, accuracy of test results, adherence to safety protocols, and timely reporting of findings. Deliverables might include regular operational status reports, maintenance logs, test data summaries, and recommendations for system improvements. The 'fixed fee' component implies that achieving certain performance standards is tied to the contractor earning their fee, but the precise standards are not detailed in the summary data.

How does this contract align with the Department of the Navy's strategic goals for maintaining and advancing its navigation and guidance systems?

This contract directly supports the Department of the Navy's (DoN) strategic goals by ensuring the continued operation and readiness of land-based test sites crucial for the development, testing, and validation of advanced navigation and guidance systems. These systems are fundamental to naval operations, impacting everything from ship navigation and missile guidance to aircraft control and unmanned systems. By providing sustained support, the contract helps maintain the technological edge necessary for national security. The long-term nature of the award suggests a commitment to ensuring the longevity and reliability of these critical capabilities, aligning with the DoN's objective to modernize and maintain its fleet and weapon systems effectively.

What is the historical spending pattern for 'LAND BASED TEST SITES SUPPORT' by the Department of the Navy, and how does this award compare?

Historical spending data for 'LAND BASED TEST SITES SUPPORT' specifically by the Department of the Navy (DoN) is not detailed in the provided information. However, the award of $298 million over 10 years represents a significant, long-term investment. The North American Industry Classification System (NAICS) code 334511 ('Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing') suggests this contract is related to the manufacturing and support of such systems. The DoN, as a major branch of the DoD, consistently invests heavily in R&D, testing, and sustainment for its advanced platforms. This $298 million contract, while substantial, needs to be viewed within the broader context of the DoN's multi-billion dollar annual budget for procurement, R&D, and operations. Without historical data on similar contracts or broader spending categories for test site support, it's difficult to definitively state if this award represents an increase, decrease, or continuation of previous spending trends.

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: FIRE CONTROL EQPT.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002420R5127

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $564,706,701

Exercised Options: $522,685,995

Current Obligation: $297,801,985

Actual Outlays: $107,200

Subaward Activity

Number of Subawards: 133

Total Subaward Amount: $56,454,845

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline