DoD awards $58.5M for LWLCCA Production Shipset to Lockheed Martin, a fixed-price incentive contract

Contract Overview

Contract Amount: $58,466,408 ($58.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2021-09-16

End Date: 2027-07-09

Contract Duration: 2,122 days

Daily Burn Rate: $27.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LWLCCA PRODUCTION SHIPSET

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $58.5 million to LOCKHEED MARTIN CORPORATION for work described as: LWLCCA PRODUCTION SHIPSET Key points: 1. Contract value represents a significant investment in advanced defense systems. 2. Sole awardee suggests a highly specialized or competitive initial bidding process. 3. Fixed-price incentive structure aims to balance cost control with performance. 4. Contract duration of over 5 years indicates a long-term strategic need. 5. Geographic location in New York may point to specific manufacturing capabilities. 6. Absence of small business set-aside suggests focus on large prime contractors.

Value Assessment

Rating: good

The contract value of $58.5 million for a production shipset appears reasonable given the specialized nature of defense systems. Benchmarking against similar complex defense manufacturing contracts would provide further insight into value for money. The fixed-price incentive (FPI) pricing structure suggests an effort to control costs while allowing for adjustments based on performance, which is a common approach for complex procurements where final costs can be uncertain.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple capable vendors had the opportunity to bid. The fact that only one award was made suggests that Lockheed Martin was either the sole technically acceptable offeror or presented the most advantageous offer among a potentially limited number of highly qualified bidders. This level of competition, while broad initially, can lead to a single strong contender emerging for highly specialized defense needs.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages multiple companies to vie for the contract, potentially driving down prices and improving terms. However, a single award from this process might indicate a niche market or highly specific requirements that limit the number of viable competitors.

Public Impact

The primary beneficiary is the Department of Defense, which will receive critical components for its operational capabilities. The contract supports the production of advanced shipset components, likely for naval or aerospace platforms. The geographic impact is centered in New York, potentially supporting local manufacturing jobs and the regional economy. The contract implies a need for specialized manufacturing skills and a skilled workforce within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if performance targets are difficult to meet under the FPI structure.
Dependence on a single contractor for critical shipset components could pose supply chain risks.
The long contract duration may require ongoing monitoring to ensure continued value and relevance.

Positive Signals

Awarded through full and open competition, suggesting a robust initial vetting of potential suppliers.
The fixed-price incentive structure incentivizes contractor performance and cost management.
The contract duration indicates a stable, long-term commitment to a critical defense capability.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on system and instrument manufacturing for navigation and guidance. The market for such specialized components is often characterized by high barriers to entry due to technological complexity and stringent quality requirements. Comparable spending benchmarks would likely be found within other major defense platform production contracts, where significant investments are made in complex integrated systems.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it explicitly mention subcontracting goals for small businesses. This suggests that the primary focus is on large prime contractors with the capacity and expertise to handle such a complex defense production requirement. The absence of small business involvement at the prime contract level may limit direct opportunities for smaller firms, though they could potentially participate as subcontractors if opportunities arise.

Oversight & Accountability

Oversight for this contract will likely be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are embedded within the fixed-price incentive structure, linking contractor profit to performance outcomes. Transparency is facilitated through contract awards databases, though specific details on performance metrics and cost breakdowns may be limited due to national security considerations.

Related Government Programs

Naval Ship Production
Aerospace Systems Manufacturing
Defense Electronics
Guidance and Navigation Systems
Advanced Manufacturing Contracts

Risk Flags

Sole awardee risk
Long-term contract dependency
Potential for cost escalation under FPI

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $58.5 million to LOCKHEED MARTIN CORPORATION. LWLCCA PRODUCTION SHIPSET

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $58.5 million.

What is the period of performance?

Start: 2021-09-16. End: 2027-07-09.

What is the historical spending pattern for LWLCCA Production Shipsets with Lockheed Martin or similar components?

Analyzing historical spending requires access to detailed contract databases and procurement histories. Without specific prior contracts for 'LWLCCA Production Shipset,' we can look at Lockheed Martin's broader defense manufacturing portfolio. The company has a long history of producing complex systems for the DoD, including ship components and aerospace systems. Past contracts for similar large-scale production runs, especially those involving advanced technology and long lead times, can range from tens of millions to billions of dollars over their lifecycle. The $58.5 million awarded here for a specific shipset suggests it might be an initial production run, a specific variant, or a component of a larger platform. Benchmarking against previous FPI contracts for comparable systems would reveal trends in cost escalation, performance achievement, and overall value delivered to the government over time.

How does the fixed-price incentive (FPI) structure typically perform in defense contracts of this scale?

Fixed-price incentive (FPI) contracts are designed to share the risks and rewards between the government and the contractor. They establish a target cost, a target profit, and a price ceiling. If the final cost is below the target, both parties share in the savings according to a predetermined formula. If the final cost exceeds the target but remains below the ceiling, the contractor's profit is reduced, and the government pays a higher price. If the cost exceeds the ceiling, the contractor absorbs the excess. In defense contracts of this scale ($58.5M), FPI contracts aim to incentivize the contractor to control costs while ensuring the government receives a quality product. Their performance can vary; successful implementation leads to cost savings and timely delivery, while poorly defined requirements or unforeseen technical challenges can lead to disputes or cost overruns that approach the ceiling. Effective oversight is crucial to ensure the incentive structure works as intended.

What are the potential risks associated with a sole awardee for a critical defense component like a shipset?

Awarding a critical defense component to a sole entity, even after full and open competition, presents several potential risks. Firstly, there's a reduced leverage for the government in future negotiations or modifications, as the contractor knows they are the only source. Secondly, it creates a single point of failure in the supply chain; any disruption at the contractor's facility (e.g., labor issues, natural disasters, financial instability) could halt production and impact defense readiness. Thirdly, without ongoing competition, there's less pressure on the contractor to innovate or maintain the most competitive pricing over the long term. Finally, the government might face challenges in developing alternative sources or ensuring knowledge transfer if the sole contractor's capabilities decline or if the contract needs to be transitioned.

What does the NAICS code 334511 indicate about the nature of this contract?

The North American Industry Classification System (NAICS) code 334511 signifies 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing.' This classification indicates that the contract is for the production or development of highly specialized equipment used in military and civilian applications for determining position, location, or direction, and for identifying targets or obstacles. Such systems are critical for platforms like aircraft, ships, and ground vehicles, requiring advanced engineering, precision manufacturing, and rigorous testing to meet demanding performance standards. Contracts under this code often involve complex electronics, sensors, and software integration, contributing significantly to the operational effectiveness of defense and transportation sectors.

How does the contract duration (2122 days) compare to typical defense production contracts?

A duration of 2122 days, which is approximately 5.8 years, is a substantial period for a defense production contract. This length suggests that the contract involves a complex manufacturing process, potentially with multiple phases, significant research and development integration, or a long-term production run for a specific defense platform. Typical defense production contracts can vary widely, but multi-year agreements for major systems or components often span several years to ensure stability for the contractor and a consistent supply for the government. Shorter contracts might be for prototypes or smaller component orders, while longer durations are usually associated with full-rate production or sustainment of major defense assets. This duration indicates a strategic, long-term commitment by the DoD to acquire these specific shipsets.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Solicitation ID: N0002420R6113

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 497 ELECTRONICS PKWY BLDG 5, LIVERPOOL, NY, 13088

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: $58,642,784

Exercised Options: $58,601,208

Current Obligation: $58,466,408

Subaward Activity

Number of Subawards: 130

Total Subaward Amount: $9,607,080

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline