Navy awards $48.8M contract for torpedo maintenance to Lockheed Martin, a sole-source provider

Contract Overview

Contract Amount: $48,786,572 ($48.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-02-24

End Date: 2026-02-23

Contract Duration: 1,095 days

Daily Burn Rate: $44.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: TORPEDO MAINTENANCE

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $48.8 million to LOCKHEED MARTIN CORPORATION for work described as: TORPEDO MAINTENANCE Key points: 1. Contract value represents a significant investment in naval readiness and platform sustainment. 2. Sole-source award raises questions about potential price inflation and lack of competitive pressure. 3. Performance-based contract type suggests a focus on achieving specific maintenance outcomes. 4. Long-term duration indicates a sustained need for these specialized torpedo services. 5. Geographic location in New York may point to specific operational or logistical considerations.

Value Assessment

Rating: questionable

The contract's value of $48.8 million for torpedo maintenance requires careful benchmarking against similar sustainment contracts. Without competitive bidding, it is difficult to definitively assess if the pricing reflects fair market value. The cost-plus incentive fee structure aims to control costs, but the absence of competition inherently limits the government's leverage in price negotiations. Further analysis of historical pricing for this specific service and contractor would be necessary to provide a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified in specific circumstances, such as when a unique capability is required or only one source exists, they generally lead to less price discovery and potentially higher costs for the government.

Taxpayer Impact: Sole-source awards limit taxpayer savings by eliminating the downward price pressure that competition provides. This means taxpayers may be paying a premium for these torpedo maintenance services compared to what could have been achieved through a competitive process.

Public Impact

The U.S. Navy benefits directly through the sustained readiness and operational capability of its torpedo systems. This contract ensures the availability of critical maintenance and repair services for advanced underwater weaponry. The primary geographic impact is in New York, where the contractor is located, potentially supporting local jobs and infrastructure. The contract supports a specialized workforce skilled in the maintenance and repair of complex naval ordnance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Lack of transparency in the sole-source justification process could obscure potential alternatives.
Cost-plus incentive fee structure, while designed for efficiency, can still lead to cost overruns if not managed tightly.

Positive Signals

Contract awarded to a known entity (Lockheed Martin) with established expertise in defense systems.
Performance-based contract type incentivizes the contractor to meet specific maintenance outcomes.
Long-term duration suggests a stable and predictable need, allowing for workforce planning.

Sector Analysis

The defense sector, particularly naval ordnance and maintenance, is characterized by high technological complexity and significant barriers to entry. Lockheed Martin is a major player in this space, often holding sole-source or limited-competition contracts due to specialized capabilities. Spending on weapon system sustainment is a critical component of overall defense budgets, ensuring platforms remain operational. Comparable spending benchmarks would likely involve other major defense contractors performing similar complex maintenance and sustainment services for critical military assets.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions, nor is there explicit information regarding subcontracting opportunities for small businesses. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Lockheed Martin voluntarily engages small businesses for specific components or services. Further investigation into subcontracting plans would be needed to fully assess the impact.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the cost-plus incentive fee structure, which ties contractor profit to performance metrics. Transparency may be limited due to the sole-source nature of the award, but contract performance data and financial expenditures should be subject to standard government reporting and potential Inspector General review.

Related Government Programs

Naval Weapons Systems Maintenance
Torpedo Manufacturing and Support
Defense Contractor Services
Department of the Navy Sustainment Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $48.8 million to LOCKHEED MARTIN CORPORATION. TORPEDO MAINTENANCE

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 $48.8 million.

What is the period of performance?

Start: 2023-02-24. End: 2026-02-23.

What is Lockheed Martin's track record with similar torpedo maintenance contracts for the U.S. Navy?

Lockheed Martin Corporation is a primary contractor for numerous U.S. Navy weapon systems, including torpedoes. They have a long-standing relationship with the Navy for the development, production, and sustainment of various torpedo types, such as the MK 48 and MK 54. Their track record typically involves complex manufacturing, integration, and lifecycle support services. While specific performance metrics for past torpedo maintenance contracts are often not publicly detailed, the Navy's continued reliance on Lockheed Martin for these critical services suggests a generally satisfactory performance history. However, the absence of competition in this specific award warrants a closer look at past performance data and any associated cost or schedule variances to ensure continued value.

How does the pricing of this contract compare to historical spending on torpedo maintenance?

Direct comparison of this $48.8 million contract to historical spending on torpedo maintenance is challenging without access to detailed historical contract data, including the scope of work and specific services rendered in prior periods. As a sole-source award, this contract's pricing is set without the benefit of competitive bidding, which typically drives down costs. To assess value, one would need to compare the per-unit cost of maintenance, the total lifecycle cost projections, and the specific services included against previous contracts awarded competitively or against industry benchmarks for similar complex ordnance sustainment. The cost-plus incentive fee structure aims to manage costs, but the baseline price established in a sole-source environment is a key factor in determining overall value for taxpayers.

What are the primary risks associated with a sole-source award for torpedo maintenance?

The primary risk associated with a sole-source award for torpedo maintenance is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the most favorable terms and prices. This can lead to taxpayers potentially overpaying for the services. Another risk is a reduction in innovation, as the incumbent contractor may have less incentive to develop more cost-effective or efficient maintenance methods. Furthermore, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single supplier, which can create vulnerabilities if that supplier faces operational issues or decides to exit the market. Ensuring robust oversight and justification for the sole-source determination is crucial to mitigate these risks.

How effective is the cost-plus incentive fee (CPIF) structure in ensuring program effectiveness for this contract?

The Cost-Plus Incentive Fee (CPIF) structure is designed to encourage contractor efficiency and cost control by linking a portion of the contractor's profit to achieving specific performance targets, often related to cost, schedule, or quality. For this torpedo maintenance contract, CPIF aims to incentivize Lockheed Martin to perform the required maintenance effectively and within projected cost parameters. The effectiveness hinges on the clarity and measurability of the incentive targets. If well-defined and rigorously monitored, CPIF can lead to better outcomes and cost savings compared to a simple cost-plus contract. However, the success of CPIF also depends on the government's ability to accurately forecast costs and establish appropriate target prices and fee structures. Without competitive benchmarks, setting these targets can be more challenging, potentially limiting the full benefit of the CPIF structure.

What is the historical spending trend for torpedo maintenance within the Department of the Navy?

Historical spending trends for torpedo maintenance within the Department of the Navy generally show a consistent and significant investment required to maintain the operational readiness of these complex weapon systems. As technology advances and platforms age, the need for specialized maintenance, repair, and upgrades persists. Spending levels can fluctuate based on fleet size, operational tempo, specific modernization programs, and the lifecycle stage of different torpedo types. While specific aggregate figures for 'torpedo maintenance' are not always easily isolated from broader weapons system sustainment budgets, it is understood to be a substantial and ongoing expenditure. The Navy relies on a mix of organic (in-house) capabilities and contracted support, with major contractors like Lockheed Martin playing a crucial role in providing specialized services, often through long-term agreements.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Ammunition (except Small Arms) Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002422R6100

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $91,922,540

Exercised Options: $53,215,665

Current Obligation: $48,786,572

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $314,373

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline