DoD's $217.6M radar development contract awarded to Lockheed Martin for Canadian Surface Combatant program

Contract Overview

Contract Amount: $21,760,721 ($21.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-12-02

End Date: 2025-10-14

Contract Duration: 1,047 days

Daily Burn Rate: $20.8K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CANADIAN SURFACE COMBATANT (CSC) BATCH 1 RADAR ENGINEERING DEVELOPMENT MATERIAL (EDM) AND SUBASSEMBLIES

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $21.8 million to LOCKHEED MARTIN CORPORATION for work described as: CANADIAN SURFACE COMBATANT (CSC) BATCH 1 RADAR ENGINEERING DEVELOPMENT MATERIAL (EDM) AND SUBASSEMBLIES Key points: 1. Contract focuses on critical radar engineering development and subassembly production. 2. Sole-source award raises questions about competitive pricing and value. 3. Long-term delivery schedule suggests a phased approach to development. 4. Performance risk may be mitigated by Lockheed Martin's established capabilities. 5. This contract supports a significant international defense partnership. 6. The contract's cost-plus-fixed-fee structure incentivizes cost management.

Value Assessment

Rating: fair

Benchmarking the value of this specific engineering development contract is challenging due to its specialized nature and sole-source award. The cost-plus-fixed-fee (CPFF) structure means actual costs will be reimbursed, plus a negotiated fee. While CPFF can be appropriate for R&D where costs are uncertain, it offers less incentive for cost savings compared to fixed-price contracts. Without comparable sole-source development contracts for similar complex radar systems, a direct price comparison is difficult. The total value of $217.6 million over approximately 3 years suggests a significant investment in advanced technology.

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. This typically occurs when only one responsible source is available or authorized by statute. For a specialized development effort like this, it's possible that Lockheed Martin possesses unique capabilities or intellectual property essential for the Canadian Surface Combatant radar system. However, the lack of competition means there was no opportunity for other vendors to offer potentially more competitive pricing or innovative solutions, which could impact overall value.

Taxpayer Impact: The absence of competition for this contract means taxpayers may not benefit from the price reductions or efficiencies that could arise from a competitive bidding process. The government relies on negotiation to ensure a fair price, but this is often less effective than market-driven competition.

Public Impact

The primary beneficiaries are the Department of Defense and the Royal Canadian Navy, as the contract supports the development of a key component for the Canadian Surface Combatant. Services delivered include engineering development and production of radar subassemblies, crucial for the operational capability of the warships. The geographic impact is primarily within New Jersey, where Lockheed Martin's operations are located, but the ultimate impact is on naval defense capabilities. Workforce implications include employment for engineers, technicians, and manufacturing personnel involved in advanced radar systems development and production.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings for taxpayers.
Cost-plus-fixed-fee contract structure may offer less incentive for strict cost control compared to fixed-price arrangements.
Long contract duration (over 3 years) increases the risk of cost overruns due to unforeseen technical challenges or market fluctuations.

Positive Signals

Award to Lockheed Martin, a major defense contractor with extensive experience in radar systems, suggests a lower technical risk.
The contract supports a critical defense capability for a key international ally, strengthening strategic partnerships.
Engineering Development Material (EDM) phase indicates a focus on maturing the technology before full-scale production.

Sector Analysis

The contract falls within the broader defense electronics and systems manufacturing sector, specifically focusing on advanced radar technology. This sector is characterized by high R&D investment, long product development cycles, and significant government procurement. The market for advanced naval radar systems is relatively concentrated, with a few major defense contractors dominating. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of the Canadian Surface Combatant program, but investments in similar advanced sensor development for naval platforms can run into hundreds of millions of dollars.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of advanced radar engineering and development, it is likely that the prime contractor, Lockheed Martin, will perform the majority of the work. Subcontracting opportunities for small businesses may exist, but they would be determined by Lockheed Martin's procurement strategy. The overall impact on the small business ecosystem is likely minimal unless significant subcontracting packages are specifically targeted towards them.

Oversight & Accountability

Oversight for this contract will be provided by the Department of the Navy, likely through contracting officers and program managers. Accountability measures are embedded in the Cost Plus Fixed Fee (CPFF) contract terms, requiring detailed cost reporting and adherence to technical specifications. Transparency may be limited due to the sole-source nature and the classified aspects of advanced defense technology. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Canadian Surface Combatant Program
Naval Radar Systems Development
Advanced Sensor Technology
Department of Defense Research and Development
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Potential for cost overruns
Long-term development schedule

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.8 million to LOCKHEED MARTIN CORPORATION. CANADIAN SURFACE COMBATANT (CSC) BATCH 1 RADAR ENGINEERING DEVELOPMENT MATERIAL (EDM) AND SUBASSEMBLIES

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 $21.8 million.

What is the period of performance?

Start: 2022-12-02. End: 2025-10-14.

What is Lockheed Martin's track record with similar radar development contracts for naval applications?

Lockheed Martin has a substantial track record in developing and producing radar systems for various military applications, including naval platforms. They are a key supplier for numerous U.S. and allied naval programs, often involved in integrating complex sensor suites. Their experience spans decades, encompassing a wide range of radar technologies from surveillance and tracking to fire control. For instance, they have been involved in programs like the Aegis Combat System, which includes advanced radar components. This extensive history suggests a high level of technical expertise and program execution capability relevant to the Canadian Surface Combatant radar development. However, specific details on past cost performance and schedule adherence for comparable sole-source development contracts would be necessary for a more precise risk assessment.

How does the pricing structure (Cost Plus Fixed Fee) compare to industry standards for this type of R&D contract?

The Cost Plus Fixed Fee (CPFF) pricing structure is common for research and development (R&D) contracts where the scope of work and final costs are uncertain at the outset. In a CPFF contract, the contractor is reimbursed for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the government wants to ensure a specific R&D effort proceeds, even with high technical uncertainty, and it incentivizes the contractor to complete the work within the estimated cost to protect their fee. However, compared to fixed-price contracts, CPFF offers less incentive for the contractor to aggressively control costs, as their profit is fixed regardless of the final cost. Industry standards suggest that for early-stage R&D with significant unknowns, CPFF is a justifiable choice, but it requires robust government oversight to manage costs effectively. The fixed fee itself should be negotiated based on the complexity, risk, and value of the work.

What are the primary technical risks associated with developing the radar system for the Canadian Surface Combatant?

The primary technical risks associated with developing the radar system for the Canadian Surface Combatant likely revolve around integrating advanced technologies into a novel platform, ensuring performance in challenging maritime environments, and achieving interoperability with other combat systems. Specific risks could include the development of new sensor components, the complexity of signal processing algorithms required for detection and tracking in cluttered environments (e.g., sea clutter, electronic countermeasures), and the integration of the radar system with the ship's overall combat management system. Ensuring the system meets stringent reliability and maintainability requirements for extended naval deployments is also a significant technical challenge. Furthermore, the transition from Engineering Development Material (EDM) to full production readiness carries inherent risks related to scaling up manufacturing processes and maintaining quality control.

What is the historical spending pattern for radar development and procurement within the Department of Defense?

Historical spending on radar development and procurement within the Department of Defense (DoD) represents a significant and consistent portion of the defense budget, reflecting the critical role of advanced sensor technology in modern warfare. Over the past decade, the DoD has allocated tens of billions of dollars annually towards research, development, testing, and evaluation (RDT&E) and procurement of various radar systems, including airborne, ground-based, and naval platforms. Major programs often involve substantial investments, with individual contracts for advanced radar systems frequently reaching hundreds of millions, and sometimes billions, of dollars. Spending patterns are influenced by evolving threats, technological advancements (e.g., AESA radar, AI integration), and strategic priorities, such as maintaining air superiority, enhancing missile defense, and improving maritime domain awareness. The Canadian Surface Combatant radar development contract, while specific, aligns with this broader trend of substantial investment in sophisticated radar capabilities.

How does the sole-source nature of this award impact the government's ability to ensure fair and reasonable pricing?

The sole-source nature of this award significantly impacts the government's ability to ensure fair and reasonable pricing. In a competitive environment, multiple bids allow the government to compare offers, identify the lowest price that meets requirements, and leverage negotiation power. With a sole-source award, the government relies heavily on its negotiation team's expertise and access to cost and pricing data from the contractor. The Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA) play crucial roles in auditing the contractor's proposed costs to verify their reasonableness and allowability. However, without competing offers, the government lacks a market benchmark to definitively validate the price. This increases the importance of robust negotiation strategies, thorough cost analysis, and potentially using historical pricing data from similar, albeit not identical, sole-source procurements as a reference point.

What are the potential long-term implications of this contract for the Canadian Surface Combatant program's overall budget and schedule?

This contract for radar engineering development and subassemblies represents a critical early-stage investment for the Canadian Surface Combatant (CSC) program. The total value of approximately $217.6 million, awarded under a Cost Plus Fixed Fee (CPFF) structure, indicates potential for cost fluctuations as development progresses. If unforeseen technical challenges arise or the scope of work expands, the final cost could exceed the initial estimate, impacting the CSC program's overall budget. Similarly, delays in the radar development phase could have a cascading effect on subsequent integration and testing milestones, potentially pushing back the program's schedule. The success of this contract is therefore crucial for maintaining the CSC program's financial and temporal objectives. Effective program management and oversight by both Lockheed Martin and the Department of National Defence will be essential to mitigate these risks.

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 AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

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: $23,359,083

Exercised Options: $23,359,083

Current Obligation: $21,760,721

Subaward Activity

Number of Subawards: 8

Total Subaward Amount: $11,533,681

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002421G5102

IDV Type: BOA

Timeline