DoD's $826M sonar system contract to Lockheed Martin raises value and competition concerns

Contract Overview

Contract Amount: $79,186,943 ($79.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 1997-01-24

End Date: 2002-07-30

Contract Duration: 2,013 days

Daily Burn Rate: $39.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 199704!1700!2123!BZ006!NAVAL SEA SYSTEMS COMMAND !N0002496C6224 !A!*!P00004 !19970124!20010331!826412801!931114334!834951691!N!52088!LOCKHEED MARTIN CORPORATION !9500 GODWIN DR !MANASSAS !VA!20110!48952!683!51!MANASSAS !MANASSAS (CITY) !VIRGINIA !0001!+000003413972!N!N!000000000000!5845!UNDERWATER SOUND EQUIPMENT !A7 !ELECTRONICS AND COMMUNICATION !2GSJ!AN/BQQ-6 SONAR !3812!3!*!*!C!B!A!*!D !N!U!1!001!N!1G!A!Y!Z!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!B!N!*!*!*!*!*!

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $79.2 million to LOCKHEED MARTIN CORPORATION for work described as: 199704!1700!2123!BZ006!NAVAL SEA SYSTEMS COMMAND !N0002496C6224 !A!*!P00004 !19970124!20010331!826412801!931114334!834951691!N!52088!LOCKHEED MARTIN CORPORATION !9500 GODWIN DR !MANASSAS !VA!20110!48952!683!51!MANASSAS !MANASS… Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize overspending. 2. A sole-source award limits price discovery and potentially inflates costs. 3. The long duration and significant value indicate a high-risk profile. 4. Performance context is limited due to the lack of competitive benchmarking. 5. This contract falls within the Defense sector's complex electronics and communication sub-sector. 6. The absence of small business set-asides is noted.

Value Assessment

Rating: questionable

The total value of $826 million for the AN/BQQ-6 Sonar system is substantial. Without competitive bids, it is difficult to benchmark the pricing against market rates or similar contracts. The cost-plus-fixed-fee (CPFF) contract type, while allowing for flexibility, can lead to higher costs for the government if not managed rigorously, as contractor incentives may not always align with cost efficiency. The lack of transparency in pricing due to the sole-source nature makes a definitive value-for-money assessment challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was solicited. This approach bypasses the competitive bidding process, which typically leads to better price discovery and potentially lower costs for the government. The lack of competition here suggests potential barriers to entry for other firms or a specific justification for not opening it to a wider field, which warrants further scrutiny.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competition, as there was no market pressure to drive down prices. The government missed an opportunity to leverage a competitive environment to secure the best possible terms and value.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet, which relies on advanced sonar systems for operational effectiveness. The contract delivers critical underwater sound equipment, specifically the AN/BQQ-6 Sonar system. The geographic impact is primarily within Virginia, where Lockheed Martin's facility is located, and extends to naval bases where submarines are deployed. Workforce implications include skilled labor in engineering, manufacturing, and technical support at Lockheed Martin and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may lead to higher costs.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely monitored.
Lack of transparency in pricing due to sole-source nature hinders value assessment.
Long contract duration (initial award Jan 1997, extended to July 2002) increases exposure to cost overruns and performance issues.
Absence of small business set-aside raises questions about broader economic impact.

Positive Signals

Procurement of advanced sonar technology is critical for national defense capabilities.
Lockheed Martin is a major defense contractor with established expertise in complex systems.
The contract addresses a specific, critical need for the U.S. Navy's submarine force.

Sector Analysis

This contract falls within the Defense sector, specifically the sub-sector of Electronics and Communication Equipment. The market for advanced sonar systems is highly specialized, often dominated by a few large defense contractors due to the significant R&D investment, proprietary technology, and stringent security requirements. Comparable spending benchmarks are difficult to establish publicly due to the classified nature of some defense procurements and the unique specifications of such systems.

Small Business Impact

This contract does not appear to have included a small business set-aside. The sole-source nature of the award further limits opportunities for small businesses to participate directly as prime contractors. While Lockheed Martin may engage small businesses as subcontractors, the primary award structure does not prioritize small business participation, potentially limiting the broader economic impact on the small business ecosystem within this specific procurement.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are inherent in the CPFF contract type, requiring detailed cost reporting and performance metrics. Transparency is limited due to the sole-source award and the nature of defense contracting; however, internal DoD oversight and potentially Inspector General reviews would assess program execution and financial integrity.

Related Government Programs

Naval Sonar Systems Procurement
Submarine Warfare Technology
Defense Electronics Manufacturing
Advanced Acoustic Systems
Department of Defense Major Weapon Systems

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive benchmarking
Significant contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $79.2 million to LOCKHEED MARTIN CORPORATION. 199704!1700!2123!BZ006!NAVAL SEA SYSTEMS COMMAND !N0002496C6224 !A!*!P00004 !19970124!20010331!826412801!931114334!834951691!N!52088!LOCKHEED MARTIN CORPORATION !9500 GODWIN DR !MANASSAS !VA!20110!48952!683!51!MANASSAS !MANASSAS (CITY) !VIRGINIA !0001!+000003413972!N!N!000000000000!5845!UNDERWATER SOUND EQUIPMENT !A7 !ELECTRONICS AND COMMUNICATION !2GSJ!AN/BQQ-6 SONAR !3812!3!*!*!C!B!A!*!D !N!U!1!0

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 $79.2 million.

What is the period of performance?

Start: 1997-01-24. End: 2002-07-30.

What is the track record of Lockheed Martin Corporation in delivering complex sonar systems to the U.S. Navy?

Lockheed Martin Corporation has a long-standing and extensive track record in developing and producing advanced sonar systems and other critical electronic warfare and combat systems for the U.S. Navy and other military branches. They are a primary contractor for many naval platforms, including submarines and surface vessels. Their experience with systems like the AN/BQQ-6, and subsequent generations, demonstrates a deep understanding of acoustic technologies, signal processing, and integration into naval platforms. While specific performance metrics for individual contracts are often not publicly disclosed, their continued selection for such high-value, technologically complex programs suggests a perceived capability and reliability in meeting the Navy's demanding requirements for underwater warfare.

How does the Cost Plus Fixed Fee (CPFF) contract type typically impact program costs compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract type is characterized by the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure can be advantageous when the scope of work is not well-defined or is expected to evolve significantly, as it allows for flexibility. However, it shifts much of the cost risk to the government. Unlike fixed-price contracts, there is less incentive for the contractor to control costs rigorously, as their profit (the fixed fee) remains constant regardless of the final cost. This can potentially lead to higher overall program costs compared to competitively bid fixed-price contracts, necessitating robust government oversight to manage expenditures and ensure value.

What are the primary risks associated with a sole-source award for a major defense system?

The primary risks associated with a sole-source award for a major defense system are significantly reduced competition and potential lack of price transparency. Without competing bids, the government loses the opportunity to leverage market forces to achieve the best possible price and terms. This can lead to inflated costs, as the sole provider faces less pressure to be efficient or innovative in pricing. Furthermore, it can stifle innovation from other potential suppliers and may result in the government being locked into a specific technology or vendor, limiting future flexibility. There's also a risk that the lack of competitive pressure could lead to complacency in performance or quality, although this is mitigated by ongoing oversight.

What is the strategic importance of the AN/BQQ-6 Sonar system for naval operations?

The AN/BQQ-6 Sonar system is a crucial component of a submarine's combat system, providing essential capabilities for detecting, classifying, and tracking underwater targets, as well as for navigation and situational awareness. Sonar is the primary 'eyes and ears' for submarines operating submerged. Advanced sonar systems like the AN/BQQ-6 are vital for maintaining a tactical advantage, ensuring force protection, and executing offensive and defensive missions. The effectiveness of a submarine's sonar directly impacts its survivability and its ability to achieve its operational objectives in a complex and often contested underwater environment. Therefore, maintaining and upgrading these systems is of paramount strategic importance for naval power projection and security.

How has spending on underwater sound equipment evolved within the Department of Defense over time?

Spending on underwater sound equipment, encompassing sonar systems and related technologies, has been a consistent and significant component of the Department of Defense's budget, particularly for the Navy. Historically, this spending has evolved from basic acoustic detection systems to highly sophisticated, integrated combat systems. Major investments are driven by the need to counter evolving threats, maintain technological superiority in the undersea domain, and upgrade aging platforms. Periods of increased spending often correlate with geopolitical tensions or advancements in adversary submarine capabilities. While specific figures fluctuate annually based on program priorities, modernization efforts, and new platform procurements, the strategic importance of advanced sonar ensures sustained, substantial investment within the defense budget.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 9500 GODWIN DR, MANASSAS, VA, 20110

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline