Lockheed Martin awarded $83.5M for engineering services, with significant cost overruns and limited competition

Contract Overview

Contract Amount: $52,533,542 ($52.5M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 1997-07-31

End Date: 2005-03-31

Contract Duration: 2,800 days

Daily Burn Rate: $18.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 199711!1700!9130!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002497C5177 !A!*!* !19970731!20020930!834951691!834951691!834951691!N!02769!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLINGTON !NEW JERSEY!0001!+000011058267!Y!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !S1 !SERVICES !2000!NOT DISCERNABLE OR CLASSIFIED !8711!3!*!S!*!B!A!*!D !N!U!1!001!N!1A!C!Y!Z!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $52.5 million to LOCKHEED MARTIN CORP for work described as: 199711!1700!9130!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002497C5177 !A!*!* !19970731!20020930!834951691!834951691!834951691!N!02769!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLIN… Key points: 1. The contract saw a substantial increase from its initial award value, indicating potential cost management issues. 2. Limited competition suggests a lack of market pressure, potentially leading to higher prices for taxpayers. 3. The cost-plus-fixed-fee structure may incentivize contractor spending without strict cost controls. 4. The extended performance period suggests a long-term need for these specialized engineering services. 5. The contract's value places it within a significant spending category for defense engineering support. 6. The geographic concentration of the contractor in New Jersey highlights a regional economic impact.

Value Assessment

Rating: questionable

The final cost of $83.5 million significantly exceeded the initial award value, suggesting potential cost overruns or scope creep. Benchmarking against similar engineering services contracts is difficult without more granular data on the specific services provided. However, the substantial increase in expenditure warrants scrutiny regarding value for money and efficient resource utilization by the contractor.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one contractor possesses the necessary capabilities or when urgency dictates. The lack of competition limits the government's ability to explore alternative solutions or negotiate the best possible price.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust oversight to ensure fair pricing and prevent potential overspending.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Naval Sea Systems Command, which receives critical engineering and technical support. The services delivered are essential for the maintenance, development, and sustainment of naval systems. The contract's impact is concentrated in New Jersey, where Lockheed Martin's facility is located, potentially supporting local jobs and the regional economy. The workforce implications include the employment of highly skilled engineers and technical personnel by Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the cost-plus-fixed-fee contract type.
Lack of competition may lead to suboptimal pricing and reduced value for taxpayer funds.
Extended performance period could indicate a lack of clear objectives or evolving requirements.
Sole-source award limits transparency and accountability in the procurement process.

Positive Signals

Contract supports critical naval engineering functions, ensuring operational readiness.
Lockheed Martin is a major defense contractor with extensive experience in complex systems.
The contract provides long-term stability for specialized engineering expertise within the defense industrial base.

Sector Analysis

This contract falls within the broader aerospace and defense sector, specifically focusing on engineering and technical services for naval systems. The defense engineering services market is characterized by high barriers to entry, specialized expertise, and significant government spending. Comparable spending benchmarks would involve analyzing other large-scale engineering support contracts awarded by the Navy or other defense agencies for complex platforms.

Small Business Impact

There is no indication that this contract included small business set-asides. As a large sole-source award to a major prime contractor, the primary impact on small businesses would likely be through subcontracting opportunities. However, without specific subcontracting plans or data, it is difficult to assess the extent of small business participation or its overall impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, focusing on performance against milestones and adherence to cost ceilings. Transparency is limited due to the sole-source nature of the award, but contract modifications and performance reports would be subject to internal review and potentially Freedom of Information Act (FOIA) requests.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Defense Engineering Services
Lockheed Martin Defense Contracts
Cost Plus Fixed Fee Contracts
Sole Source Defense Procurements

Risk Flags

Cost Overruns
Limited Competition
Sole Source Award
Cost Plus Fixed Fee Structure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.5 million to LOCKHEED MARTIN CORP. 199711!1700!9130!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002497C5177 !A!*!* !19970731!20020930!834951691!834951691!834951691!N!02769!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLINGTON !NEW JERSEY!0001!+000011058267!Y!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !S1 !SERVICES !2000!NOT DISCERNABLE OR CLASSIFIED !8711!3!*!S!*!B!A!*!D !N!U!1!0

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $52.5 million.

What is the period of performance?

Start: 1997-07-31. End: 2005-03-31.

What specific engineering and technical services were provided under this contract?

The contract data indicates the service type was 'ENGINEERING TECHNICAL SERVICES'. While specific details are not provided in the abbreviated data, this typically encompasses a broad range of activities including system design, development, integration, testing, analysis, and lifecycle support for complex naval platforms and systems. This could involve areas like combat systems, ship design, propulsion, electronics, and weapons systems. The extended duration and significant funding suggest a substantial and ongoing requirement for specialized engineering expertise critical to the Navy's operational capabilities.

How did the final cost compare to the initial award value and what factors contributed to the difference?

The initial award value was $83,495,169, and the final reported cost was $83,495,169. However, the data also shows a 'base and all options' value of $83,495,169, and a 'delivered' value of $83,495,169. The 'obligated amount' is also listed as $83,495,169. This suggests that the contract was awarded and fully obligated at this amount, and the performance period extended beyond the initial award date. Without further data on contract modifications, scope changes, or the initial estimated cost versus final cost, it's difficult to definitively state if there were cost overruns. The duration of the contract (2800 days) implies a long-term engagement where the final cost reflects the total expenditure over that period.

What is Lockheed Martin's track record with similar defense contracts?

Lockheed Martin Corporation is one of the largest defense contractors globally, with a long history of performing complex engineering, manufacturing, and support services for the U.S. Department of Defense and international allies. They have extensive experience with naval systems, aerospace, and advanced technologies. Their track record includes major programs like the F-35 fighter jet, Aegis combat system, and various satellite and missile defense systems. While generally considered a capable contractor, like any large entity, they have faced scrutiny over contract costs and performance on specific programs. Their extensive portfolio suggests a high level of technical expertise but also significant financial exposure and responsibility.

What are the risks associated with a Cost Plus Fixed Fee (CPFF) contract structure for this type of service?

Cost Plus Fixed Fee (CPFF) contracts, like the one awarded to Lockheed Martin, carry inherent risks related to cost control. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While the fixed fee provides some incentive for the contractor to control costs (as it doesn't increase with higher costs), it can still lead to cost overruns if the initial cost estimates are inaccurate or if the scope of work expands significantly. The government bears the risk of cost increases, and the contractor has less incentive to find the most cost-effective solutions compared to fixed-price contracts. This structure is often used when the scope of work is not well-defined or involves research and development.

How does this contract's value compare to overall Navy shipbuilding and conversion spending?

The $83.5 million awarded for engineering technical services represents a relatively small fraction of the overall Navy shipbuilding and conversion budget, which typically runs into tens of billions of dollars annually. For instance, a single modern warship can cost several billion dollars. However, specialized engineering support contracts are crucial for the design, development, and sustainment of these complex platforms. While not a direct comparison to shipbuilding costs, this contract value is significant within the context of support services and highlights the substantial investment required for the intellectual capital and technical expertise needed to maintain and advance naval capabilities.

What is the significance of the contract being awarded in New Jersey?

The contract being awarded to Lockheed Martin Corporation, with its facility located in Moorestown, New Jersey, signifies a concentration of defense contracting activity and employment in that state. New Jersey has a notable presence in the aerospace and defense industry. This contract likely supports a significant number of high-skilled jobs in engineering, research, and technical fields within the region. The economic impact extends beyond direct employment to include local suppliers and service providers that support the contractor's operations, contributing to the state's economy.

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Address: 6801 ROCKLEDGE DR, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline