Naval Sea Systems Command awards $173M cost-plus contract for engineering services to Lockheed Martin

Contract Overview

Contract Amount: $173,247,082 ($173.2M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 1999-06-15

End Date: 2005-02-28

Contract Duration: 2,085 days

Daily Burn Rate: $83.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 199909!1700!3083!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5102 !A!*!* !19990615!20020531!834951691!834951691!834951691!N!0V3G5!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLINGTON !NEW JERSEY!0001!+000034222516!N!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !A7 !ELECTRONICS AND COMMUNICATION !2SCY!DESTROYER DDG-51 !8711!3!*!*!*!B!A!*!D !N!R!1!001!N!1A!Z!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 $173.2 million to LOCKHEED MARTIN CORP for work described as: 199909!1700!3083!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5102 !A!*!* !19990615!20020531!834951691!834951691!834951691!N!0V3G5!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLIN… Key points: 1. Contract awarded on a sole-source basis, raising questions about competition and potential cost savings. 2. Significant duration of over 2000 days suggests a long-term, critical need for these services. 3. The cost-plus award fee structure can incentivize contractor performance but may lead to higher costs if not managed closely. 4. Focus on engineering technical services for the Destroyer DDG-51 program indicates a specialized and vital defense capability. 5. Geographic concentration in New Jersey for the contractor's facility may have local economic implications.

Value Assessment

Rating: questionable

The contract's total value of $173,247,081.72 for engineering technical services is substantial. Without comparable sole-source contracts for similar services on the DDG-51 program, it is difficult to benchmark value. The cost-plus award fee (CPAF) pricing structure, while allowing for flexibility and contractor incentive, inherently carries a higher risk of cost overruns compared to fixed-price contracts. Careful oversight is crucial to ensure the government receives good value.

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 among multiple vendors. This approach is typically used when only one vendor possesses the necessary capabilities, technology, or when urgency dictates. The lack of competition means there was no direct price comparison or incentive for multiple bidders to offer their best pricing, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competitive market forces to secure the best possible prices, potentially resulting in less favorable terms for taxpayers.

Public Impact

The primary beneficiaries are the U.S. Navy's fleet readiness and modernization efforts, specifically concerning the Destroyer DDG-51 class. Services delivered include critical engineering and technical support essential for the operation and maintenance of advanced naval platforms. The contract has a geographic impact primarily in New Jersey, where Lockheed Martin's facility is located, supporting local jobs and the regional economy. Workforce implications include the employment of skilled engineers and technical personnel required for complex defense systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition.
Cost-plus award fee structure can lead to cost escalation if not managed.
Long contract duration may indicate potential for scope creep or evolving requirements.
Specific details on performance metrics and award fee criteria are not readily available for independent assessment.

Positive Signals

Award to a major defense contractor with established expertise in naval systems.
Focus on a critical platform (DDG-51) suggests alignment with national defense priorities.
Engineering technical services are vital for maintaining complex weapon systems.
Contract duration implies a stable, long-term relationship for essential support.

Sector Analysis

This contract falls within the Defense sector, specifically supporting naval shipbuilding and systems integration. The market for specialized engineering and technical services for advanced naval platforms is concentrated among a few large defense contractors. Spending benchmarks for similar engineering support on major naval programs can range from tens to hundreds of millions of dollars over the life of a platform, depending on complexity and duration.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Lockheed Martin voluntarily includes them in its supply chain for this specific contract. Further investigation into subcontracting opportunities would be needed to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and performance standards. The cost-plus award fee structure necessitates rigorous financial oversight and performance monitoring by the government to control costs and ensure value. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance evaluations and award fee determinations may be considered sensitive.

Related Government Programs

Destroyer Modernization Programs
Naval Combat Systems Engineering
Shipbuilding and Repair Services
Defense Engineering Services
AEGIS Combat System Support

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $173.2 million to LOCKHEED MARTIN CORP. 199909!1700!3083!BZ005!NAVAL SEA SYSTEMS COMMAND !N0002499C5102 !A!*!* !19990615!20020531!834951691!834951691!834951691!N!0V3G5!LOCKHEED MARTIN CORPORATION !6801 ROCKLEDGE DR !BETHESDA !MD!20817!47850!005!34!MOORESTOWN !BURLINGTON !NEW JERSEY!0001!+000034222516!N!N!000000000000!R425!ENGINEERING TECHNICAL SERVICES !A7 !ELECTRONICS AND COMMUNICATION !2SCY!DESTROYER DDG-51 !8711!3!*!*!*!B!A!*!D !N!R!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 $173.2 million.

What is the period of performance?

Start: 1999-06-15. End: 2005-02-28.

What is Lockheed Martin's track record with similar sole-source engineering contracts for naval programs?

Lockheed Martin Corporation is a major defense contractor with extensive experience in sole-source and competed contracts for naval programs, including the DDG-51 class. They have a long history of providing complex engineering, integration, and technical services for advanced platforms. While specific details on past sole-source awards for similar scope and duration are not provided here, their established position in the defense industry suggests a pattern of securing such contracts due to specialized capabilities and existing program relationships. Assessing their performance on these contracts would require reviewing past performance evaluations, contract modifications, and any associated cost variances or disputes.

How does the $173 million contract value compare to other engineering support contracts for the DDG-51 program?

Direct comparison of this $173 million contract value to other engineering support contracts for the DDG-51 program is challenging without access to a comprehensive database of all related contracts. However, given the DDG-51 program's long service life and complexity, it is plausible that multiple contracts for various engineering, maintenance, and modernization services would cumulatively exceed this amount significantly. This specific contract appears to cover a substantial period (nearly 6 years of performance) and a broad scope of 'ENGINEERING TECHNICAL SERVICES,' suggesting it represents a significant portion of the program's engineering support budget during its term. Sole-source awards can sometimes result in higher costs than competed ones, making direct value benchmarking difficult.

What are the primary risks associated with a sole-source, cost-plus award fee contract for critical naval engineering services?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced incentive for the contractor to optimize costs. The government relies heavily on the contractor's good faith and the effectiveness of its oversight. Secondly, the cost-plus award fee (CPAF) structure, while incentivizing performance, can lead to cost overruns if the base cost estimates are inaccurate or if the contractor's efforts to achieve award fees drive up expenses without commensurate value. There's also a risk of scope creep, where requirements may expand over the long contract duration, further increasing costs. Effective government oversight and robust negotiation are critical to mitigate these risks.

How effective has the Naval Sea Systems Command (NAVSEA) been in managing similar long-term, high-value engineering contracts?

Assessing NAVSEA's overall effectiveness in managing similar contracts requires a broad review of their contracting history, performance metrics, and audit findings, which are beyond the scope of this data. However, NAVSEA, as a major procurement command within the Department of Defense, manages a vast portfolio of complex contracts. Their effectiveness is generally characterized by a mix of successes and challenges inherent in large-scale defense acquisition. Key factors influencing effectiveness include the clarity of requirements, the robustness of contract terms, the quality of government oversight personnel, and the contractor's performance. The CPAF structure and sole-source award for this specific contract suggest a reliance on strong program management and vigilant oversight to ensure successful outcomes and responsible spending.

What is the historical spending trend for engineering technical services related to the DDG-51 program?

The provided data only captures a single contract award from 1999 for engineering technical services related to the DDG-51 program. To understand historical spending trends, one would need to analyze all contracts awarded by NAVSEA (and potentially other agencies) for engineering, maintenance, modernization, and technical support for the DDG-51 class across its entire lifecycle, from initial procurement through its operational life. This would involve aggregating spending data over multiple years and potentially decades, identifying patterns in contract types, awardees, and spending levels year-over-year. Without this broader dataset, it's impossible to establish a historical spending trend for this specific service category on this program.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 6801 ROCKLEDGE DR, BETHESDA, MD, 08

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline