DoD's $661.7M engineering services contract with Lockheed Martin shows long-term engagement and follow-on action
Contract Overview
Contract Amount: $661,748,515 ($661.7M)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2003-07-11
End Date: 2008-09-30
Contract Duration: 1,908 days
Daily Burn Rate: $346.8K/day
Competition Type: FOLLOW ON TO COMPETED ACTION
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Place of Performance
Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94086
Plain-Language Summary
Department of Defense obligated $661.7 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded as a follow-on to a competed action, suggesting prior competition influenced this award. 2. The definitive contract type indicates a long-term commitment for engineering services. 3. Awarded to a single, large defense contractor, raising questions about potential competition limitations. 4. The Cost Plus Incentive Fee (CPIF) pricing structure allows for shared risk and reward between the government and contractor. 5. The contract duration of over 1900 days highlights a significant, multi-year engagement. 6. Services are categorized under Engineering Services, a broad but critical area for defense operations.
Value Assessment
Rating: fair
Benchmarking the value of this $661.7 million contract is challenging without specific performance metrics or comparable engineering service contracts. The Cost Plus Incentive Fee (CPIF) structure can lead to cost overruns if not managed tightly, but also incentivizes efficiency. The long duration suggests a sustained need, but also a potential for escalating costs over time. Without detailed breakdowns of labor categories, rates, and overhead, a precise value-for-money assessment is difficult.
Cost Per Unit: N/A
Competition Analysis
Competition Level: limited
The contract is described as a 'FOLLOW ON TO COMPETED ACTION,' which implies that the initial award was competed. However, this specific award being a follow-on suggests that competition may have been limited for this particular extension or modification. The number of bidders for this specific action is not detailed, but the award to a single entity, Lockheed Martin, indicates that either only one offer was received, or other proposals were not deemed as advantageous.
Taxpayer Impact: A follow-on action, even if preceded by competition, can sometimes result in less competitive pricing compared to a fully open competition. This could mean taxpayers may not be receiving the absolute lowest possible price for these engineering services.
Public Impact
The Department of the Navy benefits from specialized engineering services crucial for its operations and platform development. This contract supports the maintenance, modernization, or development of defense systems, indirectly benefiting national security. The geographic impact is primarily in California, where Lockheed Martin's operations are likely concentrated for this contract. The contract likely supports a significant number of engineers and technical personnel within Lockheed Martin, impacting the defense industrial workforce.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for cost creep under the CPIF structure if not rigorously monitored.
- Limited competition for this specific follow-on action could impact price optimization.
- Long contract duration may obscure current market rate relevance for engineering services.
Positive Signals
- Awarded as a follow-on to a competed action, indicating a structured procurement process.
- CPIF structure incentivizes contractor performance and cost control.
- Long-term engagement suggests a stable and reliable source of critical engineering expertise for the Navy.
Sector Analysis
Engineering services are a vital component of the defense sector, encompassing design, development, testing, and sustainment of complex military systems. The market is dominated by large, established aerospace and defense contractors like Lockheed Martin. Spending in this category is often driven by the need for specialized technical expertise that government agencies may not possess in-house. Comparable spending benchmarks would typically involve analyzing other large, long-term engineering support contracts within the Department of Defense or other federal agencies.
Small Business Impact
The contract data indicates that this was not a small business set-aside (ss=false, sb=false). As a large definitive contract awarded to a major defense contractor, it is unlikely to have direct small business set-aside benefits. However, Lockheed Martin may engage small businesses as subcontractors to fulfill specific aspects of the engineering services required, though this is not explicitly detailed in the provided data.
Oversight & Accountability
Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. The Cost Plus Incentive Fee (CPIF) structure necessitates close monitoring of costs, performance, and achievement of incentive targets. Transparency is typically managed through contract reporting requirements and potential audits by the Defense Contract Audit Agency (DCAA). Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.
Related Government Programs
- Department of Defense Research and Development
- Naval Systems Engineering Support
- Aerospace Engineering Services
- Defense Contractor Support Services
Risk Flags
- Potential for limited competition
- Cost control risks with CPIF
- Contractor dependency
- Long-term commitment may not reflect current market rates
Tags
defense, department-of-defense, department-of-the-navy, engineering-services, lockheed-martin-corporation, definitive-contract, cost-plus-incentive-fee, follow-on-action, california, large-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $661.7 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.
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 $661.7 million.
What is the period of performance?
Start: 2003-07-11. End: 2008-09-30.
What was the original competed action that this contract is a follow-on to, and what were the key terms and competitors?
The provided data indicates this contract (awarded 2003-07-11, ending 2008-09-30 for $661.7M) is a 'FOLLOW ON TO COMPETED ACTION.' However, details about the original competed action, including its award date, value, specific scope, and the competitors involved, are not present in this data snippet. To understand the full context, one would need to access the contract award history for the predecessor contract. This information is crucial for assessing whether the initial competition was robust and if the follow-on action represents a fair continuation or a potential narrowing of the competitive landscape.
How does the Cost Plus Incentive Fee (CPIF) structure typically perform in long-term defense engineering contracts regarding cost control and contractor motivation?
The Cost Plus Incentive Fee (CPIF) structure is designed to share risks and rewards between the government and the contractor. The government pays the contractor's actual costs plus a target fee, with adjustments to the fee based on performance against pre-defined targets (e.g., cost, schedule, technical performance). In long-term defense engineering contracts, CPIF can be effective if the targets are well-defined, measurable, and aligned with government objectives. It incentivizes the contractor to control costs and meet performance goals to earn a higher fee. However, if targets are poorly set or performance metrics are ambiguous, it can lead to disputes or fail to achieve desired outcomes. Rigorous government oversight is essential to ensure the incentive structure truly drives value and prevents cost overruns.
What is the typical market rate or benchmark for engineering services of this nature within the Department of Defense?
Benchmarking engineering services costs within the Department of Defense is complex due to the highly specialized and often unique nature of the work. Rates can vary significantly based on the specific engineering discipline (e.g., aerospace, electrical, mechanical, software), the level of expertise required, security clearance needs, and geographic location. For large, long-term contracts like this one, average loaded labor rates (including salary, benefits, overhead, and profit) can range widely, often from $150 to over $300 per hour, depending on the factors mentioned. Without specific details on the labor mix and tasks performed under this $661.7 million contract, a precise benchmark is difficult. However, the scale and duration suggest it involves a substantial team of experienced engineers.
What are the potential risks associated with a single large contractor like Lockheed Martin holding a significant, long-term engineering services contract?
Awarding a significant, long-term engineering services contract to a single large contractor like Lockheed Martin presents several potential risks. Firstly, it can reduce competitive pressure, potentially leading to higher prices or less innovation over the contract's life. Secondly, it creates a high degree of dependency on that specific contractor; any performance issues, financial instability, or strategic shifts by the contractor could significantly disrupt critical defense capabilities. Thirdly, a single large award might limit opportunities for smaller, more specialized firms to enter the market or contribute their unique expertise. Finally, the concentration of work within one entity can sometimes lead to a less agile response to evolving technological requirements compared to a more diverse supplier base.
How has federal spending on engineering services, particularly within the Department of the Navy, trended over the past decade?
Federal spending on engineering services, including within the Department of the Navy, has generally remained substantial, driven by the continuous need to design, develop, maintain, and modernize complex defense systems. While specific trends fluctuate based on defense budgets, geopolitical events, and acquisition priorities, the overall demand for specialized engineering expertise remains high. The Navy, in particular, invests heavily in areas like naval architecture, marine engineering, weapons systems engineering, and cybersecurity engineering. Analyzing historical spending data would likely show consistent, multi-billion dollar annual expenditures across the federal government for engineering services, with significant portions allocated to major defense contractors supporting large platforms and programs. Factors like fleet modernization programs and new platform development heavily influence year-over-year spending.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services
Product/Service Code: GUIDED MISSLES
Competition & Pricing
Extent Competed: FOLLOW ON TO COMPETED ACTION
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE (V)
Evaluated Preference: NONE
Contractor Details
Address: 1111 LOCKHEED WAY MARINE, SUNNYVALE, CA, 94089
Business Categories: Category Business, Not Designated a Small Business
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2003-07-11
Current End Date: 2008-09-30
Potential End Date: 2008-09-30 00:00:00
Last Modified: 2019-09-25
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