DoD's $13.6M Engineering Services Contract Awarded to Lockheed Martin Corp. Raises Value Questions

Contract Overview

Contract Amount: $13,575,167 ($13.6M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2007-05-25

End Date: 2009-06-30

Contract Duration: 767 days

Daily Burn Rate: $17.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: ENGINEERING SERVICES

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $13.6 million to LOCKHEED MARTIN CORP for work described as: ENGINEERING SERVICES Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can incentivize cost overruns. 2. Lack of competition suggests potential for suboptimal pricing and reduced innovation. 3. Long contract duration (767 days) increases exposure to changing market conditions and requirements. 4. The contract's value is significant within the engineering services sector. 5. Performance context is limited without specific deliverables and outcomes. 6. Risk indicators include the sole-source nature and cost-reimbursement structure.

Value Assessment

Rating: questionable

Benchmarking the value of this $13.6 million contract is challenging without detailed performance metrics and comparison to similar engineering services contracts. The cost-plus-fixed-fee (CPFF) structure, while offering flexibility, can lead to higher costs compared to fixed-price contracts if not managed rigorously. The absence of competitive bidding further limits the ability to assess if the pricing reflects fair market value. Without specific details on the services rendered and their outcomes, a definitive value-for-money assessment is difficult, but the structure and lack of competition warrant scrutiny.

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 significantly limits the government's ability to leverage market forces to achieve the best possible price and terms. Without multiple bidders, it's difficult to ascertain the range of pricing available or the level of innovation that might have been spurred by a competitive environment. The justification for a sole-source award would typically involve unique capabilities or circumstances, which are not detailed here.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most cost-effective solution, as the benefits of competition in driving down prices are absent.

Public Impact

The primary beneficiary is the contractor, Lockheed Martin Corp., which receives significant revenue for engineering services. The Department of the Navy receives specialized engineering support crucial for its operations and acquisitions. The contract's geographic impact is centered in California, where the contractor is based. Workforce implications include employment opportunities for engineers and technical staff at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure can lead to cost escalation.
Sole-source award limits price discovery and potential savings.
Long contract duration increases risk of scope creep and inefficiency.
Lack of transparency on specific deliverables makes performance assessment difficult.

Positive Signals

Award to a large, established defense contractor like Lockheed Martin suggests access to specialized expertise.
The contract supports critical defense engineering needs for the Department of the Navy.
The fixed-fee component provides some cost certainty for the government compared to pure cost-reimbursement.

Sector Analysis

This contract falls within the broader engineering services sector, a critical component of the defense industrial base. This sector encompasses a wide range of specialized technical support, design, and development services. Spending in this area is often driven by complex government procurement needs, particularly in defense, aerospace, and infrastructure. Comparable spending benchmarks would typically involve analyzing other large-scale engineering support contracts awarded by the Department of Defense or other federal agencies for similar types of services.

Small Business Impact

This contract does not appear to involve a small business set-aside, as indicated by the prime contractor being Lockheed Martin Corp. There is no information provided regarding subcontracting plans or opportunities for small businesses. Therefore, the direct impact on the small business ecosystem is likely minimal unless Lockheed Martin actively engages small businesses for subcontracted work, which is not specified.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Department of the Navy's contracting officers and program managers. Accountability measures would be tied to the terms of the Cost Plus Fixed Fee contract, including progress reports, milestone achievements, and financial audits. Transparency is often limited in sole-source defense contracts, but contract award details are generally made public. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development
Naval Sea Systems Command (NAVSEA) Contracts
Defense Engineering Support Services
Lockheed Martin Corporation Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competition
Extended contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $13.6 million to LOCKHEED MARTIN CORP. ENGINEERING SERVICES

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $13.6 million.

What is the period of performance?

Start: 2007-05-25. End: 2009-06-30.

What specific engineering services were provided under this contract, and how were they critical to the Department of the Navy's mission?

The provided data indicates the contract was for 'ENGINEERING SERVICES' (NAICS 541330) awarded to Lockheed Martin Corp. by the Department of the Navy. However, the specific nature of these services is not detailed. Typically, engineering services in this context could range from systems engineering, design, analysis, testing, and integration for naval platforms, weapons systems, or infrastructure. The criticality to the Navy's mission would depend on the specific project, such as supporting the development of new warships, upgrading existing vessels, or ensuring the operational readiness of complex defense systems. Without further documentation, the exact scope and criticality remain unspecified.

What was the justification for awarding this $13.6 million contract on a sole-source basis instead of through full and open competition?

The data explicitly states the contract was 'NOT COMPETED' (ct: NOT COMPETED), indicating a sole-source award. Federal procurement regulations allow for sole-source awards under specific circumstances, such as when only one responsible source can provide the required supplies or services, or when there is a compelling justification for other reasons (e.g., urgency, unique capabilities). For a contract of this magnitude ($13.6 million), the Department of the Navy would have been required to document a formal justification for not competing the award. This justification would typically detail why other potential contractors could not meet the requirements or why competition was not feasible or in the government's best interest. Without access to that specific justification document, the precise reasons remain unknown.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the final cost compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract type, used here, involves the government paying the contractor's actual costs plus a fixed fee representing profit. This structure offers flexibility, especially when project scope is uncertain or R&D intensive. However, it carries a higher risk of cost overruns for the government compared to fixed-price contracts, as the contractor is reimbursed for all allowable costs. The 'fixed fee' provides some incentive for the contractor to control costs to maximize their profit margin, but the primary cost risk remains with the government. If the actual costs significantly exceed initial estimates, the total expenditure can be much higher than anticipated, potentially making it less cost-effective than a well-defined fixed-price contract.

What is Lockheed Martin Corp.'s track record with similar engineering services contracts for the Department of the Navy?

Lockheed Martin Corporation is a major defense contractor with extensive experience providing a wide array of engineering and technical services to the Department of the Navy and other military branches. While this specific contract was for $13.6 million and ran from May 2007 to June 2009, the company routinely handles much larger and more complex programs involving shipbuilding, aerospace systems, C4ISR, and weapons systems development. Their track record generally includes successful delivery on numerous large-scale defense contracts, though like any large corporation, they have also faced scrutiny over cost, performance, and schedule on specific projects. A comprehensive assessment would require reviewing their performance history across multiple contracts with the Navy.

How does the $13.6 million contract value compare to typical spending on engineering services by the Department of the Navy?

The $13.6 million value of this specific contract is moderate within the context of the Department of the Navy's overall budget for engineering services. The Navy procures billions of dollars worth of engineering, technical, and professional services annually to support its vast fleet and acquisition programs. This includes everything from ship design and maintenance to advanced weapons system development and cybersecurity. While $13.6 million is a substantial sum for a single contract, it represents a small fraction of the Navy's total engineering services expenditure. Benchmarking this value would involve comparing it to the average size and scope of other engineering services contracts awarded by the Navy for similar types of work, many of which can run into hundreds of millions or even billions of dollars.

What are the potential risks associated with a contract duration of 767 days (approximately 2.1 years)?

A contract duration of 767 days, as seen here, presents several potential risks. Firstly, it increases the likelihood of scope creep, where the requirements or deliverables may evolve significantly over the contract period, potentially leading to cost increases and delays if not managed properly. Secondly, longer durations expose the contract to changes in technology, market conditions, or government priorities, which could render the original scope or solution less relevant or efficient. Thirdly, maintaining consistent oversight and performance management over an extended period can be challenging for the government. Finally, for Cost Plus Fixed Fee contracts, a longer duration provides more time for costs to accumulate, potentially increasing the overall expenditure if cost controls are not rigorously applied throughout the period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › OTHER QUALITY, TEST, INSPECT SVCS

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: 1111 LOCKHEED MARTIN WAY BLDG 157, SUNNYVALE, CA, 94089

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $27,632,851

Exercised Options: $27,632,851

Current Obligation: $13,575,167

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline