DoD's $46.2M Lockheed Martin contract for NWS System Equipment lacked competition, raising value concerns

Contract Overview

Contract Amount: $46,204,882 ($46.2M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2011-06-01

End Date: 2015-01-31

Contract Duration: 1,340 days

Daily Burn Rate: $34.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NWS SYSTEM EQUIPMENT (OPN, COMPLETION)

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $46.2 million to LOCKHEED MARTIN CORP for work described as: NWS SYSTEM EQUIPMENT (OPN, COMPLETION) Key points: 1. The contract was awarded on a non-competitive basis, limiting price discovery and potentially increasing costs. 2. The cost-plus-fixed-fee structure may incentivize cost overruns, as the contractor is reimbursed for expenses plus a fixed fee. 3. The duration of the contract (1340 days) suggests a long-term need for the system equipment. 4. The specific NAICS code (561621) indicates services related to security systems, not locksmiths. 5. The contract was awarded to a single, large defense contractor, potentially excluding smaller, specialized firms. 6. The absence of a small business set-aside raises questions about opportunities for smaller businesses in this procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bidding and the specific nature of 'NWS SYSTEM EQUIPMENT'. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex or uncertain projects, can lead to higher overall costs compared to fixed-price contracts if not managed rigorously. Without comparable contract data or a competitive process, it's difficult to definitively assess if the $46.2 million represents a fair market price. The significant duration of the contract (over three years) also implies substantial investment, making cost efficiency a key concern.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a 'NOT COMPETED' basis, indicating a sole-source procurement. This means that the Department of the Navy did not solicit bids from multiple potential offerors. The reasons for this sole-source award are not detailed in the provided data, but it typically occurs when only one source is capable of meeting the requirement, or in urgent situations. The lack of competition means there was no opportunity for price negotiation or comparison among different vendors, which can lead to higher prices for the government.

Taxpayer Impact: Taxpayers may have paid a premium for the equipment and services due to the absence of competitive pressure to lower prices. The government did not benefit from the potential cost savings that often arise from a competitive bidding process.

Public Impact

The primary beneficiary is the Department of the Navy, which receives essential NWS system equipment. The contract supports the operational readiness and security capabilities of naval forces. The geographic impact is primarily within California, where the contract was awarded. The contract likely supports a workforce involved in the manufacturing, integration, and maintenance of security systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost growth.
Sole-source award limits transparency and potential for better pricing.
Long contract duration increases exposure to potential cost escalations.

Positive Signals

Contract awarded to a major defense contractor with established capabilities.
The contract addresses a specific need for 'NWS SYSTEM EQUIPMENT', implying critical functionality.
The fixed fee component of the CPFF contract provides some level of cost predictability for the contractor's profit.

Sector Analysis

The procurement falls under the Security Systems Services sector, specifically for system equipment. This sector is crucial for national security and defense operations, involving specialized technology and integration services. The market for such systems is often dominated by large defense contractors due to the high technical requirements and security clearances needed. Comparable spending in this niche can vary widely depending on the specific system's complexity and scale, but large, sole-source awards are not uncommon in defense contexts where unique capabilities are required.

Small Business Impact

The data indicates that this contract was not competed and there was no small business set-aside (ss: false, sb: false). This suggests that small businesses were not specifically targeted or given preferential consideration in this procurement. Consequently, there are no direct subcontracting implications for small businesses stemming from a set-aside. The absence of small business participation in this particular award might limit opportunities for smaller, innovative firms to enter or expand within this specific defense technology market.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. As a definitive contract, it is subject to standard federal procurement regulations and oversight. The Inspector General's office for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse. Transparency is limited due to the sole-source nature of the award, with fewer opportunities for public scrutiny compared to a fully competed contract.

Related Government Programs

Department of Defense Procurement
Naval Systems Command Contracts
Security Systems Procurement
Cost-Plus Contracts
Sole-Source Defense Contracts

Risk Flags

Lack of Competition
Cost-Plus Contract Type
Sole-Source Award

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.2 million to LOCKHEED MARTIN CORP. NWS SYSTEM EQUIPMENT (OPN, COMPLETION)

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 $46.2 million.

What is the period of performance?

Start: 2011-06-01. End: 2015-01-31.

What specific 'NWS SYSTEM EQUIPMENT' was procured under this contract?

The provided data does not specify the exact nature of the 'NWS SYSTEM EQUIPMENT'. The NAICS code 561621, 'Security Systems Services (except Locksmiths)', suggests the equipment is related to security systems. This could encompass a wide range of items, such as surveillance equipment, access control systems, alarm systems, or integrated command and control platforms. Without further details or access to the contract's statement of work, the precise equipment remains undefined. This lack of specificity makes it difficult to assess the technical relevance or necessity of the procurement.

Why was this contract awarded on a sole-source basis instead of being competed?

The data explicitly states the contract was 'NOT COMPETED'. While the specific justification for this sole-source award is not provided, common reasons include the existence of only one responsible source capable of providing the required equipment or services, urgent and compelling circumstances that preclude competition, or if the contract is a follow-on to a previous competitive award where only one contractor possesses the necessary knowledge or proprietary technology. For this particular contract, the lack of competition means the government did not explore potential cost savings or alternative solutions that a competitive bidding process might have yielded.

How does the Cost-Plus-Fixed-Fee (CPFF) pricing structure impact the overall cost and risk for the government?

The Cost-Plus-Fixed-Fee (CPFF) structure reimburses the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty. For the government, the primary risk is that the total cost can exceed initial estimates, as the contractor is incentivized to incur costs to complete the work, while their profit (the fixed fee) remains constant. While the fixed fee provides some cost certainty regarding profit, the overall project cost is less predictable than with fixed-price contracts. Effective oversight and cost controls are crucial to mitigate the government's risk under a CPFF arrangement.

What is the track record of Lockheed Martin Corporation in providing similar security system equipment to the government?

Lockheed Martin Corporation is a major global security and aerospace company with extensive experience in providing complex systems and services to government agencies, including the Department of Defense. They have a long history of developing and integrating advanced technologies for defense applications. While specific details on their track record for 'NWS SYSTEM EQUIPMENT' are not in the provided data, their overall profile suggests they possess the technical capabilities and capacity to handle large, complex defense contracts. However, the absence of competition for this specific contract means that the government did not leverage this track record against potential offerings from other qualified contractors.

What are the potential implications of awarding a $46.2 million contract without competition for future procurements in this category?

Awarding a significant contract like this ($46.2 million) on a sole-source basis can have several implications for future procurements. It may signal to the market that the agency is willing to use sole-source justifications, potentially discouraging other firms from investing in capabilities for this specific area if they believe they won't get a fair shot at competing. It also means that the government misses the opportunity to establish a competitive baseline price, which could inform future pricing strategies. If the sole-source justification was based on unique capabilities, it might reinforce Lockheed Martin's dominant position, making future competition even more difficult unless specific efforts are made to foster a more competitive environment.

How does the contract's duration (1340 days) relate to the type of equipment and services being provided?

A contract duration of 1340 days (approximately 3.67 years) suggests that the 'NWS SYSTEM EQUIPMENT' is not a simple off-the-shelf purchase but likely involves a complex system requiring integration, installation, testing, and potentially ongoing support or maintenance over an extended period. Such durations are common for large-scale defense systems, infrastructure projects, or technology development programs where phased implementation and long-term operational readiness are critical. The extended timeline allows for a structured approach to deployment and ensures the system remains functional and relevant throughout its lifecycle, aligning with the typical needs of military security infrastructure.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Investigation and Security Services › Security Systems Services (except Locksmiths)

Product/Service Code: ALARM, SIGNAL, SECURITY DETECTION

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, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $47,629,614

Exercised Options: $47,629,614

Current Obligation: $46,204,882

Actual Outlays: $29,489

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $-396,770

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline