Navy awards $1.68B for long lead missile materials to Lockheed Martin, a sole-source contract

Contract Overview

Contract Amount: $1,676,646,362 ($1.7B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2012-07-06

End Date: 2017-09-30

Contract Duration: 1,912 days

Daily Burn Rate: $876.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FY13 LONG LEAD MATERIAL

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $1.68 billion to LOCKHEED MARTIN CORP for work described as: FY13 LONG LEAD MATERIAL Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Fixed Price Incentive contract type suggests shared risk between government and contractor. 3. Long duration of 1912 days indicates a significant, multi-year commitment. 4. Focus on long lead materials points to critical components for future missile production. 5. Contractor Lockheed Martin is a major defense supplier, suggesting established capabilities. 6. No small business set-aside indicates the primary contractor is likely a large business.

Value Assessment

Rating: questionable

The contract value of $1.68 billion for long lead missile materials is substantial. Without competitive bidding, it is difficult to benchmark the value for money. The Fixed Price Incentive (FPI) contract type aims to control costs by incentivizing the contractor to stay within target costs, but the absence of competition limits the government's leverage. Further analysis would require comparing this to similar sole-source awards for comparable missile components or assessing the contractor's historical performance on similar contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corp, was solicited. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished without alternative offers.

Public Impact

The primary beneficiaries are the Department of the Navy and its missile programs, ensuring the availability of critical components. Services delivered include the manufacturing and provision of long lead materials essential for guided missile and space vehicle production. The contract is geographically focused on California, where Lockheed Martin has significant operations. This contract supports a segment of the defense manufacturing workforce involved in advanced missile systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs.
Fixed Price Incentive contract requires careful monitoring to ensure cost targets are met.
Long contract duration increases exposure to potential cost overruns or scope creep.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests a high likelihood of technical capability and delivery.
Focus on long lead materials ensures critical supply chain components are secured for future defense needs.
Fixed Price Incentive contract structure aligns some contractor incentives with government cost objectives.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a specialized segment of the aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality requirements, and often involves complex, long-cycle production. Spending in this area is driven by national security requirements and technological advancements in defense capabilities. Comparable spending benchmarks would typically be found within other large sole-source or competitively awarded contracts for similar advanced weapon systems components.

Small Business Impact

The contract was not competed and does not indicate any small business set-aside provisions (SB: false). This suggests that the primary awardee, Lockheed Martin Corp, is a large business. There is no explicit information on subcontracting plans for small businesses within this data, but large defense contracts often include subcontracting goals. The absence of a set-aside means opportunities for small businesses to directly compete for this specific award were not present.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and significant value, robust oversight would be expected to scrutinize pricing, performance, and adherence to contract terms. The Inspector General for the Department of Defense would likely have jurisdiction for audits and investigations into potential fraud, waste, or abuse.

Related Government Programs

Guided Missile Manufacturing
Aerospace and Defense Procurement
Long Lead Time Material Acquisition
Sole Source Defense Contracts
Fixed Price Incentive Contracts

Risk Flags

Sole Source Award
Lack of Competition
Potential for Cost Overruns
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.68 billion to LOCKHEED MARTIN CORP. FY13 LONG LEAD MATERIAL

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 $1.68 billion.

What is the period of performance?

Start: 2012-07-06. End: 2017-09-30.

What is Lockheed Martin's track record with sole-source contracts for similar long lead missile materials?

Lockheed Martin Corporation, as a primary defense contractor, has a history of receiving sole-source awards for critical defense systems and components, including long lead materials for missile programs. These awards are often justified by proprietary technology, unique manufacturing capabilities, or the need for specialized expertise that only one contractor possesses. Analyzing their past performance on similar sole-source contracts would involve reviewing delivery timelines, cost performance against initial estimates, and any quality issues encountered. Without specific data on this contract's predecessors or comparable sole-source awards, a definitive assessment of their track record in this specific instance remains challenging. However, their established position in the defense industry suggests a high degree of familiarity and capability in managing such complex procurements.

How does the $1.68 billion value compare to other long lead material procurements for missile systems?

The $1.68 billion value for long lead materials is substantial and indicative of the complexity and scale of advanced missile systems. To benchmark this value effectively, comparisons would ideally be made against other sole-source or competitively awarded contracts for similar long lead components within the Navy or other branches of the Department of Defense. Factors such as the specific type of missile, the technological sophistication of the materials required, and the production volume significantly influence cost. Without access to a broader dataset of comparable contracts, it's difficult to definitively state whether this figure represents a fair market price. However, given the sole-source nature, there is an inherent risk that the price may be higher than if the contract had been competed.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risk associated with a sole-source award of this magnitude is the potential for inflated pricing due to the lack of competitive pressure. Without competing bids, the government has less leverage to negotiate the most favorable terms and prices. Other risks include potential complacency from the contractor regarding efficiency and innovation, as there is no direct threat of losing future business to competitors. Furthermore, sole-source awards can sometimes mask underlying issues with market research or acquisition planning. Robust oversight and negotiation strategies are crucial to mitigate these risks, ensuring that the government obtains the best possible value despite the absence of competition.

How effective is the Fixed Price Incentive (FPI) contract type in controlling costs for long lead materials?

The Fixed Price Incentive (FPI) contract type aims to provide a middle ground between fixed-price and cost-reimbursement contracts, offering cost control benefits. In an FPI contract, the final price is adjusted based on the contractor's performance against target cost and target profit objectives. If the contractor achieves lower costs than targeted, both the government and contractor share in the savings (under-run). Conversely, if costs exceed the target, both share in the increased cost (over-run), up to a ceiling price. For long lead materials, this structure can incentivize the contractor to manage production costs efficiently. However, the effectiveness is highly dependent on the accuracy of the initial cost estimates and the negotiation of appropriate sharing ratios. The absence of competition in this sole-source award means the initial target cost is critical and may be less rigorously tested than in a competitive scenario.

What are the historical spending patterns for guided missile and space vehicle manufacturing by the Department of the Navy?

The Department of the Navy consistently allocates significant funding towards guided missile and space vehicle manufacturing, reflecting its critical role in national defense. Historical spending in this category has generally trended upwards, driven by modernization efforts, the development of new weapon systems, and the need to maintain readiness. Major contractors like Lockheed Martin, Northrop Grumman, and Raytheon are consistent recipients of these funds. Spending patterns are influenced by geopolitical factors, technological advancements, and budgetary allocations. Analyzing specific historical data for the Navy's spending on long lead materials for missile programs would reveal trends in contract values, types of missiles procured, and the distribution of funds among key defense contractors over time.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $3,558,986,279

Exercised Options: $3,556,399,667

Current Obligation: $1,676,646,362

Actual Outlays: $958,835

Subaward Activity

Number of Subawards: 149

Total Subaward Amount: $388,763,529

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline