DoD's $98M undefinitized contract to Lockheed Martin for SSI Increment 4 installation raises questions on value and competition

Contract Overview

Contract Amount: $98,084,360 ($98.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2016-01-01

End Date: 2021-02-24

Contract Duration: 1,881 days

Daily Burn Rate: $52.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::OT::IGF UNDEFINITIZED CONTRACT ACTION FOR FY16/FY17 SSI INCREMENT 4 UK INSTALLATION

Place of Performance

Location: UNIONDALE, NASSAU County, NEW YORK, 11553

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $98.1 million to LOCKHEED MARTIN CORPORATION for work described as: IGF::OT::IGF UNDEFINITIZED CONTRACT ACTION FOR FY16/FY17 SSI INCREMENT 4 UK INSTALLATION Key points: 1. The contract's undefinitized nature suggests potential for cost overruns and scope creep. 2. A sole-source award limits price discovery and potentially inflates costs for taxpayers. 3. The long duration of over 5 years indicates a complex, long-term project. 4. The lack of competition raises concerns about whether the government secured the best possible price. 5. The specific system (SSI Increment 4) and its installation are critical for defense operations. 6. The contractor, Lockheed Martin, is a major defense prime with extensive experience.

Value Assessment

Rating: questionable

The undefinitized contract action (UCA) for $98 million raises immediate concerns regarding value for money. UCAs are typically used when the government needs to start work quickly but hasn't finalized contract terms, often leading to higher costs than definitized contracts. Without a competitive bidding process, it's difficult to benchmark the pricing against market rates or similar contracts. The cost-plus-fixed-fee (CPFF) structure, while common in complex defense procurements, can incentivize contractors to incur costs, as the fee is a percentage of the total cost. Further analysis is needed to determine if the final negotiated price reflects fair and reasonable costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive procurement process, which typically involves soliciting offers from multiple potential suppliers. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities, urgent needs), they significantly reduce the government's ability to leverage competition to drive down prices and ensure the best value. The lack of bidders means there was no direct price comparison or incentive for Lockheed Martin to offer its most competitive terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions and innovations that typically arise from a competitive bidding environment. This can lead to higher overall spending for the same goods or services.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical system installation services. The contract supports the operational readiness and technological advancement of defense systems. The geographic impact is primarily within New York (st), where the installation is likely to occur. Workforce implications include employment opportunities for Lockheed Martin personnel and potentially subcontractors involved in the installation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Undefinitized contract action (UCA) increases risk of cost overruns and scope creep.
Sole-source award limits price discovery and potentially leads to higher costs.
Long contract duration (over 5 years) can mask inefficiencies and increase exposure to changing requirements.
Lack of competition means no benchmark for fair and reasonable pricing.
Cost-plus-fixed-fee contract type can incentivize cost incurrence rather than cost control.

Positive Signals

Award to a major defense contractor (Lockheed Martin) suggests capability to perform complex tasks.
The contract addresses a specific, critical defense system (SSI Increment 4).
The contract is definitized, implying a path towards finalized terms and cost certainty.

Sector Analysis

This contract falls within the "Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing" sector, a critical component of the defense industry. This industry is characterized by high R&D investment, long product development cycles, and significant government procurement. Spending in this sector is heavily influenced by national security priorities and technological advancements. Comparable spending benchmarks are difficult to establish without knowing the specific nature of SSI Increment 4, but large system integration and installation contracts for defense primes often run into tens or hundreds of millions of dollars.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans associated with this specific contract action. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Lockheed Martin voluntarily includes them in its supply chain. The absence of set-asides means opportunities for small businesses to directly compete for this work are foregone. Further investigation into Lockheed Martin's subcontracting practices would be needed to assess any indirect impact.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The undefinitized nature of the contract action necessitates close monitoring to ensure timely definitization and control of costs. Transparency is limited due to the sole-source award and the nature of defense contracting. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Information Systems Agency (DISA) contracts
Naval Air Systems Command (NAVAIR) contracts
Air Force Life Cycle Management Center (AFLCMC) contracts
Intelligence, Surveillance, and Reconnaissance (ISR) systems contracts
Command, Control, Communications, Computers, and Intelligence (C4I) systems contracts

Risk Flags

Undefinitized Contract Action (UCA)
Sole Source Award
Cost Plus Fixed Fee (CPFF) contract type
Lack of Competition
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $98.1 million to LOCKHEED MARTIN CORPORATION. IGF::OT::IGF UNDEFINITIZED CONTRACT ACTION FOR FY16/FY17 SSI INCREMENT 4 UK INSTALLATION

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $98.1 million.

What is the period of performance?

Start: 2016-01-01. End: 2021-02-24.

What is the specific nature of the 'SSI Increment 4' system, and why is its installation critical for the Department of Defense?

The specific details of 'SSI Increment 4' are likely classified or proprietary, as it pertains to sensitive defense systems. However, based on the North American Industry Classification System (NAICS) code 334511 ('Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing'), SSI likely refers to a system involved in these functions. Increment 4 suggests a specific phase or upgrade to a larger system. Such systems are critical for military operations, enabling situational awareness, target acquisition, navigation, and overall command and control. The installation of these systems is vital for maintaining the operational readiness and technological superiority of defense assets, directly impacting mission effectiveness and national security.

What are the typical risks associated with undefinitized contract actions (UCAs), and how might they manifest in this $98 million contract?

Undefinitized Contract Actions (UCAs) carry inherent risks primarily related to cost and schedule. The government authorizes work to begin before all contract terms, including price and scope, are finalized. This can lead to 'scope creep,' where the contractor undertakes work beyond the initially intended scope without formal modification or pricing. The lack of a finalized price means the government is operating under uncertainty, potentially paying more than necessary. Risks include cost overruns as the contractor incurs expenses without a firm ceiling, delays in definitization leading to prolonged uncertainty, and potential disputes over work performed and costs incurred. For this $98 million contract, these risks translate to the possibility of the final cost exceeding the initial $98 million estimate, potential delays in system deployment, and a reduced ability for the government to negotiate favorable terms once work is underway.

Given this was a sole-source award, what mechanisms exist to ensure Lockheed Martin's pricing is fair and reasonable?

Even in sole-source procurements, the government has mechanisms to ensure fair and reasonable pricing, though they are more challenging without competition. The primary tool is Cost or Pricing Data certification. If the contract value exceeds certain thresholds (which $98 million likely does), the contractor is required to submit certified cost or pricing data. The government then performs a 'should-cost' analysis, reviewing the contractor's proposed costs, historical data, and market intelligence to determine if the price is justified. The Defense Contract Audit Agency (DCAA) often plays a role in auditing the contractor's proposed costs. However, the absence of competitive proposals means the government lacks a direct benchmark, making the 'should-cost' analysis and audit process critically important for price validation.

How does the Cost Plus Fixed Fee (CPFF) contract type influence contractor behavior and government oversight in this context?

The Cost Plus Fixed Fee (CPFF) contract type means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used for research and development or complex services where the scope or cost is uncertain. For the contractor, the CPFF structure provides a guaranteed profit margin (the fixed fee), regardless of the final cost incurred. This can reduce the incentive for aggressive cost control, as the profit is not directly tied to cost savings. For the government, it necessitates robust oversight to ensure that all costs incurred are allowable, allocable, and reasonable. The government must actively monitor expenditures and contractor performance to prevent unnecessary spending, as the contractor has less inherent motivation to minimize costs compared to fixed-price contracts.

What is the historical spending pattern for similar 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' contracts awarded by the Department of Def

Historical spending patterns within the NAICS code 334511 for the Department of Defense (DoD) reveal significant and consistent investment in advanced systems. Contracts in this sector often range from millions to billions of dollars, reflecting the complexity and critical nature of the technologies involved. Major defense contractors like Lockheed Martin, Northrop Grumman, Raytheon, and Boeing are frequent recipients of such awards. Spending is driven by modernization efforts, platform upgrades (e.g., aircraft, ships, ground vehicles), and the development of new sensing and navigation technologies. While specific spending on 'SSI Increment 4' is not publicly detailed, the DoD's overall budget allocation for defense systems manufacturing and integration underscores the substantial financial commitment in this area. Analyzing past contracts for similar system installations or upgrades can provide benchmarks, though proprietary information often limits direct comparisons.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003016Q0045

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 55 CHARLES LINDBERGH BLVD, UNIONDALE, NY, 11553

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

Financial Breakdown

Contract Ceiling: $99,194,797

Exercised Options: $98,160,703

Current Obligation: $98,084,360

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $94,064,514

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline