DoD's $263M Lockheed Martin contract for engineering services shows limited competition and fair value

Contract Overview

Contract Amount: $263,188,914 ($263.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-10-01

End Date: 2021-10-20

Contract Duration: 1,115 days

Daily Burn Rate: $236.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: SSI INCREMENT 8 UK INS PRODUCTION

Place of Performance

Location: UNIONDALE, NASSAU County, NEW YORK, 11553

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $263.2 million to LOCKHEED MARTIN CORPORATION for work described as: SSI INCREMENT 8 UK INS PRODUCTION Key points: 1. Contract awarded through a sole-source negotiation, raising concerns about price discovery. 2. Performance period of 1115 days suggests a substantial, long-term engagement. 3. The contract type (Cost Plus Incentive Fee) can incentivize cost control but also carries inherent risk. 4. Engineering services are critical for defense readiness, indicating strategic importance. 5. The contractor, Lockheed Martin, is a major defense industry player with extensive experience. 6. No small business set-aside was utilized, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized engineering services. The Cost Plus Incentive Fee structure aims to balance contractor profit with government cost savings, but without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for money. The contract's duration and scope suggest a significant investment, and ongoing monitoring of performance against cost targets would be crucial to ensure fair pricing over its life.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not openly competed. This approach is typically used when only one responsible source can provide the required services. The lack of competition means that the government did not benefit from a range of proposals and potentially lower prices that could arise from a competitive bidding process. This limits the government's ability to explore alternative solutions or achieve the best possible price through market forces.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the most competitive pricing available, as the usual pressures of market competition are absent.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially broader Department of Defense operations requiring specialized engineering support. Services delivered likely include design, development, testing, and integration of complex systems. The geographic impact is centered in New York, where the contractor is located. Workforce implications include employment for engineers and technical staff at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential innovation.
Cost Plus Incentive Fee contracts can lead to cost overruns if not managed tightly.
Lack of small business participation may reduce opportunities for smaller, specialized firms.

Positive Signals

Award to a highly experienced and capable contractor (Lockheed Martin).
Engineering services are critical for maintaining and advancing defense capabilities.
Contract duration suggests a stable, long-term need for these services.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for defense engineering services is dominated by large, established contractors like Lockheed Martin, who possess the specialized expertise and security clearances required for complex government projects. Spending in this area is driven by the need for continuous innovation, system upgrades, and maintenance of sophisticated military platforms. Comparable spending benchmarks would typically involve other large-scale engineering support contracts awarded by the DoD.

Small Business Impact

The absence of a small business set-aside for this contract indicates that it was not specifically targeted to encourage participation from small businesses. Given the sole-source nature and the likely scale and complexity of the engineering services required, it is probable that subcontracting opportunities for small businesses may be limited, unless explicitly included in the prime contract's statement of work. This could mean fewer avenues for small businesses to contribute to this specific defense procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the Cost Plus Incentive Fee structure, performance metrics, and regular reporting requirements. Transparency is generally maintained through contract databases, though detailed performance data may be restricted. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Department of Defense Engineering Services
Naval Systems Engineering Support
Aerospace Engineering Contracts
Cost-Plus Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $263.2 million to LOCKHEED MARTIN CORPORATION. SSI INCREMENT 8 UK INS PRODUCTION

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 $263.2 million.

What is the period of performance?

Start: 2018-10-01. End: 2021-10-20.

What is the track record of Lockheed Martin in delivering similar engineering services for the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with a long and extensive history of providing complex engineering, research, development, and manufacturing services to the U.S. Department of Defense and other government agencies. They are involved in numerous large-scale programs across air, space, and naval domains. Their track record typically includes delivering advanced technological solutions, systems integration, and lifecycle support for critical defense assets. While specific performance data for individual contracts is often proprietary, Lockheed Martin is generally recognized for its capabilities in handling highly technical and demanding engineering requirements, often involving significant budgets and long-term commitments.

How does the pricing structure (Cost Plus Incentive Fee) typically perform in terms of cost control compared to other contract types?

Cost Plus Incentive Fee (CPIF) contracts are designed to encourage cost efficiency by allowing the contractor to earn a higher profit if they meet or exceed certain cost, performance, or schedule targets. The government pays the actual allowable costs incurred by the contractor, plus a fee that is adjusted based on performance against pre-defined metrics. While CPIF can incentivize cost savings, it also carries risks. If targets are set too high or too low, or if performance metrics are poorly defined, it can lead to disputes or fail to achieve the desired cost control. Compared to fixed-price contracts, CPIF generally offers less price certainty for the government but can be more appropriate for research and development or complex projects where costs are difficult to estimate upfront. Effective oversight and clear target setting are crucial for CPIF success.

What are the potential risks associated with a sole-source award for engineering services?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to higher prices than might be achieved in an open competition. Without multiple bidders vying for the contract, there is less incentive for the awarded contractor to offer the most cost-effective solution or to innovate aggressively on price. Additionally, sole-source awards can limit the government's visibility into alternative technical approaches or solutions that other potential providers might offer. This can also create a perception of favoritism or a lack of transparency, potentially impacting public trust. Ensuring fair and reasonable pricing through rigorous negotiation and cost analysis becomes paramount in sole-source situations.

What is the strategic importance of engineering services for the Department of the Navy?

Engineering services are fundamental to the Department of the Navy's ability to maintain, modernize, and develop its complex fleet of ships, aircraft, and weapon systems. These services encompass a wide range of activities, including system design, integration, testing, maintenance, and upgrades, all of which are critical for ensuring operational readiness and technological superiority. The Navy relies on specialized engineering expertise to address challenges related to aging platforms, incorporate new technologies, and develop next-generation capabilities. Contracts for these services are therefore strategically vital for national security, enabling the Navy to meet its mission requirements in a rapidly evolving threat environment.

How does the contract's duration (1115 days) impact the overall value assessment?

A contract duration of 1115 days (approximately three years) indicates a significant, long-term commitment by the Department of the Navy for these engineering services. This extended period allows for the development and implementation of complex projects that cannot be completed in a shorter timeframe. From a value perspective, a longer duration can sometimes lead to better economies of scale and more stable planning for both the government and the contractor. However, it also means that the government is committed to a specific provider and scope for an extended period, making it crucial that the initial pricing and performance expectations are well-defined and that mechanisms for oversight and potential adjustments are robust throughout the contract's life.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003019R0045

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

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: $326,778,839

Exercised Options: $289,041,756

Current Obligation: $263,188,914

Actual Outlays: $28,491,096

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline