DoD's $129M missile compartment contract awarded to Lockheed Martin raises value and competition concerns

Contract Overview

Contract Amount: $129,482,844 ($129.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2021-03-01

End Date: 2027-02-28

Contract Duration: 2,190 days

Daily Burn Rate: $59.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: COMMON MISSILE COMPARTMENT REQUIREMENT

Place of Performance

Location: CAPE CANAVERAL, BREVARD County, FLORIDA, 32920

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $129.5 million to LOCKHEED MARTIN CORPORATION for work described as: COMMON MISSILE COMPARTMENT REQUIREMENT Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending without strict cost controls. 2. Awarded on a sole-source basis, the lack of competition limits price discovery and potentially inflates costs. 3. The long duration of the contract (2190 days) increases exposure to potential cost overruns and performance issues. 4. The engineering services sector (NAICS 541330) is broad, making direct cost comparisons challenging without specific service details. 5. The contract is a significant award within the Defense sector, highlighting substantial government investment in missile systems. 6. The absence of small business set-asides or subcontracting plans warrants scrutiny regarding broader economic impact.

Value Assessment

Rating: questionable

The $129.5 million contract awarded to Lockheed Martin for common missile compartment requirements is difficult to benchmark due to its sole-source nature and the 'cost plus fixed fee' (CPFF) pricing structure. CPFF contracts can lead to higher overall costs compared to fixed-price contracts, especially when competition is absent. Without competitive bids, it's challenging to ascertain if the pricing reflects fair market value for the engineering services provided. The contract's duration and the lack of detailed service breakdowns further obscure a precise value-for-money assessment.

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 Corporation, was considered. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. The lack of competition means there was no opportunity for price negotiation or comparison among different providers, potentially leading to a less favorable price for the government.

Taxpayer Impact: Taxpayers may be paying a premium for this missile compartment requirement due to the absence of competitive pressure to drive down costs. The government missed an opportunity to leverage market forces to secure the best possible price and value.

Public Impact

The primary beneficiaries are the Department of Defense and potentially its naval forces, receiving critical components for missile systems. The contract delivers essential engineering services for the development and integration of common missile compartments. The contract is geographically focused on Florida (ST, SN), indicating a concentration of work and potential economic impact in that state. The contract supports specialized engineering roles within Lockheed Martin, contributing to the high-skilled defense workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee structure may not incentivize cost efficiency as effectively as fixed-price contracts.
Long contract duration increases risk of cost overruns and performance degradation over time.
Lack of transparency regarding specific engineering services makes independent value assessment difficult.
Absence of small business participation requirements could limit economic opportunities for smaller firms.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise and established supply chains.
The contract addresses a critical defense requirement, ensuring the availability of essential missile system components.
The definitive contract type provides a clear framework for the engagement, though the pricing structure is flexible.

Sector Analysis

The engineering services sector, particularly within defense, is characterized by high barriers to entry, specialized knowledge, and significant government investment. NAICS code 541330 encompasses a wide range of engineering disciplines. This contract likely falls into a niche within aerospace and defense engineering, focusing on complex systems integration for naval platforms. Comparable spending benchmarks are difficult to establish without more granular data on the specific engineering tasks and the platforms involved. The overall defense engineering market is substantial, with significant portions dedicated to platform development and sustainment.

Small Business Impact

This contract does not appear to include any specific small business set-aside provisions, nor is there explicit mention of subcontracting requirements for small businesses. The award to a large prime contractor like Lockheed Martin suggests that the primary focus is on direct execution rather than broad subcontracting. This could limit opportunities for small businesses to participate in this specific contract's value chain, potentially impacting the small business ecosystem within the defense supply chain for this particular requirement.

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. Accountability measures would be defined within the contract's terms and conditions, including performance metrics and reporting requirements. Transparency may be limited due to the sole-source nature and the proprietary aspects of defense engineering, but contract award data is publicly available. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Sea Systems Command (NAVSEA) Contracts
Missile System Development Programs
Aerospace Engineering Services
Department of Defense Major Weapon Systems
Cost-Plus-Fixed-Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost-plus pricing structure
Lack of competition
Long contract duration
Limited transparency on specific services

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $129.5 million to LOCKHEED MARTIN CORPORATION. COMMON MISSILE COMPARTMENT REQUIREMENT

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 $129.5 million.

What is the period of performance?

Start: 2021-03-01. End: 2027-02-28.

What is Lockheed Martin Corporation's track record with similar sole-source defense contracts?

Lockheed Martin Corporation, as a major defense contractor, has a long history of receiving sole-source contracts from the Department of Defense and other government agencies. These awards are often granted for highly specialized systems, upgrades, or sustainment services where they are the sole or primary developer or possess unique capabilities. While sole-source awards are necessary in certain circumstances, they can also be subject to scrutiny regarding pricing and competition. Analyzing Lockheed Martin's past performance on similar sole-source contracts, including any audits or reviews by government oversight bodies, would provide further context on their ability to deliver value and manage costs effectively under such arrangements. Publicly available data often shows a pattern of significant contract awards, but detailed cost-performance analyses for sole-source agreements are less common.

How does the 'Cost Plus Fixed Fee' (CPFF) pricing structure compare to other contract types in terms of value for money?

The 'Cost Plus Fixed Fee' (CPFF) contract type is often used when the scope of work is not precisely defined or involves significant uncertainty, such as in research and development or complex engineering projects. Under CPFF, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. While this structure allows for flexibility and can facilitate innovation, it generally offers less value for money compared to fixed-price contracts. This is because the government bears the risk of cost overruns, and the contractor has less incentive to control costs rigorously, as their profit (the fixed fee) remains constant regardless of the final cost. Competitive bidding on fixed-price contracts typically drives better price discovery and cost efficiency for the government.

What are the primary risks associated with a sole-source award for critical defense components?

The primary risks associated with a sole-source award for critical defense components include lack of price competition, potential for inflated costs, reduced innovation, and vendor lock-in. Without competing bids, the government may not achieve the best possible price, as there is no market pressure to drive down costs. The absence of competition can also lead to complacency from the awarded contractor, potentially impacting quality or delivery timelines. Furthermore, relying on a single source can create a strategic vulnerability if that contractor faces financial difficulties, production issues, or geopolitical challenges. This can lead to supply chain disruptions for essential defense materiel, impacting national security readiness.

What is the historical spending pattern for common missile compartment requirements within the Department of the Navy?

Historical spending patterns for common missile compartment requirements within the Department of the Navy are often tied to specific naval platforms (e.g., submarines, surface combatants) and their associated missile systems. These requirements can evolve with technological advancements and strategic needs. Analyzing past contracts for similar components, including their value, duration, and contractor, would reveal trends. For instance, shifts in spending might indicate upgrades to existing systems, development of new missile technologies, or consolidation of requirements across different platforms. Without specific data on prior contracts for 'common missile compartments,' it's difficult to provide precise historical figures, but spending in this area is generally substantial and directly linked to the Navy's shipbuilding and modernization programs.

How does the engineering services sector (NAICS 541330) typically benchmark costs for complex defense systems?

Benchmarking costs in the engineering services sector (NAICS 541330) for complex defense systems is challenging due to the highly specialized and often unique nature of the work. Standard cost-per-hour rates can vary significantly based on the specific engineering discipline, the experience level of the personnel, and the geographic location. For complex defense systems, benchmarking often relies on comparing the proposed contract to similar, previously awarded contracts for analogous systems or components, adjusting for inflation and scope differences. Parametric cost estimating, which uses historical data and statistical relationships, can also be employed. However, for novel or highly proprietary systems, direct cost comparisons are difficult, and reliance on contractor-provided cost breakdowns and government cost realism analyses becomes crucial.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003021R0017

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1102 JOHN GLENN BLVD, TITUSVILLE, FL, 32780

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

Financial Breakdown

Contract Ceiling: $130,223,249

Exercised Options: $130,223,249

Current Obligation: $129,482,844

Subaward Activity

Number of Subawards: 78

Total Subaward Amount: $26,187,096

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline