DoD awards $5.18B to Lockheed Martin for wireless communications equipment, spanning nearly two decades

Contract Overview

Contract Amount: $5,178,428,983 ($5.2B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2004-09-24

End Date: 2022-08-18

Contract Duration: 6,537 days

Daily Burn Rate: $792.2K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $5.18 billion to LOCKHEED MARTIN CORP for work described as: Key points: 1. Contract value represents significant long-term investment in defense communications infrastructure. 2. Extended contract duration suggests critical and ongoing need for specialized equipment. 3. Sole-source award after exclusion of sources warrants scrutiny of justification and market alternatives. 4. Cost-plus incentive fee structure aims to balance contractor performance with cost control. 5. High contract value indicates a substantial portion of the agency's budget allocated to this area. 6. Geographic focus on California may point to key operational or manufacturing hubs.

Value Assessment

Rating: fair

The total award of $5.18 billion over a 6,537-day period (approximately 18 years) indicates a substantial investment. Benchmarking this value is challenging without specific details on the equipment and services provided. However, the extended duration and cost-plus incentive fee structure suggest a complex and evolving requirement. The contract's value per year is approximately $792,172, which appears moderate for a large defense contract of this nature, but the total scope over nearly two decades is significant.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a sole-source contract after the exclusion of other sources. This indicates that the Department of Defense determined that only Lockheed Martin could provide the necessary specialized wireless communications equipment. The justification for excluding other sources is critical to understanding the competitive landscape and potential for price discovery. Without open competition, there is a risk that pricing may not reflect the most cost-effective options available in the market.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers if robust justification and market research were not thoroughly conducted to ensure fair pricing.

Public Impact

The primary beneficiaries are the Department of Defense and its operational units requiring advanced wireless communications capabilities. Services delivered likely include the development, manufacturing, and sustainment of specialized radio and wireless communication systems. The contract's geographic impact is centered in California, suggesting a significant presence of Lockheed Martin's operations or key defense installations in the state. Workforce implications include employment opportunities within Lockheed Martin and its subcontractors, particularly in engineering, manufacturing, and program management roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award raises concerns about potential lack of competitive pressure on pricing.
Extended contract duration increases the risk of cost overruns due to evolving technology and unforeseen issues.
Cost-plus incentive fee contracts can sometimes incentivize higher spending if not carefully managed.
Lack of detailed public information on the specific equipment and services makes independent value assessment difficult.

Positive Signals

Long-term contract indicates a stable and critical need for the supplied technology.
Cost-plus incentive fee structure aims to reward performance and efficiency.
Award to a major defense contractor like Lockheed Martin suggests a high level of technical capability and reliability.
The contract's duration implies a strategic, long-term commitment to maintaining essential communication capabilities.

Sector Analysis

The contract falls within the 'Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing' sector (NAICS 334220). This sector is crucial for national security, providing the backbone for military communications. The market is characterized by high barriers to entry due to specialized technology, stringent security requirements, and significant R&D investment. Spending in this area is often dominated by large, established defense contractors due to the complexity and scale of government needs. Comparable spending benchmarks are difficult to ascertain without specific product details, but the scale of this award suggests a significant portion of the DoD's budget for such equipment.

Small Business Impact

The data indicates that small business participation (sb) was false and small business set-asides (ss) were not utilized for this contract. This suggests that the primary award went to a large prime contractor, Lockheed Martin. There is no explicit information on subcontracting plans for small businesses. Without specific subcontracting goals or reporting, the direct impact on the small business ecosystem for this particular contract is unclear, though large prime contracts often involve a tiered subcontracting structure where small businesses may participate.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms, quality standards, and delivery schedules. The cost-plus incentive fee structure implies performance metrics that DCMA would monitor. Transparency is limited by the sole-source nature and the proprietary details of defense technology. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Department of Defense Communications Systems
Military Radio and Satellite Communications
Advanced Wireless Technology Development
Defense Manufacturing and Production
Tactical Communication Equipment

Risk Flags

Sole Source Justification
Long Contract Duration
Potential for Cost Overruns
Technological Obsolescence Risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $5.18 billion to LOCKHEED MARTIN CORP. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $5.18 billion.

What is the period of performance?

Start: 2004-09-24. End: 2022-08-18.

What specific types of wireless communications equipment are being procured under this contract?

The provided data indicates the contract is for 'Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing' under NAICS code 334220. While specific product details are not available, this category generally encompasses a wide range of equipment, including tactical radios, secure communication systems, satellite communication terminals, base station equipment, and related components. Given the Department of Defense as the agency and Lockheed Martin as the contractor, it is highly probable that the equipment is specialized for military applications, focusing on secure, resilient, and high-bandwidth communication capabilities essential for command and control, intelligence, surveillance, and reconnaissance (ISR) operations, and battlefield communications.

What is the justification for awarding this contract as sole-source after excluding other sources?

The justification for a sole-source award after excluding other sources typically stems from unique capabilities, proprietary technology, or essential compatibility requirements that only one contractor can meet. For Lockheed Martin, this could involve highly specialized, classified, or integrated systems that are deeply embedded within existing defense infrastructure. Reasons might include: 1) Unique technical expertise or intellectual property held exclusively by Lockheed Martin. 2) The need for seamless integration with existing, sensitive DoD systems where introducing a different vendor could compromise security or interoperability. 3) The existence of prior substantial investment in research and development by Lockheed Martin that the government wishes to leverage. A formal Justification for Other Than Full and Open Competition (JOFOC) would detail these specific reasons, which are often classified or sensitive.

How does the cost-plus incentive fee (CPIF) structure aim to manage costs and incentivize performance?

A Cost-Plus Incentive Fee (CPIF) contract establishes an estimated cost, a target profit, and a share ratio between the government and the contractor for cost savings or overruns. The final contract price is determined by the actual costs incurred, adjusted by the incentive fee based on performance against pre-defined targets (e.g., delivery schedule, technical performance, quality). If the contractor performs better than target, they earn a higher fee (up to a ceiling); if they perform worse, their fee is reduced (down to a floor). This structure incentivizes the contractor to control costs and meet performance objectives to maximize their profit, while providing the government with a mechanism to share in cost savings or cost overruns, aligning contractor and government interests.

What are the potential risks associated with a contract of this duration and value?

Contracts spanning nearly two decades and valued at over $5 billion carry inherent risks. Technological obsolescence is a significant concern; wireless communication technology evolves rapidly, and equipment procured today might be outdated long before the contract's end date. Cost overruns are another major risk, especially with CPIF contracts, as unforeseen technical challenges, scope creep, or inflation can drive up expenses. Programmatic risks include potential shifts in defense priorities, budget uncertainties, and contractor performance issues. Furthermore, the sole-source nature increases the risk of complacency and potentially higher-than-market prices over the long term if not rigorously managed and overseen.

What is the significance of the contract being awarded in California?

The contract's association with California (SN: CALIFORNIA) likely indicates a significant operational presence for Lockheed Martin in the state, potentially involving research and development, manufacturing facilities, or key program management offices. California has a robust aerospace and defense industry ecosystem, and many major defense contractors maintain substantial operations there. This geographic concentration could imply benefits for the regional economy through job creation and investment. It may also suggest proximity to key military bases or testing ranges within California that are relevant to the deployment or testing of these wireless communication systems.

How does this contract fit within the broader landscape of federal spending on defense communications?

This $5.18 billion contract represents a substantial, long-term investment in a critical component of national defense: secure and reliable wireless communications. Federal spending in this area is consistently high, driven by the need to maintain communication superiority across global operations, support advanced weapon systems, and ensure interoperability among different military branches and allied forces. This specific award to Lockheed Martin likely addresses a core requirement for tactical or strategic communication infrastructure. It fits within a broader category of defense procurement that includes everything from individual soldier radios to complex network infrastructure, satellite systems, and cybersecurity solutions, reflecting the pervasive reliance on advanced communication technology in modern warfare.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › Space R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 6801 ROCKLEDGE DRIVE, BETHESDA, MD, 20817

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $3,756,729,479

Exercised Options: $3,510,027,174

Current Obligation: $5,178,428,983

Actual Outlays: $6,100,311

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline