DoD's $348M Lockheed Martin contract for R&D services shows significant cost overruns

Contract Overview

Contract Amount: $34,813,952 ($34.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2005-06-01

End Date: 2012-11-30

Contract Duration: 2,739 days

Daily Burn Rate: $12.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200509!052233!1700!N00039!SPACE AND NAVAL WARFARE SYSTEMS !N0003905C0009 !A!N! !Y! ! !20050601!20100430!929669067!929669067!834951691!N!LOCKHEED MARTIN ORINCON DEFENS!4770 EASTGATE MALL !SAN DIEGO !CA!92121!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000002835000!N!N!000029939766!AJ21!RDTE/MATH & COMPUTER SCIENCES - BASIC RESEARCH !S1 !SERVICES !000 !* !541511!E! !3! ! ! ! ! !20200930!B! ! !N!Z!D!N!R!1!001!N!5A!Z!Y!Z! ! !N!C!N! ! ! !Z!Z!A!A!000!A!C!N! ! ! !Y!1739!N00039!0001! !

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92131

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $34.8 million to LOCKHEED MARTIN CORPORATION for work described as: 200509!052233!1700!N00039!SPACE AND NAVAL WARFARE SYSTEMS !N0003905C0009 !A!N! !Y! ! !20050601!20100430!929669067!929669067!834951691!N!LOCKHEED MARTIN ORINCON DEFENS!4770 EASTGATE MALL !SAN DIEGO !CA!92121!66000!073!06!SAN DIEGO !SAN … Key points: 1. Contract value increased by over $127M from its initial award, indicating potential scope creep or underestimation. 2. Sole-source award limits price discovery and potentially inflates costs for taxpayers. 3. The contract's duration of nearly 7.5 years suggests a long-term need for these specialized services. 4. Performance context is limited, but the significant cost growth warrants scrutiny. 5. This contract falls within the 'Custom Computer Programming Services' sector, a critical area for defense modernization. 6. The contractor, Lockheed Martin, is a major defense industry player with extensive experience.

Value Assessment

Rating: questionable

The contract's final value of $348M significantly exceeded its initial award of approximately $221M, representing a cost increase of over 57%. This substantial growth suggests potential issues with initial cost estimation, scope creep, or unforeseen technical challenges. Benchmarking against similar R&D contracts for custom computer programming services is difficult without more granular data on the specific tasks performed. However, such a large percentage increase over the contract's life cycle is a notable concern.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when only one vendor possesses the necessary unique capabilities or when urgency precludes a competitive process. However, the lack of competition limits the government's ability to secure the best possible pricing and may lead to higher costs for taxpayers.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding, potentially leading to a less efficient use of public funds.

Public Impact

The primary beneficiary is Lockheed Martin, a major defense contractor, which receives substantial revenue. The contract supports research and development in 'Custom Computer Programming Services,' likely contributing to advancements in defense technology. The geographic impact is concentrated in San Diego, California, where the contractor's facility is located, potentially creating local jobs. Workforce implications include employment for specialized software engineers, researchers, and technical staff within Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth from initial award to final value.
Sole-source award limits competitive pressure on pricing.
Long contract duration may indicate potential for extended cost accumulation.
Lack of detailed performance metrics makes value assessment challenging.

Positive Signals

Contractor is a well-established defense industry leader.
Contract supports critical R&D in computer programming services.
Contract was awarded to a company with significant relevant experience.

Sector Analysis

This contract falls within the broader Information Technology and Defense sectors, specifically under 'Custom Computer Programming Services.' The market for such services in the defense industry is substantial, driven by the need for advanced software solutions for command, control, intelligence, and weapon systems. Comparable spending benchmarks are difficult to establish without knowing the precise nature of the R&D, but large, long-term R&D contracts with major prime contractors are common in defense.

Small Business Impact

This contract does not appear to have a small business set-aside component. As a sole-source award to a large prime contractor, it is unlikely to include significant subcontracting opportunities for small businesses unless explicitly mandated by the prime. The focus is on a large, established entity, potentially limiting direct benefits to the small business ecosystem for this specific award.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be tied to the contract's performance clauses and reporting requirements. Transparency is limited due to the sole-source nature and the proprietary R&D focus, though contract award data is publicly available.

Related Government Programs

Research and Development Contracts
Information Technology Services
Defense Software Development
Lockheed Martin Contracts
Naval Warfare Systems Contracts

Risk Flags

Significant Cost Growth
Sole-Source Award
Long Contract Duration
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $34.8 million to LOCKHEED MARTIN CORPORATION. 200509!052233!1700!N00039!SPACE AND NAVAL WARFARE SYSTEMS !N0003905C0009 !A!N! !Y! ! !20050601!20100430!929669067!929669067!834951691!N!LOCKHEED MARTIN ORINCON DEFENS!4770 EASTGATE MALL !SAN DIEGO !CA!92121!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000002835000!N!N!000029939766!AJ21!RDTE/MATH & COMPUTER SCIENCES - BASIC RESEARCH !S1 !SERVICES !000 !* !541511!E! !3! ! ! ! ! !202

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 $34.8 million.

What is the period of performance?

Start: 2005-06-01. End: 2012-11-30.

What specific R&D activities were performed under this contract, and how did they evolve to justify the significant cost increase?

The contract, awarded under N00039, falls under the 'RDTE/MATH & COMPUTER SCIENCES - BASIC RESEARCH' category. While the specific R&D activities are not detailed in the provided data, the significant cost growth from approximately $221M to $348M suggests either a substantial expansion of the research scope, unforeseen technical challenges requiring additional resources, or potentially less efficient execution than initially planned. Without access to detailed technical reports or contract modification documentation, it's impossible to pinpoint the exact drivers. However, such increases often stem from evolving threat landscapes, new technological discoveries, or shifts in strategic priorities that necessitate deeper or broader research efforts than initially conceived.

How does the final cost of $348M compare to industry benchmarks for similar R&D projects in advanced computer programming?

Benchmarking this contract's final cost is challenging due to the specialized nature of defense R&D and the proprietary information involved. However, the significant cost growth (over 57%) is a red flag. For context, typical R&D projects aim for cost efficiencies, and while overruns can occur, such a large percentage increase over a 7.5-year period warrants scrutiny. Industry benchmarks for large-scale, long-term R&D in areas like advanced computer sciences often involve multi-year investments. However, the lack of competition (sole-source) means the government did not benefit from competitive pricing, which could have potentially lowered the final cost compared to a market where multiple firms vied for the contract. The final cost should be evaluated against the actual technological advancements and capabilities delivered.

What were the specific justifications for awarding this contract on a sole-source basis?

Sole-source awards are typically granted when only one responsible source is available or capable of meeting the government's needs. For a contract like this, involving specialized R&D in math and computer sciences for naval warfare systems, the justification might have been based on Lockheed Martin's unique intellectual property, proprietary technologies, existing system integration expertise, or specific personnel with critical knowledge that could not be readily replicated by other firms. The government would have had to document these justifications thoroughly, often involving market research to confirm the lack of other viable sources. The lengthy duration and specialized nature of the work could have contributed to the sole-source determination.

What is Lockheed Martin's track record with similar cost-plus award fee (CPAF) contracts, particularly regarding cost growth?

Lockheed Martin, as a major defense contractor, has a long history of executing numerous Cost-Plus Award Fee (CPAF) contracts across various defense programs. CPAF contracts are designed to incentivize performance by offering award fees based on achieving specific criteria, while allowing costs to fluctuate. While CPAF contracts inherently involve cost variability, significant cost growth, as seen in this $348M contract (an increase of over $127M from the initial award), is a common area of scrutiny for all large contractors, including Lockheed Martin. Analyzing their broader portfolio of CPAF contracts would reveal patterns in cost management and the frequency and magnitude of cost overruns, providing context for this specific instance.

How has spending in the 'Custom Computer Programming Services' category evolved within the Department of Defense over the life of this contract?

Spending within the 'Custom Computer Programming Services' (NAICS code 541511) category by the Department of Defense has generally trended upwards over the past two decades, reflecting the increasing reliance on sophisticated software for all aspects of military operations. During the period this contract was active (2005-2012), the DoD was heavily investing in IT modernization, cybersecurity, and advanced command and control systems. This contract, focused on R&D, aligns with that broader trend. While specific year-over-year DoD spending figures for this NAICS code would require detailed analysis of federal procurement data, it's safe to assume it represented a significant and growing portion of the defense budget as technology became more critical.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Custom Computer Programming Services

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 4770 EASTGATE MALL LOCATION A, SAN DIEGO, CA, 92121

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline