DoD's $74.7M contract for towed arrays awarded to Lockheed Martin, raising questions about competition and value

Contract Overview

Contract Amount: $74,701,959 ($74.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-12-20

End Date: 2017-07-27

Contract Duration: 3,507 days

Daily Burn Rate: $21.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TL-29A AND TB-29A TOWED ARRAYS PRODUCTION AND CONVERSION

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $74.7 million to LOCKHEED MARTIN CORPORATION for work described as: TL-29A AND TB-29A TOWED ARRAYS PRODUCTION AND CONVERSION Key points: 1. The contract's value of $74.7 million over its duration indicates significant investment in naval defense systems. 2. Awarded as 'NOT COMPETED', this raises concerns about potential lack of competitive pressure on pricing and innovation. 3. The 'COST PLUS FIXED FEE' contract type suggests potential for cost overruns if not managed tightly. 4. The duration of 3507 days (over 9 years) implies a long-term need for these towed array systems. 5. The sole awardee, Lockheed Martin, is a major defense contractor, suggesting established relationships but potentially limited market access for others. 6. The contract's focus on 'Search, Detection, Navigation, Guidance...' systems highlights its critical role in naval operations.

Value Assessment

Rating: questionable

Benchmarking the value of this specific contract is challenging without comparable sole-source procurements for similar towed array systems. The 'COST PLUS FIXED FEE' structure inherently carries a higher risk of exceeding initial cost estimates compared to fixed-price contracts. While the total award amount is substantial, the lack of competition makes it difficult to definitively assess if the pricing represents fair market value or if taxpayers received optimal value for their investment. Further analysis would require detailed cost breakdowns and comparisons to industry benchmarks for similar technological components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a 'NOT COMPETED' procurement strategy, indicating that the Department of the Navy did not solicit bids from multiple sources. This approach is typically reserved for situations where only one source can fulfill the requirement, such as proprietary technology or urgent needs. The absence of a competitive bidding process means there was no direct price discovery through market forces, potentially leading to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium, as there was no incentive for multiple companies to offer their best prices. This also limits opportunities for new or smaller businesses to enter the market and compete for defense contracts.

Public Impact

Naval forces benefit from advanced towed array systems crucial for submarine detection and situational awareness. The contract supports the development and production of critical components for national security operations. The geographic impact is primarily within the United States, with potential implications for naval bases and operations. This contract likely supports a specialized workforce within Lockheed Martin, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Cost-plus contract type increases risk of budget overruns.
Sole-source award limits opportunities for small businesses to participate.
Long contract duration could indicate potential for scope creep or evolving requirements without competitive re-evaluation.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests a high likelihood of technical capability and delivery experience.
The contract addresses a critical need for advanced naval detection systems, contributing to national security.
The specific nature of towed arrays implies a focus on specialized, high-value technology.

Sector Analysis

The defense electronics sector, particularly systems for naval warfare, is characterized by high R&D costs, long product cycles, and significant government procurement. Companies like Lockheed Martin are dominant players, often benefiting from established relationships and specialized expertise. Spending in this area is driven by evolving threats and the need for technological superiority. Comparable spending benchmarks would likely involve other large-scale naval system procurements, which are often complex and awarded through limited competition due to specialized requirements.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements mentioned in the provided data. The sole-source nature of the award limits direct opportunities for small businesses to compete for the prime contract. While Lockheed Martin may engage small businesses as subcontractors, the absence of explicit set-aside provisions means their participation is not guaranteed or prioritized.

Oversight & Accountability

Oversight for this Department of Defense contract would typically fall under the purview of the Department of the Navy's contracting officers and potentially the Defense Contract Management Agency (DCMA). Inspector General (IG) offices within the DoD would have jurisdiction to investigate fraud, waste, and abuse. Transparency is often limited in sole-source defense procurements, but contract awards are generally reported in federal databases. Accountability would be managed through contract performance reviews and adherence to the terms of the 'COST PLUS FIXED FEE' agreement.

Related Government Programs

Naval Combat Systems
Sonar and Acoustic Systems
Defense Electronics Manufacturing
Submarine Warfare Technology
Department of the Navy Procurement

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $74.7 million to LOCKHEED MARTIN CORPORATION. TL-29A AND TB-29A TOWED ARRAYS PRODUCTION AND CONVERSION

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 $74.7 million.

What is the period of performance?

Start: 2007-12-20. End: 2017-07-27.

What is the historical spending pattern for towed array systems by the Department of the Navy?

Analyzing historical spending on towed array systems by the Department of the Navy requires access to detailed procurement data over multiple fiscal years. Generally, such systems represent a significant and ongoing investment due to their critical role in naval operations, particularly submarine detection. Spending can fluctuate based on modernization programs, new platform acquisitions, and evolving threat assessments. Without specific historical data for this contract category, it's difficult to provide precise figures, but it's reasonable to assume consistent, substantial budgetary allocations for these advanced technologies. The provided data for TL-29A AND TB-29A indicates a single award of approximately $74.7 million over a nearly decade-long period, suggesting a moderate but sustained investment in this specific type of towed array.

How does the 'COST PLUS FIXED FEE' contract type typically impact project costs and contractor incentives compared to other contract types?

The 'COST PLUS FIXED FEE' (CPFF) contract type is characterized by the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves significant uncertainty, such as research and development or complex system integration. While it allows flexibility and encourages contractor effort, it shifts much of the cost risk to the government. Contractors have less incentive to control costs aggressively compared to fixed-price contracts, as their profit (the fee) is fixed regardless of the final cost. This can lead to higher overall project expenditures if not managed with rigorous oversight and cost controls. For taxpayers, CPFF contracts necessitate careful monitoring to ensure costs remain reasonable and the fixed fee represents fair compensation for the work performed.

What are the potential risks associated with awarding a large defense contract on a sole-source basis?

Awarding a large defense contract on a sole-source basis, as seen with the $74.7 million towed array system contract, carries several significant risks. Primarily, it eliminates competitive pressure, which is a key mechanism for ensuring fair pricing and driving innovation. Without competing bids, the government may pay a premium for goods or services. It also limits opportunities for other capable contractors, including small businesses, to enter the market or expand their footprint. Furthermore, sole-source awards can sometimes indicate a lack of strategic sourcing or planning, potentially leading to over-reliance on a single supplier and creating vulnerabilities in the supply chain. Transparency can also be reduced, making it harder for the public and oversight bodies to scrutinize the value received.

What is Lockheed Martin's track record with similar naval defense system contracts?

Lockheed Martin is a major defense contractor with an extensive track record in developing and producing a wide array of naval defense systems, including sonar, radar, and combat systems. Their experience with complex, high-value contracts is well-established. For towed array systems specifically, their involvement would likely span various naval platforms and technological generations. While specific details of past performance on similar towed array contracts are not provided here, Lockheed Martin's position as a prime contractor in this domain suggests a history of successful, albeit often sole-source or limited-competition, awards. Their performance is generally characterized by technical capability but also subject to the typical scrutiny regarding cost and schedule adherence common in large defense procurements.

How does the geographic location of the contractor (New York) potentially impact contract performance and costs?

The contractor's location in New York (ST: NY, SN: NEW YORK) for this Department of Defense contract could have several implications. Proximity to naval facilities or research centers in the Northeast might offer logistical advantages for collaboration, testing, and delivery. However, operating costs in New York can be higher than in other regions, potentially influencing labor rates and overhead, which could be reflected in the contract's pricing, especially under a cost-plus arrangement. The presence of a skilled workforce in aerospace and defense in the region is a positive factor. The specific impact on overall costs and performance would depend on the distribution of work, supply chain logistics, and the specific cost structure negotiated within the 'COST PLUS FIXED FEE' framework.

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: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003908R0003

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 497 ELECTRONICS PKWY # 5 # BLD, LIVERPOOL, NY, 13088

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $81,201,949

Exercised Options: $77,267,467

Current Obligation: $74,701,959

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline