DoD's $83M Integrated Common Processor contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $83,004,808 ($83.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2013-12-20

End Date: 2020-03-30

Contract Duration: 2,292 days

Daily Burn Rate: $36.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTEGRATED COMMON PROCESSOR (ICP)

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $83.0 million to LOCKHEED MARTIN CORPORATION for work described as: INTEGRATED COMMON PROCESSOR (ICP) Key points: 1. The contract's value of $83 million over approximately 6 years raises questions about cost-effectiveness due to the lack of competitive bidding. 2. Sole-source awards can limit price discovery and potentially lead to higher costs for taxpayers. 3. The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector is complex, requiring specialized expertise. 4. Performance context is limited as this was a sole-source award, making direct comparisons difficult. 5. The contract's duration of nearly 7 years suggests a long-term need for the integrated common processor. 6. The absence of small business set-asides or subcontracting plans warrants further investigation into potential impacts on smaller businesses.

Value Assessment

Rating: questionable

Benchmarking the value of this $83 million contract is challenging due to its sole-source nature. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if alternative solutions could have been procured at a lower cost. The cost-plus-fixed-fee (CPFF) contract type, while common for complex R&D, can sometimes lead to cost overruns if not meticulously managed. Comparing this to similar sole-source procurements in the defense sector might offer some insight, but a true value-for-money assessment is hindered by the lack of competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not solicit bids from multiple potential contractors. This approach is typically used when only one source is capable of meeting the government's needs, often due to proprietary technology, unique capabilities, or urgent requirements. The lack of competition means that price discovery through market forces was bypassed, potentially impacting the final cost to the government.

Taxpayer Impact: Sole-source awards can result in higher prices for taxpayers as there is no competitive pressure to drive down costs. This limits the government's ability to secure the best possible value for its investment.

Public Impact

The primary beneficiaries are the Department of Defense and potentially its operational units relying on advanced navigation and guidance systems. The contract delivers critical components for search, detection, navigation, and guidance systems, essential for military operations. The geographic impact is likely concentrated within defense installations and operational theaters where these systems are deployed. Workforce implications may include specialized engineering, manufacturing, and technical roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced innovation.
The sole-source nature limits transparency in the procurement process.
Cost-plus-fixed-fee contracts can incentivize cost increases if not tightly managed.
Absence of small business participation may limit broader economic benefits.

Positive Signals

Awarded to a major defense contractor with established capabilities.
Addresses critical defense needs in navigation and guidance systems.
Long-term contract suggests sustained requirement and potential for stable supply.

Sector Analysis

The 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector is a highly specialized segment of the aerospace and defense industry. This contract falls under the broader manufacturing of electronic and precision instruments. The market is characterized by high barriers to entry, significant R&D investment, and a primary customer base of government entities. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of many defense systems, but significant government investment is typical in this area.

Small Business Impact

This contract does not appear to have included specific small business set-asides, nor is there explicit information regarding subcontracting plans for small businesses. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal unless Lockheed Martin voluntarily engages small businesses in its supply chain. Further review would be needed to determine if any subcontracting opportunities were pursued or mandated.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and the CPFF structure, rigorous oversight of costs, performance, and adherence to contract terms would be crucial. The Inspector General for the Department of Defense may also have jurisdiction for audits and investigations into potential fraud, waste, or abuse. Transparency is limited due to the non-competitive award.

Related Government Programs

Defense Advanced Research Projects Agency (DARPA) programs
Naval Air Systems Command (NAVAIR) procurements
Air Force Life Cycle Management Center (AFLCMC) contracts
Intelligence, Surveillance, and Reconnaissance (ISR) systems

Risk Flags

Sole-source award bypasses competitive bidding.
Cost-plus-fixed-fee contract type carries inherent cost escalation risks.
Lack of transparency in procurement process.
Potential for limited innovation due to absence of competition.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $83.0 million to LOCKHEED MARTIN CORPORATION. INTEGRATED COMMON PROCESSOR (ICP)

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 $83.0 million.

What is the period of performance?

Start: 2013-12-20. End: 2020-03-30.

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

Lockheed Martin Corporation, as one of the largest defense contractors globally, has a long history of receiving both competitive and sole-source contracts across various defense platforms and systems. Their track record with sole-source awards often stems from their established expertise, proprietary technologies, and existing government relationships, particularly in areas like aerospace, defense electronics, and integrated systems. While specific data on all sole-source awards is not publicly itemized in a readily comparable format, their extensive portfolio suggests significant experience in managing such contracts. However, the justification for each sole-source award is critical, as it bypasses competitive processes that typically ensure best value and price for the government. Audits and performance reviews by government oversight bodies often scrutinize sole-source awards to ensure they meet the stringent criteria for such exceptions.

How does the $83 million value compare to similar navigation and guidance system contracts?

Directly comparing the $83 million value of this Integrated Common Processor (ICP) contract to similar navigation and guidance system contracts is challenging due to several factors. Firstly, the contract was sole-sourced, meaning there was no competitive bidding to establish a market price. Secondly, the specific nature of an 'Integrated Common Processor' suggests a highly specialized component, potentially unique to the platform or system it serves within the Department of the Navy. Comparable contracts might exist within the broader 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code (334511), but their scope, technological sophistication, and contract type (e.g., fixed-price vs. cost-plus) can vary significantly. Without access to detailed specifications and competitive data for alternative systems, a precise value-for-money comparison is difficult. However, $83 million over approximately seven years for a critical defense system component is within the expected range for major defense procurements, though the lack of competition prevents a definitive assessment of whether it represents optimal value.

What are the primary risks associated with a sole-source award of this magnitude?

The primary risks associated with a sole-source award of $83 million include potential overpricing, reduced incentive for innovation, and a lack of transparency. Without competition, the government loses the benefit of market forces driving down costs, potentially paying more than necessary. The contractor may have less incentive to innovate or improve efficiency since there is no competitor vying for future business based on superior performance or cost. Furthermore, sole-source procurements can be less transparent, making it harder for oversight bodies and the public to scrutinize the fairness and reasonableness of the price and terms. There's also a risk that the government might not be aware of alternative, potentially more cost-effective solutions available from other vendors. Finally, reliance on a single source can create supply chain vulnerabilities if that contractor faces production issues or financial instability.

How effective are cost-plus-fixed-fee (CPFF) contracts in ensuring program success for complex systems?

Cost-plus-fixed-fee (CPFF) contracts are often used for complex research and development or systems integration projects where the scope of work is not fully defined at the outset, or where innovation is a key objective. Their effectiveness hinges on robust government oversight. The 'cost-plus' element allows the contractor to recover allowable costs, while the 'fixed-fee' provides a predetermined profit margin. This structure can incentivize the contractor to complete the work efficiently to maximize their fee relative to costs. However, it also carries risks: if not managed diligently, the government might incur higher costs than anticipated, and the contractor may have less incentive to control expenses beyond what is necessary to achieve the fixed fee. For complex systems like those involving navigation and guidance, CPFF can facilitate necessary exploration and adaptation, but requires stringent cost monitoring, clear performance metrics, and proactive management to ensure value and prevent cost overruns.

What is the historical spending pattern for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' by the Department of the Navy?

Historical spending by the Department of the Navy within the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' sector (NAICS 334511) is substantial, reflecting the critical nature of these technologies for naval operations. While precise year-over-year figures for this specific NAICS code can fluctuate based on major program cycles and modernization efforts, the Navy consistently invests billions annually in systems related to radar, sonar, navigation, communication, and fire control. This includes research, development, procurement, and sustainment of complex hardware and software. Spending patterns are influenced by geopolitical factors, technological advancements, and the lifecycle of existing platforms. Contracts within this sector often involve high-value, long-duration procurements, including both competitive bids for mature technologies and sole-source awards for specialized or developmental systems, similar to the ICP contract.

What are the implications of this contract being classified under 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing'?

Classifying this contract under NAICS code 334511, 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing,' signifies that the core purpose of the procurement relates to the development, production, or integration of systems used for locating, tracking, orienting, and piloting aircraft and vessels. This includes technologies like radar, sonar, GPS, inertial navigation systems, flight control computers, and related instrumentation. Companies operating in this space typically possess advanced engineering capabilities, often involving complex hardware-software integration, signal processing, and adherence to stringent military specifications. The classification suggests the Integrated Common Processor (ICP) likely plays a crucial role in processing data from various sensors or providing essential computational functions for these critical operational systems, underpinning the Navy's ability to conduct missions effectively.

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: INFORMATION TECHNOLOGY EQUIPMENT (INCLD FIRMWARE) SOFTWARE,SUPPLIES& SUPPORT EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003913R0035

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 9500 GODWIN DR, MANASSAS, VA, 20110

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

Financial Breakdown

Contract Ceiling: $97,843,498

Exercised Options: $90,671,625

Current Obligation: $83,004,808

Subaward Activity

Number of Subawards: 67

Total Subaward Amount: $109,684,584

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline