DoD's $501M Lockheed Martin contract for navigation systems lacked competition, raising value concerns

Contract Overview

Contract Amount: $50,111,329 ($50.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-03-31

End Date: 2010-11-30

Contract Duration: 974 days

Daily Burn Rate: $51.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: TAS::17 1804::TAS TSS PRODUCTION IAW SECTION C HEREIN

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $50.1 million to LOCKHEED MARTIN CORPORATION for work described as: TAS::17 1804::TAS TSS PRODUCTION IAW SECTION C HEREIN Key points: 1. The contract's value of $501 million over its period of performance warrants scrutiny due to the lack of competitive bidding. 2. Sole-source awards can lead to higher prices and reduced innovation compared to open competition. 3. The fixed-price contract type offers some cost certainty but doesn't mitigate the risk of overpayment without competition. 4. Performance context is limited without clear metrics, but the duration suggests a significant operational need. 5. This contract falls within the Defense sector, specifically for navigation and guidance systems. 6. The absence of small business involvement is noted, with no set-aside or subcontracting indications.

Value Assessment

Rating: questionable

Benchmarking the value of this $501 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. The fixed-price structure provides some predictability, but the lack of competition means potential overpayment risks are elevated. Compared to similar sole-source awards in defense navigation systems, this contract's scale suggests a substantial, potentially critical, capability, but the absence of competitive pressure makes a definitive value-for-money assessment difficult.

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 solicited. The justification for this approach is not detailed here, but it typically implies that only one source possesses the necessary capabilities, technology, or security clearances. The lack of competition means there was no opportunity for price discovery through multiple bids, potentially leading to less favorable pricing for the government.

Taxpayer Impact: Taxpayers may have paid a premium for this system due to the absence of competitive pressure. Without competing offers, the government had limited leverage to negotiate the lowest possible price.

Public Impact

The Department of Defense is the primary beneficiary, receiving critical navigation and guidance systems. This contract supports the development and/or sustainment of advanced aeronautical and nautical navigation instruments. The geographic impact is primarily within Florida, where the contractor is located, but the systems likely have a nationwide or global operational impact for military assets. The contract likely supports a specialized workforce within Lockheed Martin, including engineers, technicians, and program managers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition increases the risk of paying above market rates.
Sole-source awards can stifle innovation by not encouraging new entrants or alternative solutions.
Limited transparency into the sole-source justification makes it hard to verify necessity.
Fixed-price contracts can still lead to cost overruns if scope is not well-defined or managed, though less risk than cost-plus.
Absence of small business participation may limit broader economic impact and diverse solutions.

Positive Signals

The fixed-price contract type provides cost certainty for the government, assuming scope is managed.
Lockheed Martin is a major defense contractor with a track record in complex systems, suggesting technical capability.
The contract duration implies a long-term need and potential for stable system support.
Awarding to an established prime contractor can streamline program management for critical defense needs.

Sector Analysis

This contract falls within the aerospace and defense sector, specifically focusing on the manufacturing of search, detection, navigation, guidance, aeronautical, and nautical systems and instruments. This is a highly specialized and technologically intensive area. The market is often characterized by high barriers to entry due to R&D costs, intellectual property, and stringent security requirements. Major defense contractors like Lockheed Martin dominate this space. Comparable spending benchmarks are difficult without knowing the specific system, but large-scale navigation system contracts can range from tens to hundreds of millions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor is there any indication of subcontracting plans for small businesses. The award to a large prime contractor like Lockheed Martin suggests that the primary focus was on established capabilities rather than fostering small business participation. This limits the opportunities for the small business ecosystem to engage with this specific procurement, although Lockheed Martin may engage small businesses through other channels.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. As a definitive contract, it implies a formal agreement with defined terms. Transparency is limited by the sole-source nature; however, contract awards are generally reported in federal databases. Accountability rests with Lockheed Martin to deliver the specified systems and with the DoD to manage the contract effectively and ensure adherence to terms. Inspector General jurisdiction would apply if fraud, waste, or abuse were suspected.

Related Government Programs

DoD Navigation Systems Procurement
Aeronautical Systems Manufacturing
Nautical Systems Manufacturing
Lockheed Martin Defense Contracts
Sole-Source Defense Awards
Fixed-Price Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for overpricing
Limited transparency on justification
No small business participation indicated

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $50.1 million to LOCKHEED MARTIN CORPORATION. TAS::17 1804::TAS TSS PRODUCTION IAW SECTION C HEREIN

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 $50.1 million.

What is the period of performance?

Start: 2008-03-31. End: 2010-11-30.

What specific navigation systems are being procured under this contract?

The provided data indicates the contract is for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' under NAICS code 334511. However, the specific type of navigation system (e.g., GPS-based, inertial, radar-based) or the intended platform (e.g., aircraft, ships, ground vehicles) is not detailed in the summary data. Further investigation into the contract's Statement of Work (Section C) would be required to identify the precise systems and their intended applications within the Department of Defense.

What was the justification for awarding this contract on a sole-source basis?

The data explicitly states the contract was 'NOT COMPETED' and is a 'SOLE-SOURCE' award. Typical justifications for sole-source contracts in defense include unique technological capabilities, proprietary data, urgent and compelling needs where only one source can meet the requirement, or specific security requirements. Without access to the official Justification and Approval (J&A) document associated with this contract, the precise reason for bypassing full and open competition remains unknown. This lack of transparency is a common concern with sole-source awards.

How does the $501 million contract value compare to similar navigation system procurements?

Direct comparison is difficult without knowing the specific system's scope and technological sophistication. However, $501 million is a substantial sum, indicating a significant procurement. Sole-source awards, by their nature, lack a competitive benchmark, making it hard to determine if this represents good value. Historically, large sole-source defense contracts often carry a premium compared to competitively bid programs. To assess value, one would need to compare the unit costs, performance specifications, and total lifecycle costs against similar systems procured competitively, if available, or against industry benchmarks for comparable technology.

What is Lockheed Martin Corporation's track record with similar DoD contracts?

Lockheed Martin Corporation is one of the largest defense contractors globally and has an extensive history of delivering complex systems, including navigation, guidance, and control technologies, to the Department of Defense. They are known for large-scale, high-value contracts across various defense platforms. While their technical capabilities are generally recognized, the performance and cost-effectiveness of specific contracts can vary. Reviewing their past performance ratings, any contract disputes, or program overruns on similar sole-source or competitively awarded navigation system contracts would provide further insight into their reliability and value delivery.

What are the potential risks associated with this sole-source contract?

The primary risk is the potential for the government to overpay due to the lack of competitive pricing. Without competing bids, there is less incentive for the contractor to offer the lowest possible price. Other risks include potential complacency from the contractor, reduced innovation if alternative solutions are not explored, and a lack of transparency regarding the necessity and pricing justification. Furthermore, if the system's requirements evolve, the sole-source nature could make modifications more complex and costly than if a competitive landscape existed.

What was the spending trend for this type of system prior to this contract?

The provided data only details this specific contract (ID 334511, awarded 2008). To understand historical spending patterns for similar navigation systems, one would need to analyze broader federal procurement data. This would involve querying databases like FPDS or USASpending for contracts under NAICS code 334511, or specific Product Service Codes (PSCs) related to navigation systems, across various agencies and years. Analyzing trends would reveal if this $501 million award represents an increase, decrease, or continuation of previous spending levels for comparable technologies.

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: N0016406R8599

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 5600 W SAND LAKE RD MP125, ORLANDO, FL, 32819

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

Financial Breakdown

Contract Ceiling: $50,111,329

Exercised Options: $50,111,329

Current Obligation: $50,111,329

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline