DoD's $12.6M contract for navigation systems awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $12,662,600 ($12.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-09-27

End Date: 2021-02-01

Contract Duration: 1,223 days

Daily Burn Rate: $10.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::CT::IGF

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $12.7 million to LOCKHEED MARTIN CORPORATION for work described as: IGF::CT::IGF Key points: 1. The contract was awarded on a sole-source basis, raising questions about potential price overruns. 2. The duration of the contract (1223 days) suggests a long-term need for these navigation systems. 3. The use of a Cost Plus Fixed Fee (CPFF) pricing structure can incentivize cost overruns. 4. The lack of competition limits opportunities for innovative solutions and potentially lower prices. 5. The contract falls under the 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' NAICS code. 6. The contract was awarded to a single, large defense contractor, potentially excluding smaller, specialized firms.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the sole-source award and lack of publicly available cost breakdowns. The CPFF structure, while common in complex defense procurements, carries inherent risks of cost escalation. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value or if taxpayers received the best possible deal. Further analysis of historical pricing for similar navigation systems and Lockheed Martin's performance on prior contracts would be needed for a more definitive assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning the Department of Defense did not conduct a competitive bidding process. This typically occurs when only one vendor is capable of meeting the requirement, or in cases of urgent need. The absence of competition means that potential cost savings and innovation that could arise from multiple bidders vying for the contract were not realized. This approach can sometimes lead to higher prices and less favorable terms for the government.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium for these navigation systems, as there was no market pressure to drive down costs. It also limits the government's ability to explore a wider range of technological solutions.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, which will receive advanced navigation systems. These systems are crucial for the operational effectiveness and safety of naval assets. The contract supports high-tech manufacturing jobs within the aerospace and defense sector, likely concentrated in Florida where the contractor has a presence. The successful deployment of these systems contributes to national security by enhancing the capabilities of military platforms.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Cost Plus Fixed Fee contract type can incentivize cost overruns if not closely managed.
Lack of competition may restrict access to potentially more innovative or cost-effective solutions from other vendors.
Long contract duration (1223 days) increases exposure to potential cost increases over time.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to established expertise and technology.
The contract addresses a critical need for navigation systems within the Department of Defense.
The specific NAICS code indicates a focus on a specialized and technologically advanced manufacturing area.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on navigation systems. This is a highly specialized and technologically intensive industry characterized by long development cycles, significant R&D investment, and a limited number of large, established players. The market size for such defense-related systems is substantial, driven by ongoing military modernization and operational requirements globally. Comparable spending benchmarks would typically involve other large-scale defense procurements for similar electronic warfare or guidance systems.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for them based on the available data. The award to a large prime contractor like Lockheed Martin suggests that the primary work will be performed by the contractor or its large-tier subcontractors. This limits the direct impact on the small business ecosystem within this specific procurement, although the overall defense industrial base does rely on small business suppliers.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Inspector General's office may conduct audits or investigations into contract performance and costs, particularly given the CPFF structure. Transparency is generally limited in sole-source defense contracts, but reporting requirements on cost and performance are typically mandated. Accountability rests with the contracting officer and program managers to ensure the contractor meets the terms and objectives of the contract.

Related Government Programs

Defense Logistics Agency (DLA) procurement of electronic components
Naval Air Systems Command (NAVAIR) research and development contracts
Air Force Life Cycle Management Center (AFLCMC) avionics procurements
Department of Defense procurement of guidance, navigation, and control systems

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of competitive pricing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.7 million to LOCKHEED MARTIN CORPORATION. IGF::CT::IGF

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 $12.7 million.

What is the period of performance?

Start: 2017-09-27. End: 2021-02-01.

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

Assessing Lockheed Martin's track record with similar sole-source navigation system contracts requires a deep dive into historical contract data. Generally, large defense contractors like Lockheed Martin have extensive experience fulfilling complex sole-source requirements due to their established capabilities and long-standing relationships with government agencies. However, sole-source awards, by their nature, lack the transparency of competitive processes. To evaluate their performance, one would need to examine past contracts for cost overruns, schedule adherence, and the quality of delivered systems. Data on previous CPFF contracts awarded to Lockheed Martin for navigation systems would be particularly relevant. Publicly available contract databases and Inspector General reports can sometimes offer insights into performance issues or successes. Without specific data on comparable contracts, it's difficult to definitively state their track record, but their position as a major defense contractor implies a significant history of such awards.

How does the $12.6 million value compare to similar navigation system procurements?

Comparing the $12.6 million value of this contract to similar procurements is challenging without more specific details on the exact nature of the navigation systems and their intended application. However, for context, the Department of Defense procures a wide range of navigation systems, from components for individual soldier equipment to complex integrated systems for aircraft and ships. The value can range from thousands to billions of dollars. Given this contract's duration (1223 days) and its award to a major contractor for system manufacturing, $12.6 million appears to be a moderate-sized award within the broader defense procurement landscape. To make a more precise comparison, one would need to identify contracts with similar technical specifications, quantities, and contract types (like CPFF) awarded competitively or non-competitively within the last few years. The sole-source nature of this award also complicates direct value comparisons, as competitive bids often drive prices down.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for navigation systems?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract, like the one awarded to Lockheed Martin, is the potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fee is fixed, the contractor has less incentive to control costs compared to fixed-price contracts, as cost savings do not directly increase their profit margin. This can lead to 'cost-plus' behavior where efficiency is not prioritized. For complex systems like navigation equipment, where development and production costs can be difficult to estimate accurately upfront, this risk is amplified. Effective oversight, stringent cost accounting standards, and clear performance metrics are crucial to mitigate these risks and ensure the government does not overpay. The government bears the risk of cost increases, while the contractor is assured a fixed profit.

How effective are sole-source procurements in meeting urgent defense needs?

Sole-source procurements can be effective in meeting urgent defense needs, but they come with significant trade-offs. When there is a critical, time-sensitive requirement and only one known source capable of fulfilling it, a sole-source award allows the government to bypass the lengthy competitive bidding process. This can expedite delivery and ensure that essential capabilities are acquired quickly. However, this speed comes at the potential cost of higher prices and reduced innovation, as competition is absent. The justification for sole-source awards typically requires rigorous documentation to ensure it is truly necessary and not simply a matter of convenience. While effective for urgency, their routine use can undermine the principles of fair and open competition, potentially leading to less value for taxpayer money in the long run.

What is the historical spending trend for navigation system manufacturing by the Department of Defense?

Historical spending trends for navigation system manufacturing by the Department of Defense are substantial and generally increasing, driven by technological advancements and the need for sophisticated military capabilities. The DoD consistently invests billions of dollars annually in various electronic systems, including navigation, guidance, and control. This specific contract, valued at $12.6 million, represents a small fraction of the overall DoD budget for such systems. Over the past decade, there has been a continuous push towards more precise, resilient, and integrated navigation solutions, including those resistant to jamming or spoofing. Spending patterns are influenced by geopolitical factors, modernization programs, and the phasing out of older technologies. Analyzing trends requires looking at aggregate spending across relevant NAICS codes and contract types over multiple fiscal years to identify patterns and growth areas.

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: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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

Financial Breakdown

Contract Ceiling: $12,737,758

Exercised Options: $12,662,600

Current Obligation: $12,662,600

Actual Outlays: $1,832,039

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0016416GJQ87

IDV Type: BOA

Timeline