DoD's $16.1M Lockheed Martin contract for tactical systems integration lacks competition, raising value concerns

Contract Overview

Contract Amount: $16,096,692 ($16.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-09-01

End Date: 2025-03-31

Contract Duration: 942 days

Daily Burn Rate: $17.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: ENGINEERING SERVICES FOR TACTICAL SYSTEMS INTEGRATION SUPPORT.

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $16.1 million to LOCKHEED MARTIN CORPORATION for work described as: ENGINEERING SERVICES FOR TACTICAL SYSTEMS INTEGRATION SUPPORT. Key points: 1. The contract's sole-source nature limits price discovery and potentially inflates costs. 2. A high degree of contractor lock-in is evident due to the specialized nature of the services. 3. The extended duration of the contract (942 days) suggests a long-term need but also potential for cost overruns. 4. Performance risk is moderate, given the contractor's established presence in defense systems integration. 5. This contract falls within the broad professional, scientific, and technical services sector. 6. The absence of small business participation is noted, with no set-aside or subcontracting requirements. 7. The Cost Plus Fixed Fee (CPFF) contract type can incentivize cost escalation if not closely monitored.

Value Assessment

Rating: questionable

Benchmarking the value of this specific engineering services contract is challenging due to its specialized nature and lack of competitive bidding. The Cost Plus Fixed Fee (CPFF) structure, while common for complex R&D or integration efforts, carries inherent risks of cost escalation. Without competitive proposals to establish a baseline, it's difficult to definitively assess if the $16.1 million obligation represents a fair market price. The absence of comparable sole-source contracts for similar tactical systems integration support makes a direct price comparison problematic.

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 conduct a competitive solicitation. This approach is typically used when only one responsible source can provide the required services, often due to proprietary technology, unique capabilities, or urgent needs. The lack of competition means that potential cost savings that could arise from a bidding process were not realized, and the government did not benefit from a range of technical approaches or pricing structures.

Taxpayer Impact: Taxpayers may be paying a premium for these services due to the absence of competitive pressure. Without multiple bids, there is less assurance that the price reflects the lowest reasonable cost for the required engineering support.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Navy, receiving critical engineering support for tactical systems. The services delivered are essential for the integration and functionality of advanced military hardware. The geographic impact is primarily within the United States, supporting defense operations and potentially related industrial bases. Workforce implications include specialized engineering roles, likely benefiting highly skilled professionals within the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can incentivize cost growth if not rigorously managed.
Lack of small business participation means missed opportunities for smaller innovative firms.
Extended contract duration increases the risk of scope creep and budget overruns.
Specialized nature of services creates contractor dependency and limits future sourcing options.

Positive Signals

Contract awarded to a well-established defense contractor with proven expertise in systems integration.
Services are critical for maintaining and enhancing tactical system capabilities for national security.
The contract duration aligns with the expected lifecycle of complex defense systems.
The Department of the Navy has a clear need for this specialized technical support.

Sector Analysis

This contract falls under the 'All Other Professional, Scientific, and Technical Services' category, a broad sector encompassing a wide range of specialized expertise. The defense industry, a significant component of this sector, heavily relies on such services for research, development, integration, and sustainment of complex systems. Spending in this area is substantial, driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of tactical systems integration, but overall federal spending on professional and technical services runs into billions annually.

Small Business Impact

This contract does not include any small business set-aside provisions, nor does it appear to have specific subcontracting requirements for small businesses. The award to Lockheed Martin Corporation, a large prime contractor, suggests that opportunities for small businesses would primarily be through subcontracting, if any. The absence of explicit small business goals in the contract award documentation indicates a missed opportunity to leverage the innovation and agility of the small business ecosystem within the defense industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Given the Cost Plus Fixed Fee (CPFF) structure, rigorous financial oversight and auditing are crucial to ensure costs are reasonable and allocable. Transparency is facilitated through contract databases like FPDS, but detailed performance metrics and cost breakdowns may be less publicly accessible due to the sensitive nature of defense systems. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Systems Integration Support
Tactical Systems Engineering
Professional, Scientific, and Technical Services
Department of the Navy Contracts
Cost Plus Fixed Fee Contracts
Sole Source Procurements

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of small business participation
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.1 million to LOCKHEED MARTIN CORPORATION. ENGINEERING SERVICES FOR TACTICAL SYSTEMS INTEGRATION SUPPORT.

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 $16.1 million.

What is the period of performance?

Start: 2022-09-01. End: 2025-03-31.

What is Lockheed Martin Corporation's track record with similar sole-source contracts for tactical systems integration?

Lockheed Martin Corporation is a major defense contractor with extensive experience in systems integration across various platforms, including tactical systems. They frequently engage in sole-source or limited-competition contracts due to their established role in developing and maintaining complex defense technologies. Analyzing their past performance on similar sole-source awards would involve reviewing contract histories for cost overruns, schedule delays, and performance issues. While specific data on all sole-source contracts is not always public, their overall performance ratings and past contract awards suggest a capability to deliver, though the lack of competition inherently limits external validation of value for money on any single award.

How does the $16.1 million value compare to market rates for comparable engineering services?

Directly comparing the $16.1 million value to market rates for comparable engineering services is challenging due to the specialized nature of 'tactical systems integration support' and the sole-source award. Market rates are typically established through competitive bidding processes where multiple vendors offer proposals. In a sole-source scenario, the government relies on negotiation and internal cost analysis, which may not fully capture the most competitive pricing available. Without access to detailed cost breakdowns or comparable sole-source contracts for similar niche services, it's difficult to definitively benchmark this price against industry standards. However, the absence of competition suggests a potential for higher-than-market pricing.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for this type of service?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract, like the one awarded to Lockheed Martin, is the potential for cost escalation. In a CPFF structure, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This can incentivize contractors to incur higher costs, as their fee remains constant regardless of the total project expenditure. Effective oversight, stringent cost controls, and clear definition of allowable costs are critical to mitigate this risk. Without robust management, the government may end up paying significantly more than initially anticipated, especially on long-duration projects.

What is the historical spending pattern for tactical systems integration support by the Department of the Navy?

Historical spending patterns for tactical systems integration support by the Department of the Navy are substantial, reflecting the continuous need to modernize and maintain advanced military capabilities. While specific figures for 'tactical systems integration support' as a distinct category can fluctuate year-to-year and are often embedded within broader research, development, testing, and evaluation (RDT&E) or procurement budgets, the overall trend indicates consistent investment. The Navy procures a wide array of complex systems, from naval vessels and aircraft to communication and sensor networks, all requiring sophisticated integration services. Spending in this area is influenced by geopolitical factors, technological advancements, and strategic defense priorities, often involving multi-year contracts with major defense contractors.

What are the implications of awarding this contract solely to Lockheed Martin Corporation?

Awarding this contract solely to Lockheed Martin Corporation has several implications. Firstly, it reinforces the company's position as a key provider of tactical systems integration services to the Department of the Navy, potentially leading to further sole-source awards in the future due to established familiarity and expertise. Secondly, it limits opportunities for other capable contractors, including small businesses, to enter or expand their presence in this specific market segment. Thirdly, it concentrates critical knowledge and capabilities within a single entity, which can create dependency and potentially reduce leverage for the government in future negotiations. Finally, it places a greater onus on the government to ensure robust oversight and performance management to mitigate risks associated with a lack of competition.

Are there any performance metrics or key performance indicators (KPIs) publicly available for this contract?

Publicly available performance metrics or Key Performance Indicators (KPIs) for specific defense contracts, especially those involving sensitive tactical systems integration, are often limited. While contract award databases like FPDS provide basic information on the award itself, detailed performance data, quality assurance reports, or specific KPIs are typically considered internal government documents or proprietary information. The Department of the Navy would have internal mechanisms to track Lockheed Martin's performance against contract requirements, but these are not generally released to the public due to national security considerations and the desire to protect procurement-sensitive information. Contract modifications or task orders might contain some performance clauses, but these are also not always readily accessible.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0016720R0001

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 9500 GODWIN DR, MANASSAS, VA, 20110

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: $16,809,149

Exercised Options: $16,809,149

Current Obligation: $16,096,692

Subaward Activity

Number of Subawards: 59

Total Subaward Amount: $6,084,371

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0016721D0007

IDV Type: IDC

Timeline