DoD's $1.18B R&D contract with Lockheed Martin shows high cost per research hour

Contract Overview

Contract Amount: $11,765,011 ($11.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-03-19

End Date: 2011-09-30

Contract Duration: 1,290 days

Daily Burn Rate: $9.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: 32-2228-08

Place of Performance

Location: LITTLETON, JEFFERSON County, COLORADO, 80127

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $11.8 million to LOCKHEED MARTIN CORPORATION for work described as: 32-2228-08 Key points: 1. The contract's value suggests a significant investment in advanced research and development. 2. Competition was robust, indicating a healthy market for these specialized R&D services. 3. The cost-plus-fixed-fee structure may incentivize cost overruns, posing a potential risk. 4. This contract falls within the R&D sector, focusing on physical, engineering, and life sciences. 5. The duration of the contract points to a long-term research objective. 6. The absence of small business set-asides means limited direct opportunities for smaller firms.

Value Assessment

Rating: fair

The contract's total award of $1.18 billion over approximately 4 years represents a substantial investment. Benchmarking the value is challenging without specific deliverables, but the duration and cost-plus-fixed-fee structure suggest a complex, long-term research effort. The fixed fee component provides some cost control, but the overall cost-plus nature warrants scrutiny for efficiency compared to fixed-price R&D contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple qualified contractors had the opportunity to bid. This level of competition is generally positive for price discovery and ensuring the government receives competitive offers. The fact that Lockheed Martin was selected indicates they provided the most advantageous offer based on the evaluation criteria.

Taxpayer Impact: Full and open competition typically leads to better value for taxpayers by driving down prices and encouraging innovation among bidders.

Public Impact

The Department of Defense benefits from advanced research capabilities in physical, engineering, and life sciences. This contract supports the development of new technologies potentially crucial for national security. The primary beneficiaries are the research and development teams at Lockheed Martin and its subcontractors. Geographic impact is likely concentrated around Lockheed Martin's research facilities, primarily in Colorado. Workforce implications include highly skilled scientists, engineers, and technicians.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can lead to cost overruns if not managed diligently.
The long duration of the contract may introduce risks related to evolving technological needs or market shifts.
Lack of small business participation limits broader economic impact and potential for innovative solutions from smaller firms.

Positive Signals

Awarded under full and open competition, suggesting strong market interest and competitive pricing.
The contract is with a prime contractor with a significant track record in defense R&D.
Focus on critical R&D areas aligns with strategic defense objectives.

Sector Analysis

This contract falls within the Research and Development sector, specifically NAICS code 541712 (Research and Development in the Physical, Engineering, and Life Sciences, except Biotechnology). This sector is characterized by high innovation, long development cycles, and significant government investment, particularly in defense. Comparable spending benchmarks are difficult without knowing the specific research area, but R&D contracts of this magnitude are common within the Department of Defense for developing next-generation technologies.

Small Business Impact

This contract was not set aside for small businesses, and the prime contractor, Lockheed Martin, is a large corporation. This means there were no direct set-aside requirements. However, large prime contractors are often required to subcontract a portion of their work to small businesses. The extent of subcontracting to small businesses will determine the indirect impact on the small business ecosystem for this specific contract.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The cost-plus-fixed-fee structure necessitates close monitoring of costs and progress to ensure value for money. Transparency is generally maintained through contract reporting requirements, though specific research details may be sensitive.

Related Government Programs

Department of Defense Research and Development Programs
Advanced Technology Development Contracts
Lockheed Martin Corporation Contracts
Cost-Plus-Fixed-Fee Contracts
National Security Research Initiatives

Risk Flags

Cost Overrun Risk (CPFF Structure)
Long-Term Project Management Challenges
Technological Obsolescence Risk
Limited Small Business Participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.8 million to LOCKHEED MARTIN CORPORATION. 32-2228-08

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 $11.8 million.

What is the period of performance?

Start: 2008-03-19. End: 2011-09-30.

What is Lockheed Martin's track record with similar Department of Defense R&D contracts?

Lockheed Martin Corporation is a major defense contractor with extensive experience in research and development across various domains for the Department of Defense. They have a long history of securing and executing large-scale R&D contracts, often involving complex systems and advanced technologies. Their track record includes numerous successful projects contributing to national security, though like any large contractor, they have also faced scrutiny regarding cost, schedule, and performance on specific programs. Analyzing their portfolio of past R&D awards, particularly those with similar cost structures (e.g., cost-plus) and research areas, would provide further context on their ability to deliver within budget and on time for this specific contract.

How does the value of this contract compare to other R&D spending within the Department of Defense?

The $1.18 billion awarded to Lockheed Martin for R&D is a significant sum, placing it among substantial investments within the DoD's research portfolio. The Department of Defense consistently allocates billions annually to R&D across various branches and agencies to maintain technological superiority. While this specific contract's value is high, it represents a portion of the overall DoD R&D budget, which can exceed tens of billions of dollars in any given fiscal year. To contextualize its value, one would compare it to the average award size for similar R&D efforts (e.g., physical, engineering, life sciences) and the total annual R&D spending by the DoD or specific services like the Air Force or Navy.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for R&D?

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for R&D revolve around cost control and potential for cost overruns. In a CPFF structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee. While the fixed fee provides some incentive for the contractor to control costs (as it doesn't increase with higher expenses), the government bears the risk of cost increases. If the research proves more complex or expensive than initially estimated, the total cost to the government can escalate significantly. Effective oversight, detailed cost tracking, and robust negotiation of the fixed fee are crucial to mitigate these risks and ensure value for taxpayer money.

How effective is full and open competition in ensuring value for money in R&D contracts?

Full and open competition is generally considered the most effective method for ensuring value for money in R&D contracts. By allowing all responsible sources to submit bids, the government maximizes the pool of potential offerors, fostering a competitive environment. This competition drives down prices, encourages innovation, and allows the government to select the offer that provides the best overall value, considering technical merit, past performance, and price. For R&D, where technical innovation is paramount, competition ensures that the government can access a wide range of ideas and capabilities, selecting the most promising solutions at a reasonable cost.

What are the implications of the contract's duration (1290 days) on its overall cost and effectiveness?

A contract duration of 1290 days (approximately 3.5 years) for R&D suggests a project with significant complexity and a long-term objective. Such durations are common in research where breakthroughs are not guaranteed and iterative development is necessary. While longer durations can allow for more thorough research and development, they also introduce risks. These include potential obsolescence of technology by the end of the period, shifts in strategic priorities, and the challenge of maintaining cost control over an extended timeframe. The effectiveness will depend on the contractor's ability to manage the project scope, adapt to potential changes, and deliver meaningful advancements within the specified period.

What is the significance of the 'Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)' NAICS code?

The NAICS code 541712 signifies that this contract is focused on scientific inquiry and experimentation aimed at discovering or developing new knowledge and products in the physical sciences (e.g., physics, chemistry, materials science), engineering disciplines (e.g., aerospace, mechanical, electrical), and life sciences (excluding biotechnology, which has its own code). This broad category covers a wide range of advanced research crucial for defense applications, such as developing new materials, improving weapon systems, enhancing communication technologies, or advancing medical countermeasures. Contracts under this code typically involve high levels of technical expertise and innovation.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: RESEARCH AND DEVELOPMENT › General Science and Technology R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: BASIC RESEARCH

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 4770 EASTGATE MALL LOCATION A, SAN DIEGO, CA, 92121

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

Financial Breakdown

Contract Ceiling: $12,177,810

Exercised Options: $12,177,810

Current Obligation: $11,765,011

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline