Navy's $260M MH-60R/S aircraft parts contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $259,847,675 ($259.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-02-01

End Date: 2020-09-30

Contract Duration: 242 days

Daily Burn Rate: $1.1M/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FIRM FIXED PRICE (FFP) PERFORMANCE BASED LOGISTICS (PBL) CONTRACT FOR SUPPLY SUPPORT OF APPROXIMATELY 1,049 WEAPON REPLACEABLE ASSEMBLIES (WRAS)&SHOP REPLACEABLE ASSEMBLIES (SRAS) ASSOCIATED WITH BOTH THE MH-60R&MH-60S AIRCRAFT.

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $259.8 million to LOCKHEED MARTIN CORPORATION for work described as: FIRM FIXED PRICE (FFP) PERFORMANCE BASED LOGISTICS (PBL) CONTRACT FOR SUPPLY SUPPORT OF APPROXIMATELY 1,049 WEAPON REPLACEABLE ASSEMBLIES (WRAS)&SHOP REPLACEABLE ASSEMBLIES (SRAS) ASSOCIATED WITH BOTH THE MH-60R&MH-60S AIRCRAFT. Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Performance-based logistics (PBL) structure aims to incentivize contractor efficiency and availability. 3. Focus on weapon and shop replaceable assemblies suggests critical component support for fleet readiness. 4. The contract duration of 242 days is relatively short for a major logistics support effort. 5. Lack of competition raises concerns about value for money and potential for cost overruns. 6. The contract's value is substantial, indicating significant reliance on the awarded firm.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specific focus on unique aircraft parts. Without competitive bids, it's difficult to assess if the $260 million price reflects fair market value or if it's inflated. The performance-based logistics (PBL) aspect, however, suggests an attempt to tie payment to outcomes, which can be a positive indicator if well-defined and monitored. Further analysis would require comparing the unit costs of the specific assemblies to historical data or industry benchmarks, which are not readily available in the provided data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when only one vendor can provide the required goods or services, often due to proprietary technology, unique expertise, or existing infrastructure. The absence of competition means that the Department of the Navy did not solicit bids from multiple suppliers, which can limit opportunities for price negotiation and potentially lead to higher costs for the government. The rationale for this sole-source award would need further investigation to understand if it was truly justified.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive bidding. Without multiple offers, there is less pressure on the contractor to offer the lowest possible price, potentially leading to less efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Navy's MH-60R and MH-60S helicopter fleets, ensuring operational readiness. Services delivered include supply support for approximately 1,049 critical weapon and shop replaceable assemblies. Geographic impact is national, supporting naval aviation readiness across various operational theaters. Workforce implications include maintaining specialized logistics and maintenance personnel within the contractor's organization and potentially within the Navy's maintenance depots.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Lack of transparency in the justification for sole-sourcing.
Performance-based metrics need rigorous oversight to ensure value.
Short contract duration may indicate a stop-gap measure or require subsequent competitive actions.

Positive Signals

Performance-based logistics (PBL) structure can drive efficiency and availability.
Focus on critical assemblies supports high-readiness requirements for MH-60 fleets.
Contractor (Lockheed Martin) is a major defense supplier with established capabilities.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for specialized military aircraft components is often characterized by high barriers to entry, proprietary technology, and long-standing relationships between government agencies and prime contractors. Spending in this area is critical for maintaining the operational readiness of aging and advanced military platforms. Comparable spending benchmarks would typically involve analyzing other PBL contracts for similar high-value, complex weapon systems.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a stated criterion or outcome for this contract. As a sole-source award to a large prime contractor, there is a potential for limited subcontracting opportunities for small businesses unless specifically mandated or pursued by the prime. This contract does not appear to be a small business set-aside, and its structure may not actively foster the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given it's a sole-source award, scrutiny on performance metrics and cost justification would be crucial. Transparency is limited by the non-competitive nature. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected. The performance-based logistics (PBL) structure necessitates robust monitoring of contractor performance against defined outcomes.

Related Government Programs

MH-60R Seahawk Program
MH-60S Knighthawk Program
Naval Aviation Logistics Command Management Information System (NALCOMIS)
Defense Logistics Agency (DLA) Aviation

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $259.8 million to LOCKHEED MARTIN CORPORATION. FIRM FIXED PRICE (FFP) PERFORMANCE BASED LOGISTICS (PBL) CONTRACT FOR SUPPLY SUPPORT OF APPROXIMATELY 1,049 WEAPON REPLACEABLE ASSEMBLIES (WRAS)&SHOP REPLACEABLE ASSEMBLIES (SRAS) ASSOCIATED WITH BOTH THE MH-60R&MH-60S AIRCRAFT.

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 $259.8 million.

What is the period of performance?

Start: 2020-02-01. End: 2020-09-30.

What is the historical spending pattern for supply support of MH-60R/S aircraft assemblies by the Department of the Navy?

Analyzing historical spending for MH-60R/S aircraft assemblies requires access to detailed contract databases beyond the provided summary. Typically, such support contracts are long-term and involve significant investment due to the complexity and criticality of the components. Past spending would likely show a pattern of sole-source or limited-competition awards to incumbent contractors like Lockheed Martin, reflecting the specialized nature of the parts and the need for sustainment. Fluctuations in spending could be driven by fleet size changes, modernization programs, or the introduction of new weapon replaceable assemblies (WRAs) and shop replaceable assemblies (SRAs). Without specific historical data, it's difficult to ascertain if the current $260 million award represents an increase or decrease compared to previous periods on a like-for-like basis.

How does the performance-based logistics (PBL) structure of this contract compare to industry best practices for aircraft sustainment?

Performance-based logistics (PBL) is a widely adopted strategy in defense contracting aimed at improving weapon system readiness and reducing total ownership costs by incentivizing contractor performance. Best practices for PBL involve clearly defined, measurable performance metrics (e.g., item availability, response times, system uptime) tied directly to mission requirements. Payments are often linked to achieving these metrics, shifting the focus from transactional parts sales to integrated system support. For MH-60R/S sustainment, a well-structured PBL contract should encompass not just parts supply but also maintenance, repair, and overhaul, potentially including diagnostics and prognostics. The success of this contract's PBL structure hinges on the clarity and attainability of its performance standards and the robustness of the Navy's oversight mechanisms to ensure Lockheed Martin is delivering tangible value and readiness improvements, not just meeting minimum contractual obligations.

What are the specific risks associated with a sole-source award for critical aircraft components like WRAs and SRAs?

Sole-source awards for critical aircraft components like Weapon Replaceable Assemblies (WRAs) and Shop Replaceable Assemblies (SRAs) carry several significant risks. Foremost is the risk of inflated pricing, as the absence of competition removes the primary mechanism for driving down costs. The government may end up paying more than necessary for these essential parts. Secondly, there's a risk of reduced innovation and responsiveness; without competitive pressure, the sole-source provider may have less incentive to invest in process improvements, develop more cost-effective solutions, or expedite delivery. Furthermore, a sole-source dependency can create strategic vulnerabilities. If the contractor faces production issues, financial instability, or decides to discontinue support for certain parts, the government has limited alternatives, potentially jeopardizing fleet readiness. Ensuring robust contract management and performance monitoring becomes paramount in mitigating these risks.

What is Lockheed Martin's track record in providing logistics support for naval aviation platforms?

Lockheed Martin, as a major defense contractor, has an extensive track record in providing logistics support for numerous naval aviation platforms, including the MH-60 series helicopters. They are the prime contractor for the MH-60R and MH-60S programs, which inherently involves sustainment and supply chain management for critical components. Their experience encompasses managing complex supply chains, providing maintenance, repair, and overhaul (MRO) services, and implementing performance-based logistics (PBL) strategies. While specific performance metrics for past contracts are not detailed here, Lockheed Martin's long-standing role suggests a deep understanding of the platform's requirements and established capabilities. However, like any large contractor, oversight is crucial to ensure consistent performance, fair pricing, and adherence to contractual obligations across all their support agreements.

How does the value of this contract compare to other major sustainment contracts for similar military aircraft?

Comparing the $260 million value of this specific contract requires context regarding its duration (242 days) and scope (supply support for ~1,049 WRAs/SRAs). Annualized, this contract represents approximately $130 million per year. Sustainment contracts for complex military aircraft, especially those involving performance-based logistics (PBL), can range from tens of millions to billions of dollars over their lifecycle, depending on the platform's age, fleet size, operational tempo, and the breadth of services included (e.g., MRO, training, engineering support). For instance, major fighter or bomber aircraft sustainment programs often exceed hundreds of millions annually. The MH-60R/S contract appears substantial for its defined period and scope, but its true comparability hinges on whether it represents a full sustainment package or a specific component support effort. Without knowing the exact number of aircraft supported and the specific WRAs/SRAs covered, direct comparison is difficult.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Aircraft Parts and Auxiliary Equipment Manufacturing

Product/Service Code: AEROSPACE CRAFT COMPONENTS AND ACCESSORIES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 1801 STATE RT 17 C, OWEGO, NY, 13827

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: $259,847,675

Exercised Options: $259,847,675

Current Obligation: $259,847,675

Subaward Activity

Number of Subawards: 739

Total Subaward Amount: $959,842,523

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0038320DW001

IDV Type: IDC

Timeline