DoD awards $363M for MH-60R/S aircraft supply support, with Lockheed Martin as sole provider

Contract Overview

Contract Amount: $362,852,552 ($362.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-10-01

End Date: 2021-09-30

Contract Duration: 364 days

Daily Burn Rate: $996.8K/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 $362.9 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 focuses on performance-based logistics for weapon and shop replaceable assemblies. 2. Sole-source award raises questions about price competitiveness and potential for cost savings. 3. Limited competition may indicate unique contractor capabilities or market concentration. 4. Contract duration of one year suggests a need for ongoing performance evaluation. 5. The award falls within the 'Other Aircraft Parts' manufacturing sector. 6. No small business set-aside was utilized, impacting potential for small business participation.

Value Assessment

Rating: fair

The contract's value of $363 million for a one-year period of performance for supply support of MH-60R/S aircraft assemblies appears substantial. Benchmarking this against similar performance-based logistics contracts for complex military aircraft is challenging due to the specific nature of the assemblies and the sole-source award. Without competitive bids, it is difficult to definitively assess if the pricing represents optimal value for money. The contract's structure, however, aims to incentivize contractor performance through PBL, which can lead to efficiencies if managed effectively.

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 considered. This approach is typically justified when a single source possesses unique capabilities, proprietary technology, or when urgent needs preclude a competitive process. The lack of competition limits the government's ability to leverage market forces to drive down prices and explore alternative solutions, potentially leading to higher costs than a competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government has less leverage to negotiate favorable terms and pricing when only one provider is available.

Public Impact

The primary beneficiaries are the U.S. Navy's MH-60R and MH-60S helicopter fleets, ensuring operational readiness. Services delivered include the supply and support of approximately 1,049 weapon and shop replaceable assemblies. The geographic impact is national, supporting naval aviation readiness across various operational theaters. Workforce implications include the potential for sustained employment at Lockheed Martin and its supply chain partners involved in these aircraft components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings.
Lack of competition may reduce incentive for cost optimization by the contractor.
Performance-based logistics can be complex to manage and measure effectively.
Reliance on a single contractor for critical components poses supply chain risk.

Positive Signals

Performance-based logistics aims to improve readiness and reduce total ownership costs.
Focus on specific aircraft assemblies ensures specialized support.
Contractor is a known entity with established experience on these platforms.

Sector Analysis

This contract operates 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 manufacturers and the Department of Defense. Spending in this sub-sector is driven by military modernization programs and sustainment efforts for existing fleets. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of weapon replaceable assemblies and the sole-source award.

Small Business Impact

This contract was not awarded as a small business set-aside, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. Consequently, the direct impact on the small business ecosystem is likely minimal unless Lockheed Martin voluntarily includes small businesses in its supply chain for this contract. The absence of set-asides means opportunities for small businesses to directly compete for this significant portion of defense spending are foregone.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the performance-based logistics (PBL) framework, which links payment to contractor performance metrics. Transparency is generally maintained through contract databases and reporting requirements, although the specifics of performance metrics and achieved outcomes may not always be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

MH-60R Seahawk Program
MH-60S Knighthawk Program
Naval Aviation Sustainment Contracts
Aerospace Parts Manufacturing
Defense Logistics Support

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Supply chain dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $362.9 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 $362.9 million.

What is the period of performance?

Start: 2020-10-01. End: 2021-09-30.

What is Lockheed Martin's track record with MH-60R/S aircraft support contracts?

Lockheed Martin Corporation, through its various divisions and acquisitions, has a long-standing history of supporting the MH-60R and MH-60S helicopter programs, which are operated by the U.S. Navy. As the prime contractor for these platforms, they are deeply involved in their development, production, and sustainment. This includes providing various components, systems, and logistics support. Their extensive experience with these specific aircraft suggests a deep understanding of their operational requirements and the associated supply chain needs for components like weapon replaceable assemblies (WRAs) and shop replaceable assemblies (SRAs). Past performance data, often detailed in contract award justifications and performance reviews, would provide a more granular view of their reliability, responsiveness, and cost-effectiveness in fulfilling similar support roles.

How does the $363 million contract value compare to historical spending on MH-60R/S supply support?

The $363 million contract value represents the total obligated amount for a one-year period (October 1, 2020, to September 30, 2021) for supply support of WRAs and SRAs for the MH-60R/S aircraft. To compare this to historical spending, one would need to examine prior contracts for similar services. This would involve looking at annual spending figures for logistics support, spare parts, and maintenance for these helicopter types over previous years. Factors such as inflation, changes in fleet size, operational tempo, and evolving sustainment strategies (e.g., shifts towards Performance-Based Logistics) would influence year-over-year comparisons. Without access to detailed historical contract data for these specific assemblies and support types, a precise comparison is difficult, but this figure provides a significant data point for annual sustainment investment.

What are the primary risks associated with a sole-source award for critical aircraft components?

The primary risks associated with a sole-source award for critical aircraft components like WRAs and SRAs are multifaceted. Firstly, there is a significant risk of elevated costs due to the lack of competitive bidding. Without market pressure, the sole contractor may not be incentivized to offer the most competitive pricing, potentially leading to overpayment by the government. Secondly, there's a risk of reduced innovation and efficiency, as the contractor faces less pressure to improve processes or develop cost-saving alternatives. Thirdly, a sole-source dependency creates a critical supply chain vulnerability; any disruption at the contractor's end—be it production issues, financial instability, or geopolitical factors—can have immediate and severe impacts on fleet readiness. Finally, it limits the government's flexibility to switch to alternative suppliers or technologies if they become available or more advantageous.

How effective is Performance-Based Logistics (PBL) in ensuring value for money in defense contracts?

Performance-Based Logistics (PBL) is designed to improve weapon system readiness and reduce total ownership costs by shifting the focus from transactional parts sales to achieving specific performance outcomes. When implemented effectively, PBL can enhance value for money by incentivizing the contractor to manage inventory, reduce lead times, improve reliability, and optimize maintenance processes. The contractor assumes greater risk and reward tied to achieving agreed-upon performance metrics (e.g., system availability, response times). However, the effectiveness hinges on the clarity and measurability of these metrics, the robustness of the incentive structure, and the government's ability to effectively manage and oversee the PBL arrangement. Poorly defined metrics or inadequate oversight can undermine the intended benefits, potentially leading to costs not being fully controlled or performance targets not being met.

What is the typical market structure for specialized aircraft parts like WRAs and SRAs?

The market structure for specialized aircraft parts, such as Weapon Replaceable Assemblies (WRAs) and Shop Replaceable Assemblies (SRAs) for military platforms like the MH-60R/S, is often characterized by high concentration and limited competition. This is due to several factors: the original equipment manufacturer (OEM), often a major defense contractor like Lockheed Martin, typically holds the design control and intellectual property rights for these components. Production often requires specialized manufacturing capabilities, stringent quality control processes, and adherence to military specifications, creating high barriers to entry for new suppliers. Furthermore, the relatively small volume of demand for specific parts for aging or specialized fleets, compared to commercial markets, makes it economically challenging for multiple companies to invest in production lines. This often leads to situations where the OEM or a select few authorized suppliers are the only viable sources, resulting in sole-source or limited-competition procurements.

What are the implications of this contract being a Firm Fixed Price (FFP) type?

The contract being a Firm Fixed Price (FFP) type has significant implications for both the government and the contractor. For the government, FFP offers the highest degree of cost certainty, as the price is fixed regardless of the contractor's actual costs incurred. This protects the buyer from cost overruns. However, this certainty comes at the cost of potentially paying a higher initial price, as the contractor will likely build in a contingency to cover unforeseen risks and costs. For the contractor, FFP places the burden of managing costs and risks squarely on their shoulders. They stand to gain higher profits if they can perform the work efficiently and below the anticipated cost, but they also face the risk of losses if costs exceed the fixed price. In the context of a sole-source award, the FFP structure still provides cost predictability for the government, but the absence of competition means the 'fixed' price might not be as competitive as it could be in a different contracting scenario.

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

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: $362,852,552

Exercised Options: $362,852,552

Current Obligation: $362,852,552

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $2,851

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0038320DW001

IDV Type: IDC

Timeline