DoD awards $367M contract for MH-60R/S helicopter parts, raising questions about competition and value

Contract Overview

Contract Amount: $367,104,747 ($367.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-10-01

End Date: 2024-04-30

Contract Duration: 577 days

Daily Burn Rate: $636.2K/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.

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $367.1 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. 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 performance and reduce long-term costs. 3. Focus on weapon and shop replaceable assemblies suggests critical support for fleet readiness. 4. Lack of competition raises concerns about whether the government secured the best possible pricing. 5. Contract duration of nearly two years indicates a significant, ongoing need for these parts. 6. The contract's value, while substantial, needs benchmarking against similar support contracts for context.

Value Assessment

Rating: questionable

The contract's value of $367 million for supply support of MH-60R & MH-60S weapon and shop replaceable assemblies is substantial. Without a competitive bidding process, it is difficult to definitively assess if this represents excellent value for money. Benchmarking against similar performance-based logistics contracts for aviation components would be necessary to provide a more precise value assessment. The firm fixed-price nature offers some cost certainty, but the lack of competition is a significant factor in evaluating overall value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach bypasses the standard competitive procurement process, which typically involves multiple bidders vying for the contract. While sole-source awards can be justified under specific circumstances (e.g., unique capabilities, urgent needs), they generally lead to less robust price discovery and can potentially result in higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The absence of competition means taxpayers may not benefit from the cost savings typically achieved through a bidding process. This could translate to a higher overall expenditure for the required parts and support services.

Public Impact

The primary beneficiaries are the U.S. Navy and Marine Corps, ensuring the operational readiness of their MH-60R and MH-60S Seahawk helicopters. The contract delivers essential supply support for approximately 1,049 weapon replaceable assemblies (WRAs) and shop replaceable assemblies (SRAs). This support is critical for maintaining the flight hours and mission capabilities of these vital rotary-wing aircraft. The contract has implications for the aviation maintenance workforce, ensuring they have the necessary parts to perform their duties.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to suboptimal pricing for taxpayers.
Lack of transparency in the procurement process due to non-competition makes value assessment challenging.
Reliance on a single contractor for critical parts could create supply chain vulnerabilities if not managed effectively.

Positive Signals

Performance-Based Logistics (PBL) contract structure incentivizes contractor performance and long-term cost efficiency.
Firm Fixed Price (FFP) contract type provides cost certainty for the government.
Focus on WRAs and SRAs directly supports fleet readiness and operational availability of MH-60R/S helicopters.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, specifically focusing on aircraft parts and auxiliary equipment. The market for specialized helicopter components and logistics support is often characterized by high barriers to entry due to technical expertise, certifications, and established relationships with defense agencies. While the overall market for aircraft parts is significant, contracts for specific platforms like the MH-60 series are often concentrated among a few key suppliers or original equipment manufacturers.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a stated objective or requirement for this contract. This suggests that the contract was not set aside for small businesses, nor does it appear to have specific subcontracting goals for small businesses outlined in the award details. Consequently, the direct impact on the small business ecosystem from this specific award is likely minimal, unless Lockheed Martin voluntarily engages small businesses in its supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a firm fixed-price contract, oversight would focus on ensuring delivery of specified parts and adherence to performance metrics outlined in the Performance-Based Logistics (PBL) agreement. Transparency is limited by the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

MH-60R Seahawk Helicopter Support
MH-60S Seahawk Helicopter Support
Naval Aviation Readiness Programs
Aircraft Parts Manufacturing
Logistics Support Services

Risk Flags

Sole-source award
Lack of competition
Potential for price escalation
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $367.1 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.

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 $367.1 million.

What is the period of performance?

Start: 2022-10-01. End: 2024-04-30.

What is Lockheed Martin Corporation's track record with similar performance-based logistics (PBL) contracts for naval aviation?

Lockheed Martin Corporation has a significant history of managing complex logistics and support contracts for various defense platforms, including naval aviation. They are a primary contractor for the MH-60R/S Seahawk helicopters themselves, which positions them well to understand the intricacies of their support requirements. Their experience with PBL contracts generally involves managing the availability and sustainment of critical components, aiming to improve readiness rates and reduce total ownership costs. However, the specific performance metrics, historical success rates, and cost-effectiveness of their past PBL contracts for similar naval aviation assets would require a deeper dive into program-specific data and performance reviews. Assessing their track record on this specific contract would involve examining delivery performance, cost trends, and achievement of availability targets over its duration.

How does the $367 million contract value compare to historical spending on MH-60R/S supply support?

To accurately compare this $367 million contract value to historical spending, one would need to analyze the total obligated amounts and contract actions for MH-60R/S supply support over previous years. This would involve querying contract databases for similar contracts awarded to Lockheed Martin or other potential suppliers for WRAs and SRAs for these helicopter variants. Factors such as inflation, changes in fleet size, operational tempo, and technological upgrades would need to be considered for a meaningful comparison. Without this historical data, it's challenging to determine if this award represents an increase, decrease, or stable level of spending for this category of support.

What are the primary risks associated with a sole-source award for critical helicopter parts?

The primary risks associated with a sole-source award for critical helicopter parts like those for the MH-60R/S are multifaceted. Firstly, the lack of competition can lead to inflated pricing, as the contractor faces no pressure to offer the most cost-effective solution. Secondly, it can reduce incentives for innovation and efficiency, as the contractor may not need to compete on service or product improvement. Thirdly, it creates a dependency on a single supplier, which can introduce supply chain vulnerabilities. If the sole-source contractor experiences production issues, financial instability, or decides to discontinue support, the government may face significant disruptions to fleet readiness. Finally, it limits the government's ability to leverage market dynamics to secure better terms or explore alternative solutions.

What are the expected performance outcomes and metrics for this Performance-Based Logistics (PBL) contract?

While the specific performance metrics are not detailed in the provided data, Performance-Based Logistics (PBL) contracts typically focus on achieving specific outcomes related to system readiness, availability, and reliability, rather than just the delivery of parts. For this contract supporting MH-60R/S WRAs and SRAs, expected performance outcomes likely include maintaining a certain percentage of parts availability, ensuring timely delivery of replacements, minimizing repair turnaround times, and potentially reducing the overall cost of ownership for these components. The contractor is incentivized to meet or exceed these targets, often with financial rewards, and may face penalties for failing to do so. The success of the contract hinges on clearly defined, measurable, achievable, relevant, and time-bound (SMART) performance metrics.

What is the significance of the 'Other Aircraft Parts and Auxiliary Equipment Manufacturing' NAICS code (336413) in relation to this contract?

The North American Industry Classification System (NAICS) code 336413, 'Other Aircraft Parts and Auxiliary Equipment Manufacturing,' signifies the primary industry classification for the goods and services being procured under this contract. This code encompasses establishments primarily engaged in manufacturing aircraft parts and auxiliary equipment, such as engines, propellers, landing gear, avionics, and other components, but not the complete aircraft. For this contract, it specifically covers the supply of Weapon Replaceable Assemblies (WRAs) and Shop Replaceable Assemblies (SRAs) for the MH-60R and MH-60S helicopters. This classification helps in understanding the market landscape, identifying potential competitors (though not applicable in a sole-source scenario), and benchmarking spending against similar activities within the defense industrial base.

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: $367,104,747

Exercised Options: $367,104,747

Current Obligation: $367,104,747

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $938

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