DoD's $372M Seahawk PBL Performance Order awarded to Lockheed Martin, a sole-source contract for aircraft parts

Contract Overview

Contract Amount: $372,144,229 ($372.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-10-01

End Date: 2024-09-30

Contract Duration: 365 days

Daily Burn Rate: $1.0M/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY2024 SEAHAWK PBL PERFORMANCE ORDER

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $372.1 million to LOCKHEED MARTIN CORPORATION for work described as: FY2024 SEAHAWK PBL PERFORMANCE ORDER Key points: 1. This contract represents a significant investment in maintaining critical naval aviation capabilities. 2. The sole-source nature raises questions about potential price inflation and limited market engagement. 3. Performance is tied to a fixed-price structure, aiming to control costs for the specified period. 4. The contract falls within the 'Other Aircraft Parts' manufacturing sector, indicating specialized component support. 5. Oversight will be crucial to ensure value for money given the lack of competitive bidding.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. The fixed-price structure provides some cost control, but the absence of competition means there's no direct comparison to market rates or alternative suppliers. The awarded amount of $372.14 million for a one-year period suggests a high unit cost for the services or parts provided, necessitating close monitoring of performance and any potential cost escalations.

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 solicit bids from multiple potential suppliers. This approach is typically used when a specific contractor possesses unique capabilities or when urgency dictates a rapid award. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down prices. Without multiple bids, there is less assurance that the government is receiving the best possible value for its investment.

Public Impact

Naval aviation readiness and operational capability are directly supported by this contract. The U.S. Navy's fleet of Seahawk helicopters benefits from the provision of essential parts and support. This contract ensures the continued availability of critical components for a key military asset. The workforce at Lockheed Martin in New York is likely engaged in fulfilling this order.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs.
Lack of transparency in the justification for sole-sourcing requires scrutiny.
Dependence on a single supplier can create long-term risks if alternatives are not explored.

Positive Signals

Fixed-price contract structure provides some cost predictability.
Award supports critical defense capabilities and readiness.
Contract duration of one year allows for periodic re-evaluation of needs.

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 a limited number of qualified suppliers. Spending in this area is driven by defense modernization, sustainment, and operational readiness requirements. Comparable spending benchmarks would typically involve analyzing other sustainment contracts for major weapon systems within the Department of Defense.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses indicated in the provided data. The award to a large prime contractor like Lockheed Martin suggests that the primary focus is on the prime's capabilities. This could limit opportunities for small businesses to participate directly in this specific contract, although they may be involved further down the supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price structure, which shifts some risk to the contractor. Transparency is limited by the sole-source nature of the award, but contract performance metrics and financial reporting should be subject to review. The Inspector General for the Department of Defense may have jurisdiction for audits and investigations if fraud or waste is suspected.

Related Government Programs

Department of Defense Aircraft Procurement
Naval Aviation Sustainment Programs
Helicopter Component Manufacturing
Defense Logistics Agency Support Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for price inflation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $372.1 million to LOCKHEED MARTIN CORPORATION. FY2024 SEAHAWK PBL PERFORMANCE ORDER

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 $372.1 million.

What is the period of performance?

Start: 2023-10-01. End: 2024-09-30.

What is the historical spending pattern for Seahawk PBL performance orders with Lockheed Martin?

Analyzing historical spending for Performance-Based Logistics (PBL) orders related to the Seahawk platform and specifically with Lockheed Martin is crucial for understanding cost trends and value. While the provided data is for a single FY2024 order, a comprehensive review would involve examining contract awards over the past 5-10 fiscal years. This would include looking at the total value of PBL contracts, the frequency of orders, and any year-over-year changes in pricing or scope. Understanding if this $372 million order represents an increase or decrease compared to previous years, and whether the scope of support has changed, is vital for assessing the current award's value and identifying potential cost efficiencies or escalations. Without historical data, it's difficult to determine if this award is consistent with past investments or if it signals a new spending trajectory.

What specific justification was provided for awarding this contract on a sole-source basis?

The justification for a sole-source award is critical for understanding why competitive procedures were bypassed. Typically, sole-source procurements are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source can provide the required supplies or services, or when there is a compelling urgency. For a platform like the Seahawk, justifications might include unique technical expertise, proprietary data rights held by the contractor, or the need for seamless integration with existing systems that only the original equipment manufacturer can provide. A thorough review of the Justification and Approval (J&A) document associated with this contract award is necessary to ascertain the specific rationale. This document should detail the market research conducted, the reasons why other sources were deemed unsuitable, and the steps taken to ensure fair and reasonable pricing despite the lack of competition.

How does the fixed-price nature of this contract mitigate risks for the government?

A Firm Fixed Price (FFP) contract structure, like the one used for this Seahawk PBL performance order, is designed to provide the government with cost certainty. Under an FFP contract, the contractor assumes the primary responsibility for all costs incurred and is only entitled to the agreed-upon price, regardless of their actual costs. This mitigates the risk of cost overruns for the government, as the total expenditure is predetermined. It incentivizes the contractor to manage their own costs efficiently to maximize profit. However, the government still bears the risk that the fixed price might be too high if adequate price competition or cost analysis was not performed during the negotiation phase, especially in a sole-source scenario. Effective oversight is still required to ensure the contractor meets performance obligations.

What are the key performance indicators (KPIs) associated with this PBL contract, and how are they monitored?

Performance-Based Logistics (PBL) contracts, such as this one, are intended to focus on outcomes and performance rather than just the delivery of goods or services. Key Performance Indicators (KPIs) are essential for measuring the contractor's success in meeting these outcomes. For aircraft parts and support, typical KPIs might include metrics like aircraft availability rates, response times for part delivery, inventory management efficiency, system reliability, and turnaround times for repairs. The contract should clearly define these KPIs, along with acceptable performance thresholds and any associated incentives or disincentives (e.g., performance-based payments or penalties). Monitoring these KPIs requires robust data collection and analysis, likely involving integrated government and contractor teams. Regular performance reviews are crucial to assess the contractor's adherence to these metrics and to ensure the overall effectiveness and value of the PBL arrangement.

What is the potential impact of this contract on the broader market for naval aviation parts and support?

The sole-source award of this significant contract to Lockheed Martin for Seahawk PBL performance could have several implications for the broader market. Firstly, it reinforces Lockheed Martin's dominant position in supporting this specific platform, potentially creating a barrier to entry for other companies seeking to offer competing sustainment solutions. Secondly, the lack of competition may disincentivize other potential suppliers from investing in the capabilities needed to support the Seahawk, thereby limiting future market options. Conversely, if Lockheed Martin effectively executes this contract and demonstrates strong performance and value, it could set a high benchmark for future PBL contracts. However, the long-term effect of limiting competition is generally a reduction in market dynamism and potentially higher sustained costs for the government and taxpayers.

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

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: $372,144,229

Exercised Options: $372,144,229

Current Obligation: $372,144,229

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