DoD's $106M Lockheed Martin contract for CIS services raises questions on value and competition

Contract Overview

Contract Amount: $106,082,396 ($106.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2021-01-01

End Date: 2026-06-30

Contract Duration: 2,006 days

Daily Burn Rate: $52.9K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Official Description: PR 1300897049 TO PROCURE CIS SERVICES AND ASSOCIATED ADMIN SUPPORT VIA FMS LOA #AT-GSU, AT-LCQ, JA-LZK, JA-FWT, JA-FZZ, JA-QAD, JA-LZU, KS-LQI, NO-GEM, SP LGT

Place of Performance

Location: DAHLGREN, KING GEORGE County, VIRGINIA, 22448

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $106.1 million to LOCKHEED MARTIN CORPORATION for work described as: PR 1300897049 TO PROCURE CIS SERVICES AND ASSOCIATED ADMIN SUPPORT VIA FMS LOA #AT-GSU, AT-LCQ, JA-LZK, JA-FWT, JA-FZZ, JA-QAD, JA-LZU, KS-LQI, NO-GEM, SP LGT Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize higher spending. 2. Limited competition raises concerns about price discovery and potential overpayment. 3. The long duration (2006-2026) suggests a need for ongoing, critical services. 4. The significant value indicates a substantial reliance on Lockheed Martin for these services. 5. The absence of small business participation warrants further investigation into subcontracting opportunities. 6. The contract's classification as 'Not Available for Competition' requires scrutiny of justification.

Value Assessment

Rating: questionable

Benchmarking the value of this $106 million contract is challenging without specific service details and comparable market rates. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex or uncertain scope work, can lead to costs exceeding initial estimates if not carefully managed. The lack of competition further complicates a direct value assessment, as there's no market pressure to drive down prices. The contract's duration, spanning over 20 years, suggests a long-term need, but also raises questions about whether the pricing has remained competitive over time.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'Not Available for Competition,' indicating a sole-source procurement. This means the Department of the Navy did not solicit bids from multiple offerors. The justification for this approach is critical to understanding why full and open competition was not pursued. Without competition, there is a reduced incentive for the contractor to offer the most competitive pricing, and the government has fewer options to ensure it is receiving the best value.

Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward pressure on prices that competition provides. This can lead to higher costs for essential services.

Public Impact

The primary beneficiaries are likely Department of Defense entities requiring Command, Information, and Services (CIS) support. The contract delivers essential administrative and IT-related services critical for operational readiness. Services are likely concentrated within the geographic areas served by the specified FMS LOA locations. The contract supports a significant workforce, primarily through Lockheed Martin's employees and potentially subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Cost-plus-fixed-fee structure can incentivize increased spending without guaranteed efficiency.
Long contract duration without clear performance metrics could mask inefficiencies.
Sole-source award requires strong justification to ensure necessity and fair pricing.
Limited transparency on specific services provided hinders public oversight.

Positive Signals

Contract addresses critical Command, Information, and Services (CIS) needs for the Navy.
Long-term award suggests a stable and reliable service provider for essential functions.
Lockheed Martin is a major defense contractor with extensive experience in complex systems.
The contract supports national security objectives through critical IT and administrative functions.

Sector Analysis

This contract falls within the Engineering Services sector, specifically related to IT and administrative support for defense operations. The market for such services is large and competitive, with numerous firms capable of providing these capabilities. However, the specific nature of CIS services within a military context often leads to specialized requirements and potentially fewer qualified bidders, especially when classified as sole-source. Comparable spending benchmarks are difficult to establish without detailed service scope, but large-scale IT and engineering support contracts for the DoD can range from tens to hundreds of millions of dollars.

Small Business Impact

The contract data indicates that small business participation (sb) is false, and it was not set aside for small businesses (ss is false). This suggests that the primary award went to a large corporation, Lockheed Martin. There is no explicit information on subcontracting plans or goals. Without a small business set-aside or clear subcontracting requirements, there is a risk that small businesses may not benefit from this significant federal spending, potentially limiting opportunities within the small business ecosystem for defense contracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a definitive contract, it is subject to standard federal procurement regulations and oversight. The Inspector General for the Department of Defense may also conduct audits or investigations into the contract's performance and cost management. Transparency is limited by the sole-source nature and the lack of detailed public information on the specific services rendered and performance metrics.

Related Government Programs

Defense Information Systems Agency (DISA) IT Services
Naval Information Warfare Systems Command (NAVWAR) Contracts
Department of Defense Enterprise IT Services
Command and Control Systems Procurement
Federal Civilian IT Services Contracts

Risk Flags

Sole-source award lacks competitive pricing pressure.
Cost-plus-fixed-fee structure may incentivize higher costs.
Long contract duration increases risk of technology obsolescence and cost escalation.
Lack of small business participation noted.
Limited transparency on specific services and performance metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $106.1 million to LOCKHEED MARTIN CORPORATION. PR 1300897049 TO PROCURE CIS SERVICES AND ASSOCIATED ADMIN SUPPORT VIA FMS LOA #AT-GSU, AT-LCQ, JA-LZK, JA-FWT, JA-FZZ, JA-QAD, JA-LZU, KS-LQI, NO-GEM, SP LGT

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 $106.1 million.

What is the period of performance?

Start: 2021-01-01. End: 2026-06-30.

What specific Command, Information, and Services (CIS) are being procured under this contract, and how do they align with the Department of the Navy's mission requirements?

The contract, PR 1300897049, is for 'CIS SERVICES AND ASSOCIATED ADMIN SUPPORT VIA FMS LOA'. While the exact nature of these services is not detailed in the provided data, CIS typically encompasses a broad range of functions critical to military operations. This includes network management, cybersecurity, data processing, communication systems support, and associated administrative tasks necessary to maintain and operate these complex systems. The contract's alignment with the Navy's mission would depend on which specific units or programs these services support, likely contributing to operational readiness, intelligence gathering, and command and control capabilities. The use of FMS LOA (Foreign Military Sales Logistics Support Activity) suggests these services might also support allied nations' defense systems or joint international operations, further underscoring their strategic importance.

What was the justification for awarding this contract on a sole-source basis, and were alternative solutions considered?

The contract is explicitly marked as 'NOT AVAILABLE FOR COMPETITION,' indicating a sole-source award. The justification for such an award typically falls under specific exceptions to full and open competition, such as the existence of only one responsible source, urgent and compelling needs, or specific national security requirements that preclude competition. Without access to the official justification document (e.g., a Justification and Approval for Other Than Full and Open Competition - J&A), it is impossible to determine the precise reasons. However, for a large, long-term contract with a major defense contractor like Lockheed Martin, potential justifications could include unique technical capabilities, proprietary technology, seamless integration with existing systems, or specific requirements tied to foreign military sales. The absence of competition means taxpayers did not benefit from potential cost savings that a competitive bidding process might have yielded.

How does the Cost Plus Fixed Fee (CPFF) pricing structure impact the overall cost-effectiveness and potential for cost overruns in this contract?

The Cost Plus Fixed Fee (CPFF) pricing structure means the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves significant uncertainty, making it difficult to establish a firm fixed price. While the 'fixed fee' provides some predictability for the contractor's profit, the 'cost-plus' element means the government bears the risk of cost overruns. If the actual costs exceed estimates, the total contract value increases. This can incentivize contractors to incur higher costs, as their fee remains constant, potentially leading to less cost-consciousness than in fixed-price contracts. Effective oversight, stringent cost controls, and clear performance metrics are crucial to mitigate the risk of cost overruns and ensure value for money under a CPFF arrangement.

What is the historical spending pattern for CIS services procured by the Department of the Navy, and how does this contract compare?

Analyzing the historical spending pattern for CIS services by the Department of the Navy requires access to extensive procurement data beyond this single contract. However, this $106 million contract, awarded in 2021 and running through 2026, represents a significant investment. The Navy, like other branches of the DoD, relies heavily on sophisticated IT and communication systems, making CIS a substantial and ongoing expenditure. Contracts for such services often span multiple years and involve large dollar values due to the complexity and critical nature of military operations. Without comparative data on other similar CIS contracts, it's difficult to definitively state if this contract's value is high or low relative to the market or historical Navy spending. However, its sole-source nature and substantial value suggest it addresses a critical, long-term need that the Navy has determined is best met by Lockheed Martin.

What are the potential risks associated with the long duration (over 20 years) of this contract, and what mitigation strategies are in place?

The contract's duration, spanning from 2006 to 2026 (20 years), presents several potential risks. Firstly, technology obsolescence is a significant concern; IT systems and services procured early in the contract may be outdated by its end, requiring costly upgrades or replacements. Secondly, long-term sole-source contracts can lead to complacency and reduced innovation from the contractor, as competitive pressure is absent. Thirdly, the risk of cost escalation over two decades is substantial, especially with a CPFF structure. Mitigation strategies typically involve robust contract management, including regular performance reviews, periodic re-evaluations of service needs and pricing, and incorporating clauses for technological refresh or service modernization. However, the 'Not Available for Competition' status and CPFF structure may limit the government's leverage in enforcing cost-effectiveness and modernization over such an extended period.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: EDUCATION AND TRAINING › EDUCATION AND TRAINING SERVICES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6134019R0015

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 100 GLOBAL INNOVATION CIR, ORLANDO, FL, 32825

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: $142,739,306

Exercised Options: $142,739,306

Current Obligation: $106,082,396

Subaward Activity

Number of Subawards: 115

Total Subaward Amount: $7,344,834

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline