Lockheed Martin awarded $20.3M sole-source contract for AEGIS sustainment support, raising value-for-money questions

Contract Overview

Contract Amount: $20,349,696 ($20.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-03-01

End Date: 2026-03-31

Contract Duration: 1,126 days

Daily Burn Rate: $18.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: AEGIS TRAINEES SUSTAINMENT SUPPORT COMS

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $20.3 million to LOCKHEED MARTIN CORPORATION for work described as: AEGIS TRAINEES SUSTAINMENT SUPPORT COMS Key points: 1. The contract's sole-source nature limits competitive pressure, potentially impacting overall value. 2. Engineering services for AEGIS sustainment are critical for naval readiness. 3. The contract duration of over three years suggests a long-term need for these specialized services. 4. The cost-plus-fixed-fee structure may incentivize cost increases, requiring close oversight. 5. Performance context is limited due to the lack of publicly available performance metrics. 6. The contract falls within the broader Defense sector, specifically naval engineering support.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging without comparable bids. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or sustainment, can lead to higher costs if not managed diligently. The total value of $20.3 million over approximately three years suggests a significant investment in maintaining the AEGIS system's operational capability. Without competitive bids, it's difficult to ascertain if this represents a fair market price or if efficiencies could have been achieved through a more open competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically justified when only one vendor possesses the necessary specialized knowledge, technology, or capability to perform the required services. The lack of competition means that price discovery through bidding was bypassed, potentially leading to less favorable pricing for the government compared to a fully competed scenario.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. The government did not benefit from the price reductions and innovation that typically arise from a competitive procurement process.

Public Impact

The primary beneficiaries are the U.S. Navy personnel who rely on the AEGIS combat system for national defense. The services delivered ensure the continued operational readiness and effectiveness of critical naval assets. The geographic impact is primarily centered in New Jersey, where the contractor is located, potentially supporting local jobs. The contract supports highly skilled engineering and technical workforce within the defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost escalation if not closely monitored.
Lack of publicly available performance metrics makes it difficult to assess contractor efficiency.
The long contract duration requires sustained oversight to ensure continued value.
Limited transparency on the justification for sole-source award.

Positive Signals

Contract supports a critical national defense system (AEGIS).
Lockheed Martin is a major defense contractor with extensive experience in naval systems.
The contract aims to ensure the sustainment and readiness of vital naval assets.
The fixed fee component of the CPFF contract provides some cost predictability.

Sector Analysis

The AEGIS Combat System is a cornerstone of modern naval warfare, integral to the U.S. Navy's fleet. This contract falls within the broader Defense Engineering Services sector, which is characterized by high technical complexity, specialized expertise, and significant government investment. The market for AEGIS sustainment is likely concentrated among a few prime defense contractors with established relationships and deep knowledge of the system. Comparable spending benchmarks are difficult to establish due to the proprietary nature of defense systems and the sole-source award.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, Lockheed Martin, is a large corporation. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan for this contract is not detailed here. The absence of a direct small business set-aside means that opportunities for small businesses to directly compete for this specific work are limited.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a sole-source award, the justification and terms would be subject to review by relevant procurement authorities. Transparency regarding the specific oversight mechanisms and accountability measures is limited in the provided data. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

AEGIS Combat System
Naval Ship Systems Engineering
Defense Sustainment Contracts
Department of Defense Engineering Services
Cost-Plus-Fixed-Fee Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of competitive bidding
Limited performance transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $20.3 million to LOCKHEED MARTIN CORPORATION. AEGIS TRAINEES SUSTAINMENT SUPPORT COMS

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 $20.3 million.

What is the period of performance?

Start: 2023-03-01. End: 2026-03-31.

What is the specific justification for awarding this contract on a sole-source basis to Lockheed Martin?

The provided data does not explicitly state the justification for the sole-source award. Typically, sole-source procurements are justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source is available or capable of providing the required services, or in cases of urgent and compelling need. For a complex system like AEGIS, it's plausible that Lockheed Martin, as the original developer or a key integrator, possesses unique knowledge, proprietary data, or specialized facilities essential for its sustainment, making them the only viable option. A detailed justification document, usually available through official channels like SAM.gov or agency solicitations, would provide the precise rationale.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for sustainment services, and what are its implications for cost control?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common for complex services where the scope of work may evolve or is difficult to define precisely upfront, such as research, development, or sustainment. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of costs, and cost-reimbursement contracts without a fixed fee. The primary implication for cost control in CPFF contracts is the government's responsibility to diligently monitor and audit contractor costs to ensure they are reasonable, allocable, and allowable. While the fee is fixed, the total contract value can increase significantly if costs escalate. Effective oversight, clear performance metrics, and robust cost accounting standards are crucial to mitigate the risk of cost overruns inherent in CPFF arrangements.

What is Lockheed Martin's track record with AEGIS sustainment contracts, and have there been past performance issues?

Lockheed Martin Corporation is a primary contractor for the AEGIS Combat System, involved in its development, production, and sustainment for decades. Their track record with AEGIS sustainment is generally extensive, given their deep involvement with the system. While specific performance issues are not detailed in the provided data, large, long-term defense contracts can sometimes encounter challenges related to cost growth, schedule delays, or technical performance. Publicly available contract databases and performance reports (like CPARS - Contractor Performance Assessment Reporting System) would offer more granular insights into Lockheed Martin's specific performance on past AEGIS sustainment efforts. However, their continued role as a prime contractor suggests a generally acceptable level of performance over time.

What is the historical spending trend for AEGIS sustainment support by the Department of the Navy?

Historical spending on AEGIS sustainment support by the Department of the Navy has been substantial, reflecting the critical role of the AEGIS Combat System in naval operations. While specific figures for this particular contract's predecessors are not provided, the overall trend indicates consistent and significant investment in maintaining and upgrading these complex systems. The Navy relies heavily on AEGIS for air and missile defense across its fleet, necessitating ongoing sustainment, modernization, and training. Spending in this category typically fluctuates based on fleet size, system upgrades, and geopolitical threats, but it remains a core component of the Navy's shipbuilding and conversion, and operation and maintenance budgets. The $20.3 million awarded here is part of a larger, ongoing commitment to AEGIS readiness.

Are there any specific performance metrics or Key Performance Indicators (KPIs) associated with this contract that are publicly available?

The provided data does not include specific performance metrics or Key Performance Indicators (KPIs) for this contract. For sustainment services, typical KPIs might include system availability rates, response times for technical support, defect resolution times, and successful completion of maintenance tasks within scheduled windows. For CPFF contracts, performance is often tied to the contractor's ability to manage costs effectively while meeting defined technical and operational requirements. Without access to the contract's Statement of Work (SOW) or performance work statement (PWS), it is difficult to ascertain the precise KPIs. Such details are usually found in contract award documents or performance reports, which are not included in the abbreviated data.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6134023R0012

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: $41,409,533

Exercised Options: $21,201,880

Current Obligation: $20,349,696

Subaward Activity

Number of Subawards: 15

Total Subaward Amount: $1,300,191

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline