Lockheed Martin awarded $152M for AEGIS Weapons System support, raising questions on competition and value

Contract Overview

Contract Amount: $15,227,873 ($15.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-12-28

End Date: 2026-12-31

Contract Duration: 2,194 days

Daily Burn Rate: $6.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INTEGRATED PROGRAM MANAGEMENT, ENGINEERING SUPPORT SERVICES, LOGISTICS SUPPORT SERVICES, IN SUPPORT OF THE AEGIS WEAPONS SYSTEM FOR NAVAL SURFACE WARFARE CENTER, PORT HUENEME DIVISION, PORT HUENEME, CALIFORNIA

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $15.2 million to LOCKHEED MARTIN CORPORATION for work described as: INTEGRATED PROGRAM MANAGEMENT, ENGINEERING SUPPORT SERVICES, LOGISTICS SUPPORT SERVICES, IN SUPPORT OF THE AEGIS WEAPONS SYSTEM FOR NAVAL SURFACE WARFARE CENTER, PORT HUENEME DIVISION, PORT HUENEME, CALIFORNIA Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (over 6 years) warrants close monitoring of performance and costs. 3. The nature of specialized AEGIS system support suggests limited contractor alternatives. 4. Performance context is critical given the system's importance to naval operations. 5. Sector positioning highlights a concentration of defense spending on major weapon systems. 6. Lack of competition is a key risk indicator for potential cost overruns.

Value Assessment

Rating: questionable

Benchmarking the value for this sole-source contract is challenging due to the lack of comparable bids. The Cost Plus Fixed Fee (CPFF) contract type allows for cost reimbursement plus a fixed fee, which can incentivize cost overruns if not managed tightly. Without competitive pricing, it's difficult to ascertain if the $152 million represents a fair market value for the engineering, logistics, and program management services provided for the AEGIS Weapons System. Further analysis of the fixed fee percentage and historical cost trends would be necessary for a more definitive assessment.

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 conduct a competitive bidding process. This typically occurs when only one responsible source can provide the required services, often due to specialized knowledge, proprietary technology, or unique capabilities. The lack of competition means that taxpayers did not benefit from the price reductions and innovations that can arise from a competitive environment. This approach limits the government's ability to negotiate the best possible price.

Taxpayer Impact: Sole-source awards mean taxpayers may not be getting the best possible price, as there was no opportunity for multiple companies to bid and drive down costs through competition.

Public Impact

The primary beneficiaries are the U.S. Navy's surface warfare capabilities, ensuring the continued operational readiness of the AEGIS Weapons System. Services delivered include integrated program management, engineering support, and logistics support, crucial for maintaining a complex defense system. Geographic impact is centered around the Naval Surface Warfare Center, Port Hueneme Division, California, a key hub for naval systems support. Workforce implications include continued employment for specialized engineers, logisticians, and program managers within Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee structure can incentivize higher costs if not rigorously overseen.
Long contract duration (over 6 years) increases exposure to potential cost growth and performance drift.
Dependence on a single contractor for critical system support poses a risk if performance falters.

Positive Signals

Contract supports a critical and complex defense system (AEGIS), indicating specialized expertise is likely required.
The contractor, Lockheed Martin, is a major defense contractor with extensive experience in complex weapon systems.
The fixed fee component of the contract provides some level of cost predictability for the fee portion.

Sector Analysis

The defense sector, particularly concerning major weapon systems like AEGIS, represents a significant portion of federal spending. This contract falls within the engineering and support services sub-sector, which is vital for maintaining the operational readiness and technological advancement of military platforms. The AEGIS system is a cornerstone of U.S. naval defense, and contracts for its sustainment are typically long-term and high-value, often dominated by a few prime contractors with specialized knowledge. Comparable spending benchmarks would involve other major platform support contracts within the Department of Defense.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false, suggesting that there are no explicit requirements for Lockheed Martin to subcontract a specific portion of this work to small businesses. This could limit opportunities for small businesses to participate in supporting the AEGIS Weapons System, potentially concentrating the economic benefits among larger firms.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Naval Surface Warfare Center. As a Cost Plus Fixed Fee contract, rigorous financial oversight and performance monitoring are essential to ensure costs are reasonable and deliverables are met. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of the AEGIS system. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

AEGIS Combat System
Naval Surface Warfare Centers
Defense Engineering Services
Defense Logistics Support
Major Defense Acquisition Programs

Risk Flags

Sole Source Award
Cost Plus Fixed Fee Contract Type
Long Contract Duration
Critical Defense System Support

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.2 million to LOCKHEED MARTIN CORPORATION. INTEGRATED PROGRAM MANAGEMENT, ENGINEERING SUPPORT SERVICES, LOGISTICS SUPPORT SERVICES, IN SUPPORT OF THE AEGIS WEAPONS SYSTEM FOR NAVAL SURFACE WARFARE CENTER, PORT HUENEME DIVISION, PORT HUENEME, CALIFORNIA

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 $15.2 million.

What is the period of performance?

Start: 2020-12-28. End: 2026-12-31.

What is Lockheed Martin's track record with AEGIS Weapons System support contracts?

Lockheed Martin Corporation has a long-standing and extensive history as the prime contractor for the AEGIS Combat System, including its development, integration, and sustainment. Their track record with AEGIS support is generally characterized by deep technical expertise and a significant role in the system's evolution. However, like many large defense contractors managing complex, long-term programs, there can be scrutiny regarding cost performance and schedule adherence on specific contracts. Detailed performance reviews and past performance evaluations within the Department of the Navy would provide a more granular understanding of their specific successes and challenges related to AEGIS sustainment.

How does the $152 million value compare to similar AEGIS support contracts?

Direct comparison of the $152 million value is difficult without access to specific contract details and the scope of work for other AEGIS support contracts. However, given that AEGIS is a highly complex and critical weapons system, multi-year support contracts of this magnitude are not uncommon. The value is influenced by factors such as the specific systems being supported (e.g., different ship classes, upgrades), the duration of the contract, and the mix of services (engineering, logistics, program management). The sole-source nature of this award means it cannot be directly benchmarked against competitively awarded contracts for similar services, making a 'value for money' assessment inherently challenging.

What are the primary risks associated with this sole-source, Cost Plus Fixed Fee contract?

The primary risks associated with this contract are twofold. Firstly, the sole-source award eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive environment. There is less incentive for the contractor to aggressively control costs when there are no competing offers. Secondly, the Cost Plus Fixed Fee (CPFF) structure, while providing a fixed profit margin, can still incentivize the contractor to incur costs, as the government reimburses allowable expenses. Without robust oversight and detailed cost tracking, there is a risk of cost growth beyond initial projections, even with a fixed fee.

How effective is the AEGIS Weapons System, and how does this contract contribute to its effectiveness?

The AEGIS Weapons System is widely regarded as one of the most capable naval combat systems in the world, providing air and missile defense for numerous U.S. Navy cruisers and destroyers, as well as for allied navies. Its effectiveness stems from its integrated radar, command and control, and weapon launching capabilities. This contract directly contributes to the system's effectiveness by ensuring its ongoing program management, engineering support, and logistics are maintained. These services are crucial for system upgrades, maintenance, troubleshooting, and ensuring the system remains operational and technologically relevant against evolving threats.

What are the historical spending patterns for AEGIS Weapons System support?

Historical spending on AEGIS Weapons System support has been substantial and consistent, reflecting the system's critical role and long service life. The Department of the Navy consistently allocates significant budget resources towards the sustainment, modernization, and upgrade of the AEGIS fleet. Spending typically occurs through a combination of prime contracts for major support services, like this one, as well as numerous smaller contracts for specific components, maintenance, and training. Over the years, total spending on AEGIS sustainment has amounted to billions of dollars, underscoring its importance and the ongoing investment required.

What is the potential impact of the contract duration (over 6 years) on cost and performance?

A contract duration exceeding six years for complex systems like AEGIS presents both opportunities and risks. On the positive side, it allows for long-term planning, stability for the contractor's workforce, and potentially deeper integration and understanding of the system. This can lead to efficiencies and improved performance over time. However, it also extends the period during which costs are incurred, increasing the overall financial commitment. Longer durations also heighten the risk of performance degradation, technological obsolescence if not managed, and potential cost overruns if initial estimates prove inaccurate or unforeseen issues arise. Continuous oversight is crucial throughout the contract's life.

Industry Classification

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

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6339420R0021

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 199 BORTON LANDING RD, MOORESTOWN, NJ, 08057

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: $31,013,075

Exercised Options: $26,524,077

Current Obligation: $15,227,873

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $395,001

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline