DoD's $46.7M Lockheed Martin contract for AEGIS radar systems shows limited competition

Contract Overview

Contract Amount: $46,683,007 ($46.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-09-18

End Date: 2026-05-18

Contract Duration: 2,799 days

Daily Burn Rate: $16.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE SERVICES UNDER THIS CONTRACT INCLUDE: TEST AND EVALUATION, ENGINEERING CHANGE DEVELOPMENT, ORDNANCE/SHIP ALTERATIONS, MODERNIZATION ENGINEERING, LOGISTICS AND TECHNICAL SUPPORT, ORDNANCE ALTERATIONS KIT DEVELOPMENT, INTEGRATION AND TEST SUPPORT, AN/SPY-1 SERIES RADAR ANTENNA REFURBISHMENT, AND COAST GUARD DEEP-WATER PROGRAM DESIGN AGENT FIELD ENGINEERING SUPPORT. THESE SERVICES ARE IN SUPPORT OF AEGIS CGS AND DDGS, ALLIED AEGIS SHIPS, AND U.S. COAST GUARD AEGIS CONFIGURED SHIPS.

Place of Performance

Location: PORT HUENEME CBC BASE, VENTURA County, CALIFORNIA, 93043

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $46.7 million to LOCKHEED MARTIN CORPORATION for work described as: THE SERVICES UNDER THIS CONTRACT INCLUDE: TEST AND EVALUATION, ENGINEERING CHANGE DEVELOPMENT, ORDNANCE/SHIP ALTERATIONS, MODERNIZATION ENGINEERING, LOGISTICS AND TECHNICAL SUPPORT, ORDNANCE ALTERATIONS KIT DEVELOPMENT, INTEGRATION AND TEST SUPPORT, AN/SPY-1 SERIES RADAR ANTENNA … Key points: 1. Contract focuses on critical engineering and modernization for AEGIS radar systems, impacting naval defense capabilities. 2. Sole-source award to Lockheed Martin raises questions about price competitiveness and potential for cost overruns. 3. Long-term contract duration (2018-2026) suggests a sustained need for these specialized engineering services. 4. Services encompass a broad range of technical support, from ordnance alterations to deep-water program design. 5. The contract's value, while significant, needs benchmarking against similar sole-source procurements for value assessment. 6. Lack of competition may limit opportunities for innovation and cost savings from alternative providers.

Value Assessment

Rating: questionable

The contract's value of $46.7 million for engineering services related to AEGIS radar systems is substantial. However, without a competitive bidding process, it is difficult to benchmark its value against market rates or similar contracts. The cost-plus-fixed-fee structure, while common for complex R&D, can lead to higher costs if not closely managed. Further analysis of cost breakdowns and comparison to historical sole-source AEGIS-related contracts would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to Lockheed Martin Corporation. This indicates that the Department of the Navy determined that only Lockheed Martin could provide the required specialized services for the AEGIS Combat System. The lack of competition means that the government did not explore alternative solutions or pricing from other potential vendors, which could limit price discovery and potentially lead to higher costs.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without multiple bids, there is less incentive for the contractor to offer the most cost-effective solution.

Public Impact

The U.S. Navy and Coast Guard benefit from continued support and modernization of their AEGIS-configured ships. Services ensure the operational readiness and technological advancement of critical naval defense systems. The contract supports specialized engineering and technical expertise within the defense sector. Geographic impact is primarily within defense facilities and potentially at contractor sites in California. Workforce implications include sustained employment for engineers and technical specialists at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not rigorously overseen.
Long contract duration may reduce flexibility to adapt to evolving technological needs or market conditions.
Lack of transparency in the sole-source justification process could obscure potential alternatives.
Dependence on a single contractor for critical AEGIS system support poses a long-term strategic risk.

Positive Signals

Contractor (Lockheed Martin) is a recognized leader in defense systems, suggesting technical expertise.
Services directly support critical naval defense capabilities for the U.S. Navy and Coast Guard.
Long-term nature of the contract provides stability for essential ongoing support and modernization.
Focus on modernization and upgrades ensures fleet readiness and technological relevance.
Specific focus on AEGIS systems indicates deep specialization and understanding of complex platforms.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense systems. The market for specialized AEGIS system support is highly concentrated, with Lockheed Martin being a primary, if not sole, provider for many aspects of the system's development and sustainment. Comparable spending benchmarks are difficult to establish due to the proprietary nature of AEGIS technology and the limited number of entities capable of providing such specialized services. The overall defense engineering services market is substantial, but this niche is dominated by a few key players.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by 'sb': false. Given the sole-source nature and the specialized, high-technology requirements of AEGIS system engineering, it is unlikely that small businesses would be primary awardees. However, Lockheed Martin may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data. The impact on the small business ecosystem is likely minimal for this specific prime contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Accountability measures would be embedded within the contract's terms, including performance metrics and reporting requirements. Transparency is limited due to the sole-source nature and the proprietary aspects of the AEGIS system. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract's execution.

Related Government Programs

AEGIS Combat System
Naval Surface Warfare
Ship Modernization Programs
Defense Engineering Services
Ordnance Systems Support
Coast Guard Deep-Water Program

Risk Flags

Sole-source award
Potential for cost overruns (CPFF structure)
Long-term contractor dependency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $46.7 million to LOCKHEED MARTIN CORPORATION. THE SERVICES UNDER THIS CONTRACT INCLUDE: TEST AND EVALUATION, ENGINEERING CHANGE DEVELOPMENT, ORDNANCE/SHIP ALTERATIONS, MODERNIZATION ENGINEERING, LOGISTICS AND TECHNICAL SUPPORT, ORDNANCE ALTERATIONS KIT DEVELOPMENT, INTEGRATION AND TEST SUPPORT, AN/SPY-1 SERIES RADAR ANTENNA REFURBISHMENT, AND COAST GUARD DEEP-WATER PROGRAM DESIGN AGENT FIELD ENGINEERING SUPPORT. THESE SERVICES ARE IN SUPPORT OF AEGIS CGS AND DDGS, ALLIED AEGIS SHIPS, AND U.S. COAST GUARD AEGIS CONFIGURED SHIPS.

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 $46.7 million.

What is the period of performance?

Start: 2018-09-18. End: 2026-05-18.

What is Lockheed Martin's track record with AEGIS system contracts?

Lockheed Martin Corporation has a long and established history as the prime contractor for the AEGIS Combat System, a role it has held for decades. The company is responsible for the development, integration, and sustainment of the AEGIS system across various U.S. Navy platforms (destroyers and cruisers) and for allied nations. Their track record includes numerous upgrades, modernization efforts, and ongoing support contracts, demonstrating deep technical expertise and a significant role in maintaining the operational capability of the fleet. This specific contract builds upon that extensive experience, focusing on engineering change development, modernization, and technical support for the radar antenna refurbishment and field engineering.

How does the pricing of this contract compare to similar sole-source procurements for AEGIS components?

Direct comparison of pricing for this specific $46.7 million contract to similar sole-source AEGIS procurements is challenging due to the proprietary nature of the data and the unique scope of each contract. Sole-source contracts inherently lack the price discovery mechanism of competition. However, the cost-plus-fixed-fee (CPFF) structure suggests that costs are reimbursed plus a negotiated fixed fee. Benchmarking would require access to detailed cost breakdowns, historical pricing data for comparable sole-source AEGIS sustainment or modernization efforts, and an understanding of the specific technical challenges addressed. Without this granular data, a definitive value-for-money assessment relative to other sole-source deals remains difficult.

What are the primary risks associated with a sole-source contract for critical defense systems like AEGIS?

The primary risks associated with a sole-source contract for critical defense systems like AEGIS include potential for inflated pricing due to lack of competition, reduced incentive for contractor efficiency and innovation, and a heightened dependence on a single supplier. This dependence can create strategic vulnerabilities if the contractor faces financial difficulties, operational disruptions, or decides to exit the market. Furthermore, the absence of competitive pressure may lead to less rigorous cost control and potentially slower adoption of technological advancements compared to a competitive environment. Ensuring robust oversight and negotiation is crucial to mitigate these risks.

How effective is the current contract in ensuring the modernization and readiness of AEGIS-equipped ships?

The contract's stated services, including engineering change development, modernization engineering, and AN/SPY-1 series radar antenna refurbishment, are directly aimed at ensuring the modernization and readiness of AEGIS-equipped ships. By providing ongoing technical support and upgrades, the contract helps maintain the technological edge and operational capability of these critical naval assets. The long duration (2018-2026) suggests a sustained commitment to these goals. However, the effectiveness is ultimately measured by the successful implementation of these services, the performance of the upgraded systems, and the continued availability of AEGIS ships for their intended missions, which requires ongoing performance monitoring beyond the contract's scope.

What has been the historical spending trend for AEGIS system engineering and support services by the Department of the Navy?

Historical spending by the Department of the Navy on AEGIS system engineering and support services has been substantial and consistent over many years, reflecting the system's centrality to naval defense strategy. While specific figures for 'engineering services' can fluctuate annually based on modernization cycles and new platform integration, the overall investment in AEGIS sustainment, upgrades, and related engineering support runs into billions of dollars over the system's lifecycle. This $46.7 million contract represents a portion of that ongoing, significant investment. Trends generally show a continuous need for upgrades and sustainment, driven by evolving threats and technological advancements, leading to sustained, high-value contracts.

Are there any performance concerns or issues reported regarding Lockheed Martin's execution of previous AEGIS-related contracts?

Information regarding specific performance concerns or issues with Lockheed Martin's execution of previous AEGIS-related contracts is not detailed in the provided data. Generally, large, long-term defense contracts can experience challenges related to schedule delays, cost overruns, or technical performance issues. However, Lockheed Martin's long-standing role as the prime contractor suggests a generally acceptable level of performance to the Department of the Navy, otherwise, such sole-source awards would be unlikely to continue. A comprehensive review would require access to contract performance reports, CPARS (Contractor Performance Assessment Reporting System) data, and any official findings from oversight bodies.

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: N6426717R0132

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: $63,992,064

Exercised Options: $63,992,064

Current Obligation: $46,683,007

Actual Outlays: $11,412,420

Subaward Activity

Number of Subawards: 50

Total Subaward Amount: $7,098,382

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline