Lockheed Martin awarded $139.6M contract for equipment repair, highlighting potential value concerns in a sole-source procurement

Contract Overview

Contract Amount: $13,960,596 ($14.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2005-12-20

End Date: 2008-11-30

Contract Duration: 1,076 days

Daily Burn Rate: $13.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200603!150317!1700!N68335!NAVAL AIR ENGINEERING STATION !N6833506C0116 !A!N! !N! ! !20051220!20060930!001690924!001690924!834951691!N!LOCKHEED MARTIN CORPORATION !12506 LAKE UNDERHILL RD !ORLANDO !FL!32825!57080!740!51!NORFOLK NAV SHIPYD !PORTSMOUTH (CITY) !VIRGINIA !+000003538633!N!N!000000000000!J066!MAINT & REPAIR OF EQ/INSTRUMENTS & LAB EQUIPMENT !S1 !SERVICES !000 !NOT DISCERNABLE !811219!E! !3! ! ! ! ! !99990909!B! ! !A! !D!U!J!1!001!N!1A!C!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y!9700!001175!0001! !

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $14.0 million to LOCKHEED MARTIN CORPORATION for work described as: 200603!150317!1700!N68335!NAVAL AIR ENGINEERING STATION !N6833506C0116 !A!N! !N! ! !20051220!20060930!001690924!001690924!834951691!N!LOCKHEED MARTIN CORPORATION !12506 LAKE UNDERHILL RD !ORLANDO !FL!32825!57080!740!51!NORFOLK NAV SHIPYD !PORT… Key points: 1. The contract's value of $139.6 million for equipment repair warrants scrutiny due to the lack of competitive bidding. 2. Sole-source procurements can lead to inflated prices and reduced innovation compared to open competition. 3. The duration of the contract (over 3 years) suggests a long-term need, making price efficiency critical. 4. Performance context is limited without details on specific equipment or repair complexity. 5. The contract falls under the 'Other Electronic and Precision Equipment Repair and Maintenance' category, indicating a specialized service.

Value Assessment

Rating: questionable

The contract value of $139.6 million for equipment repair and maintenance is substantial. Without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The lack of competition raises concerns about whether the government secured the best possible value. Further analysis would be needed to determine if the pricing is reasonable for the services rendered, especially given the sole-source nature of the award.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. The implications for price discovery are significant, as the absence of competing offers means there was no direct pressure to offer the lowest possible price. This method is often used when only one source possesses the necessary capabilities or when urgency dictates.

Taxpayer Impact: For taxpayers, a sole-source award means there is a higher risk of paying a premium for goods or services, as the government did not benefit from the price reductions that competition usually drives.

Public Impact

The primary beneficiaries are likely the Department of the Navy and potentially other branches of the Department of Defense requiring specialized equipment repair. The services delivered involve the maintenance and repair of electronic and precision equipment, crucial for operational readiness. The geographic impact is centered around naval facilities, specifically the Norfolk Naval Shipyard in Portsmouth, Virginia. Workforce implications include the employment of skilled technicians and support staff at Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition increases the risk of overpayment.
Sole-source awards can limit access to innovative solutions from other potential providers.
Contract duration without competitive re-evaluation may lead to sustained higher costs.
Transparency in pricing and justification for sole-source award could be improved.

Positive Signals

Award to a known entity (Lockheed Martin) may indicate a level of trust in their capabilities.
Specialized nature of the equipment may genuinely limit the number of qualified providers.
Firm Fixed Price contract type can provide cost certainty if the scope is well-defined.

Sector Analysis

This contract falls within the broader defense industrial base, specifically focusing on maintenance, repair, and overhaul (MRO) services for specialized electronic and precision equipment. The market for such services is often characterized by high barriers to entry due to technical expertise, security clearances, and proprietary knowledge. While specific market size data for this niche is not readily available, the overall defense MRO sector is substantial, with significant government spending allocated annually to ensure the readiness of military assets. This contract represents a portion of that spending, supporting critical operational capabilities.

Small Business Impact

The data indicates this contract was not set aside for small businesses, nor does it explicitly mention subcontracting plans for small businesses. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Lockheed Martin voluntarily engages them for specific components or services. Without specific subcontracting goals or reporting, it's difficult to assess the broader impact on the small business ecosystem in this instance.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the contract's terms and conditions, including performance standards and reporting requirements. Transparency is often limited in sole-source procurements, though justifications for such awards are usually documented internally. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Shipyard Maintenance Contracts
Defense Equipment Repair Services
Lockheed Martin Defense Contracts
Sole-Source Defense Procurements
Electronic Equipment Maintenance

Risk Flags

Sole-source award lacks competitive pricing pressure.
Potential for cost overruns without competitive benchmarking.
Limited transparency regarding specific equipment and repair scope.
Long-term reliance on a single provider.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $14.0 million to LOCKHEED MARTIN CORPORATION. 200603!150317!1700!N68335!NAVAL AIR ENGINEERING STATION !N6833506C0116 !A!N! !N! ! !20051220!20060930!001690924!001690924!834951691!N!LOCKHEED MARTIN CORPORATION !12506 LAKE UNDERHILL RD !ORLANDO !FL!32825!57080!740!51!NORFOLK NAV SHIPYD !PORTSMOUTH (CITY) !VIRGINIA !+000003538633!N!N!000000000000!J066!MAINT & REPAIR OF EQ/INSTRUMENTS & LAB EQUIPMENT !S1 !SERVICES !000 !NOT DISCERNABLE !811219!E! !3! ! ! ! ! !999

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 $14.0 million.

What is the period of performance?

Start: 2005-12-20. End: 2008-11-30.

What specific types of electronic and precision equipment are covered under this contract, and what is the criticality of their function to naval operations?

The contract specifies 'MAINT & REPAIR OF EQ/INSTRUMENTS & LAB EQUIPMENT' under the Product Service Code 811219. While the exact list of equipment is not detailed in the provided data, this category typically includes a wide range of items such as diagnostic tools, calibration instruments, laboratory apparatus, and potentially specialized electronic systems used in testing, maintenance, or research and development at naval facilities. The criticality of this equipment can vary significantly; some instruments might be essential for routine maintenance and quality control, while others could be vital for advanced research or the functioning of complex weapon systems. Without further details on the specific items, assessing their direct impact on naval operations remains speculative, but the broad category suggests support for a range of technical functions.

What was the justification provided for awarding this contract on a sole-source basis to Lockheed Martin Corporation?

The provided data indicates the contract was 'NOT COMPETED' (CT: NOT COMPETED). Federal procurement regulations typically require justification for sole-source awards, often citing reasons such as unique capabilities possessed by only one contractor, urgent and compelling needs where competition is impractical, or specific follow-on work where only the original contractor can provide the necessary services or parts. For this specific contract, the justification would likely stem from Lockheed Martin's unique expertise, proprietary technology, or existing infrastructure related to the specific equipment requiring maintenance. A formal Justification for Other Than Full and Open Competition (JOFOC) would have been required and documented by the Department of the Navy.

How does the contract's value of $139.6 million compare to historical spending on similar repair and maintenance services for naval electronic equipment?

Comparing the $139.6 million contract value requires context on the scope and duration of similar services. This contract spans from December 20, 2005, to September 30, 2008 (approximately 3 years), with a base value of $139,605,960. This averages to roughly $46.5 million per year. To assess value, one would need to examine historical data for contracts with similar Product Service Codes (PSCs) like 811219, awarded by the Department of the Navy or other defense agencies. Factors such as the complexity of the equipment, the specific services required (e.g., depot-level repair vs. field service), and the prevailing market rates at the time of award are crucial. Without access to a comprehensive database of comparable contracts and their specific terms, a precise benchmark is difficult. However, given the sole-source nature, there's an inherent risk that this value might be higher than what could have been achieved through competition.

What are the potential risks associated with a sole-source contract of this magnitude and duration for equipment maintenance?

Sole-source contracts, especially those of significant value like $139.6 million and a duration of nearly three years, carry several inherent risks. Firstly, the lack of competition can lead to higher prices than might be obtained in a competitive environment, as the contractor faces less pressure to be cost-efficient. Secondly, there's a risk of complacency; without the threat of losing future business to competitors, the contractor might be less motivated to innovate or improve service quality. Thirdly, the government may become overly reliant on a single provider, creating potential vulnerabilities if that provider experiences financial difficulties, operational issues, or decides to exit the market. Finally, the absence of multiple bids makes it harder to independently verify the reasonableness of the price and the scope of work performed.

What performance metrics or oversight mechanisms were likely in place to ensure Lockheed Martin fulfilled the contract requirements effectively?

While specific performance metrics are not detailed in the provided data, contracts of this nature typically include robust oversight mechanisms. The Department of the Navy would have assigned a Contracting Officer's Representative (COR) or a Technical Point of Contact (TPOC) responsible for monitoring Lockheed Martin's performance. Key performance indicators (KPIs) would likely have been established, focusing on aspects such as turnaround time for repairs, quality of workmanship, adherence to technical specifications, and delivery schedules. Regular progress reports, site visits, and potentially formal performance reviews would have been conducted. The Firm Fixed Price (FFP) contract type itself provides a level of cost control, but ensuring the quality and timeliness of the service is paramount and would be actively managed through the COR/TPOC.

Industry Classification

NAICS: Other Services (except Public Administration) › Electronic and Precision Equipment Repair and Maintenance › Other Electronic and Precision Equipment Repair and Maintenance

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 12506 LAKE UNDERHILL RD, ORLANDO, FL, 90

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline