DoD's $1.15B contract for ESM OTPS awarded to Lockheed Martin, raising questions about competition and value

Contract Overview

Contract Amount: $11,550,372 ($11.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-08-10

End Date: 2011-07-01

Contract Duration: 1,421 days

Daily Burn Rate: $8.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PRE-PRODUCTION ESM OTPS

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $11.6 million to LOCKHEED MARTIN CORPORATION for work described as: PRE-PRODUCTION ESM OTPS Key points: 1. The contract's value of over $1.15 billion warrants scrutiny regarding its necessity and efficiency. 2. Awarded on a sole-source basis, the lack of competition limits price discovery and potentially inflates costs. 3. The duration of the contract (over 3 years) suggests a long-term commitment that requires ongoing performance monitoring. 4. The specific nature of 'ESM OTPS' is not detailed, making it difficult to benchmark against similar procurements. 5. The absence of small business involvement raises concerns about broader economic impact and equitable distribution of federal funds. 6. The contract's fixed-price nature aims to transfer risk to the contractor, but oversight is still crucial.

Value Assessment

Rating: questionable

Benchmarking the value of this $1.15 billion contract is challenging due to the lack of detailed service descriptions and comparable sole-source awards. The firm-fixed-price structure suggests an attempt to control costs, but without competitive bidding, it's difficult to ascertain if the pricing reflects fair market value. The significant dollar amount necessitates robust justification for its necessity and efficiency, especially given the absence of competitive pressure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was considered. This approach bypasses the standard competitive procurement process, which typically involves soliciting bids from multiple vendors. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, national security imperatives), they inherently limit price negotiation and can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings that typically arise from a competitive bidding process. This can result in a higher overall expenditure for the government, potentially diverting funds from other critical programs or requiring increased appropriations.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Department of the Navy, receiving essential Electronic Support Measures (ESM) Operational Test Program Set (OTPS) capabilities. The services delivered are critical for defense readiness, likely involving advanced technology for surveillance, intelligence gathering, or electronic warfare. The contract's geographic impact is primarily tied to the operations and facilities of Lockheed Martin and the Department of the Navy, with potential implications for national security infrastructure. Workforce implications are concentrated within Lockheed Martin's specialized engineering, manufacturing, and technical support teams, contributing to high-skilled employment in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated pricing and reduced innovation.
Sole-source award limits opportunities for small businesses to participate.
The long contract duration requires sustained oversight to ensure performance and prevent cost overruns.
The specific nature of 'ESM OTPS' is vague, hindering a clear understanding of the delivered value.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized and potentially critical defense capabilities.
Firm-fixed-price contract structure aims to provide cost certainty for the government.
The contract supports national defense objectives, contributing to the security of the United States.

Sector Analysis

This contract falls within the 'Other Measuring and Controlling Device Manufacturing' sector, which is a niche within the broader aerospace and defense industry. The defense sector is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. Spending in this area is driven by evolving threats and technological advancements, with major contractors like Lockheed Martin playing a dominant role. Comparable spending benchmarks are difficult to establish without more specific details on the ESM OTPS technology.

Small Business Impact

This contract does not appear to include any small business set-asides, as indicated by 'sb': false. The sole-source nature of the award further limits opportunities for small businesses to participate either as prime contractors or through subcontracting. This concentration of a large federal contract with a major prime contractor can reduce the overall ecosystem of small businesses involved in defense contracting, potentially impacting their growth and ability to compete for future work.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and significant value, rigorous oversight is essential to ensure performance, manage risks, and verify that the government is receiving fair value. Transparency is limited due to the lack of competitive bidding. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Defense Electronic Warfare Systems
Naval Intelligence Systems
Advanced Sensor Technology Procurement
Military Test and Evaluation Equipment
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award lacks competitive justification.
High contract value requires thorough justification and oversight.
Lack of detail on 'ESM OTPS' hinders value assessment.
No small business participation indicated.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $11.6 million to LOCKHEED MARTIN CORPORATION. PRE-PRODUCTION ESM OTPS

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 $11.6 million.

What is the period of performance?

Start: 2007-08-10. End: 2011-07-01.

What is the specific function and technological sophistication of the 'ESM OTPS' being procured?

The provided data abbreviates the item as 'PRE-PRODUCTION ESM OTPS'. 'ESM' typically refers to Electronic Support Measures, which are systems used to detect and identify enemy radar signals for intelligence gathering and threat warning. 'OTPS' likely stands for Operational Test Program Set, indicating equipment used for testing and evaluating other systems. The 'PRE-PRODUCTION' designation suggests this contract may be for early-stage development, testing, or initial fielding of a new or significantly upgraded ESM capability. The technological sophistication is likely high, involving advanced signal processing, data analysis, and integration with other military platforms, but specific details are proprietary and not publicly available in this dataset.

Why was this contract awarded on a sole-source basis instead of through full and open competition?

Sole-source awards are typically justified when only one responsible source can provide the required supplies or services. For defense contracts, this often occurs due to unique technological capabilities, proprietary data, urgent national security needs where competition is not feasible, or when a specific contractor is the only source for essential parts or services. Without further documentation from the Department of Defense, the precise justification for awarding this $1.15 billion contract to Lockheed Martin without competition remains unclear. However, it suggests that the government determined that Lockheed Martin possessed unique expertise, technology, or intellectual property essential for the 'ESM OTPS' that could not be replicated or obtained through a competitive process.

How does the $1.15 billion contract value compare to historical spending on similar ESM or OTPS procurements?

Direct comparison of the $1.15 billion contract value to historical spending on similar 'ESM OTPS' procurements is difficult without more granular data on the specific systems and their functionalities. However, as a sole-source award to a single contractor over a period of approximately three years (from August 2007 to July 2011), this represents a substantial investment. Large-scale sole-source contracts in the defense sector, particularly for advanced electronic systems, can range from hundreds of millions to billions of dollars. The value suggests a significant program of record or a critical upgrade/development phase for the Navy's electronic warfare capabilities. Without access to detailed historical procurement databases for comparable ESM/OTPS systems, a precise benchmark is not feasible from the provided data alone.

What are the potential risks associated with a sole-source contract of this magnitude?

The primary risks associated with a sole-source contract of this magnitude ($1.15 billion) include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of transparency in the procurement process. Taxpayers may not receive the best possible value for their money. Furthermore, reliance on a single source can create vulnerabilities if the contractor faces financial difficulties, production issues, or geopolitical challenges. The government also misses out on the opportunity to foster competition and potentially develop relationships with other capable suppliers in the market. Robust contract management and oversight are critical to mitigate these risks.

What is Lockheed Martin Corporation's track record with the Department of Defense, particularly in electronic warfare or similar systems?

Lockheed Martin Corporation is one of the largest defense contractors globally and has an extensive, long-standing track record with the Department of Defense (DoD). They are a major player in various defense sectors, including aerospace, defense, security, and advanced technologies. Specifically, Lockheed Martin is heavily involved in electronic warfare systems, radar technology, intelligence, surveillance, and reconnaissance (ISR) platforms, and command and control systems. They have been a prime contractor on numerous large-scale DoD programs, including fighter aircraft (like the F-35), missile defense systems, and various classified and unclassified electronic warfare suites. Their history with the DoD is characterized by the development and production of complex, high-value systems, often involving sole-source or limited-competition awards due to the specialized nature of the technology.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Other Measuring and Controlling Device Manufacturing

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

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: 1801 STATE ROUTE 17C, OWEGO, NY, 23

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $11,550,372

Exercised Options: $11,550,372

Current Obligation: $11,550,372

Contract Characteristics

Cost or Pricing Data: YES

Timeline