DoD awards $60M+ to Lockheed Martin for radar systems, raising questions about competition and value

Contract Overview

Contract Amount: $60,076,459 ($60.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2024-09-23

End Date: 2029-08-01

Contract Duration: 1,773 days

Daily Burn Rate: $33.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: E2D RADAR OTPS PHASE 3 & 4 GROUP 2

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $60.1 million to LOCKHEED MARTIN CORPORATION for work described as: E2D RADAR OTPS PHASE 3 & 4 GROUP 2 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant contract value suggests a critical need for advanced radar technology. 3. Long performance period (nearly 5 years) indicates a complex and ongoing requirement. 4. The 'Cost Plus Fixed Fee' structure may incentivize cost overruns. 5. Lack of competition raises concerns about whether the government is achieving best value. 6. The specific nature of the 'E2D RADAR OTPS PHASE 3 & 4 GROUP 2' suggests a specialized, high-tech defense application.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized technology. The 'Cost Plus Fixed Fee' (CPFF) contract type means that while the fee is fixed, the total cost is not, potentially leading to higher-than-expected expenditures if costs escalate. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if there's an opportunity for cost savings through negotiation or alternative providers. The government bears the risk of cost overruns under this contract type.

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 goods or services, or in cases of urgent need. The absence of competition means there were no other bidders to compare against, and the government did not benefit from the price discovery that competition usually provides. This can lead to higher prices than might be achieved in a competitive environment.

Taxpayer Impact: Taxpayers may be paying a premium for this radar system due to the lack of competitive pressure. Without multiple bids, there's less incentive for the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other branches of the U.S. military requiring advanced radar capabilities. The contract will deliver advanced radar systems essential for defense operations, likely for surveillance, targeting, and situational awareness. The geographic impact is primarily within New York, where the contractor is located, but the end-use is national defense. Workforce implications include skilled labor in engineering, manufacturing, and program management at Lockheed Martin and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayer dollars.
Cost Plus Fixed Fee structure carries inherent risk of cost escalation.
Lack of transparency in pricing due to non-competitive award.
Long contract duration could mask inefficiencies or scope creep.
Specialized nature of the technology may create long-term dependency on a single supplier.

Positive Signals

Award to a major defense contractor with established expertise in radar systems.
Contract addresses a critical defense need for advanced technology.
Long-term performance period suggests a stable and ongoing requirement.
Potential for technological advancement and innovation within a specialized field.

Sector Analysis

The defense electronics sector is characterized by high R&D costs, long product development cycles, and significant government procurement. Companies like Lockheed Martin are major players, often securing large, long-term contracts for specialized systems. The market for advanced radar technology is highly concentrated, with a few prime contractors dominating. This contract fits within the broader defense procurement landscape, where complex systems are developed and delivered to meet evolving military requirements. Comparable spending benchmarks are difficult to establish due to the proprietary nature of defense technology.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Lockheed Martin, a large prime contractor, is likely to subcontract portions of this work. The extent to which small businesses will benefit through subcontracting opportunities is not detailed in the provided data. Analysis of subcontracting plans would be necessary to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The 'Cost Plus Fixed Fee' structure necessitates close monitoring of costs incurred by Lockheed Martin to ensure adherence to the fixed fee and to manage potential cost overruns. Transparency may be limited due to the sole-source nature of the award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

E-2D Advanced Hawkeye Program
Advanced Radar Systems Procurement
Naval Aviation Electronics
Defense Intelligence, Surveillance, and Reconnaissance (ISR) Systems

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding
Potential for cost overruns
Long contract performance period

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $60.1 million to LOCKHEED MARTIN CORPORATION. E2D RADAR OTPS PHASE 3 & 4 GROUP 2

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 $60.1 million.

What is the period of performance?

Start: 2024-09-23. End: 2029-08-01.

What is the track record of Lockheed Martin Corporation in delivering complex radar systems to the Department of Defense?

Lockheed Martin Corporation is a well-established and major defense contractor with extensive experience in developing and producing advanced radar systems for various military applications. They have a long history of delivering complex electronic warfare and surveillance systems, including radar for aircraft, ships, and ground-based platforms. Their portfolio includes programs like the F-35's APG-81 AESA radar and various surveillance and reconnaissance systems. While their track record is generally strong in terms of technological capability, large defense contracts can sometimes face challenges related to cost overruns, schedule delays, and performance issues, which are not uncommon in the defense industry. Specific performance metrics for this particular contract would require further investigation into past performance evaluations.

How does the 'Cost Plus Fixed Fee' (CPFF) contract type compare to other contract types in terms of value for money for the government?

The 'Cost Plus Fixed Fee' (CPFF) contract type is often used for research and development or complex projects where the scope of work is not fully defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. While this structure allows the government to pursue projects with uncertain costs and provides flexibility, it carries a higher risk of cost escalation for the government compared to fixed-price contracts. The fixed fee, however, provides some incentive for the contractor to control costs, as their profit is not directly tied to the total cost. For value for money, fixed-price incentive contracts or firm-fixed-price contracts are generally preferred when risks can be clearly defined and managed, as they place more cost risk on the contractor and incentivize efficiency.

What are the potential risks associated with awarding a sole-source contract for advanced radar systems?

Awarding a sole-source contract for advanced radar systems presents several potential risks. Firstly, the lack of competition means the government may not achieve the best possible price, as there is no pressure from competing bids to drive down costs. This can lead to higher expenditures for taxpayers. Secondly, it can foster a dependency on a single supplier, potentially limiting future options and bargaining power. If the sole-source contractor faces production issues, financial instability, or decides to discontinue the product line, the government could be left in a difficult position. Furthermore, without competitive benchmarking, it's harder to assess the true market value of the technology and ensure the government is receiving a fair deal. This can also reduce the incentive for the contractor to innovate aggressively if they are guaranteed the contract regardless of competitive alternatives.

What is the typical market size and competitive landscape for advanced radar systems procurement by the U.S. Department of Defense?

The market for advanced radar systems procurement by the U.S. Department of Defense is substantial, running into billions of dollars annually. It is characterized by high barriers to entry due to the significant R&D investment, specialized expertise, and stringent security requirements. The landscape is dominated by a few large, established defense contractors, such as Lockheed Martin, Northrop Grumman, Raytheon Technologies, and BAE Systems. These companies possess the technological capabilities, manufacturing infrastructure, and security clearances necessary to compete for and execute these complex programs. Competition often occurs at the prime contract level for major system development, but the supply chain involves numerous smaller, specialized firms providing components and subsystems. The nature of defense procurement, with its long development cycles and evolving threats, means that contracts are often awarded through complex, lengthy processes, with sole-source or limited competition being not uncommon for highly specialized or proprietary technologies.

How does the duration of this contract (nearly 5 years) impact the assessment of its overall value and risk?

The nearly five-year duration of this contract (1773 days) indicates a long-term, complex requirement for the E2D RADAR OTPS PHASE 3 & 4 GROUP 2 systems. From a value perspective, a longer duration can allow for economies of scale in production and potentially lower per-unit costs over time if production is efficient. It also provides stability for the contractor, potentially leading to better planning and resource allocation. However, a long duration also increases the risk of cost escalation due to inflation, changes in material costs, or unforeseen technical challenges that may arise over an extended period. Furthermore, the longer the contract, the greater the potential for technological obsolescence if the underlying threat environment or technological advancements outpace the system's capabilities. Close oversight and robust contract management are crucial to mitigate these risks and ensure value is maintained throughout the contract's life.

What are the implications of this contract being awarded to Lockheed Martin Corporation, a major defense prime contractor?

Awarding this contract to Lockheed Martin Corporation, a major defense prime contractor, has several implications. Firstly, it suggests the Department of the Navy is leveraging the company's established expertise, technological capabilities, and existing infrastructure for developing and producing advanced radar systems. This can lead to faster program initiation and potentially higher quality outcomes due to the contractor's experience. However, as a major prime contractor, Lockheed Martin often has significant influence and may command premium pricing. The sole-source nature of this award, combined with the contractor's size, raises concerns about market concentration and the government's ability to negotiate the best possible terms. It also implies that the government is relying on a single entity for a critical defense capability, highlighting the importance of strong oversight and relationship management to ensure performance and value.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Instrument Manufacturing for Measuring and Testing Electricity and Electrical Signals

Product/Service Code: INSTRUMENTS AND LABORATORY EQPT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N6833523R0036

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 497 ELECTRONICS PKWY, LIVERPOOL, NY, 13088

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: $60,076,459

Exercised Options: $60,076,459

Current Obligation: $60,076,459

Subaward Activity

Number of Subawards: 4

Total Subaward Amount: $17,327,619

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline