DoD's $43.6M Lockheed Martin Engineering Services Contract Awarded via Sole Source, Lacking Competition

Contract Overview

Contract Amount: $43,582,597 ($43.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2012-11-16

End Date: 2016-07-29

Contract Duration: 1,351 days

Daily Burn Rate: $32.3K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: ACAT II M6.5/M6.5+ PHASE III

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $43.6 million to LOCKHEED MARTIN CORPORATION for work described as: ACAT II M6.5/M6.5+ PHASE III Key points: 1. Contract awarded on a sole-source basis, raising concerns about price discovery and potential overpayment. 2. Significant duration of over three years suggests a substantial and ongoing need for engineering services. 3. The Cost Plus Incentive Fee (CPIF) contract type can incentivize performance but also carries inherent cost risks. 4. Lack of competition limits opportunities for small businesses to participate in this significant defense contract. 5. The contract's focus on engineering services indicates a critical support role within the Department of Defense. 6. Performance occurred primarily in Texas, suggesting a localized impact for this federal expenditure.

Value Assessment

Rating: questionable

Benchmarking the value of this $43.6 million contract is challenging due to its sole-source nature and the specific engineering services provided. Without competitive bids, it's difficult to ascertain if the pricing reflects fair market value. The CPIF structure means costs could fluctuate, and the final expenditure might differ from initial estimates. Comparing it to similar sole-source engineering contracts within the DoD could offer some context, but the unique technical requirements may limit direct comparisons.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This indicates that the Department of Defense likely identified Lockheed Martin Corporation as the only responsible source capable of fulfilling the specific engineering services required. The absence of multiple bidders means there was no direct price competition, which can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive pressure. Without alternative bids, there's less assurance that the government secured the best possible price for these critical engineering services.

Public Impact

The Department of Defense benefits from specialized engineering expertise provided by Lockheed Martin. Services delivered likely support critical defense systems or platforms, ensuring operational readiness. The geographic impact is concentrated in Texas, where the contract performance occurred. Workforce implications include employment for engineers and technical staff at Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
CPIF contract type introduces cost uncertainty and potential for overruns if not managed carefully.
Lack of transparency in the procurement process due to sole-source award.
Limited opportunities for small businesses to engage with this significant defense expenditure.

Positive Signals

Award to a major defense contractor suggests access to specialized and potentially critical engineering capabilities.
The contract duration indicates a sustained need and commitment to a specific defense objective.
CPIF structure can incentivize contractor efficiency and innovation to meet performance goals.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader aerospace and defense industry. The market for defense engineering services is dominated by a few large, established contractors like Lockheed Martin, who possess the specialized knowledge and security clearances required for government work. Spending in this area is often driven by the need for advanced technological development, system sustainment, and modernization of military assets. Comparable spending benchmarks would typically involve analyzing other large, sole-source engineering contracts awarded by the DoD for similar complex projects.

Small Business Impact

The fact that this contract was not competed and the small business (SB) flag is false indicates no specific set-aside for small businesses. This means that opportunities for small business subcontractors may be limited, depending on Lockheed Martin's subcontracting plan. Without a set-aside, the primary awardee is a large corporation, potentially excluding smaller, specialized firms from direct participation in this significant contract value.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures would be tied to the Cost Plus Incentive Fee (CPIF) contract terms, focusing on performance metrics and cost control. Transparency might be limited due to the sole-source nature of the award, but contract details and performance reports are usually available through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Defense Research and Development
Aerospace Engineering Services
Defense Contractor Support Services
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Lack of competition
Cost Plus Incentive Fee (CPIF) contract type carries inherent cost risk
No small business set-aside

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $43.6 million to LOCKHEED MARTIN CORPORATION. ACAT II M6.5/M6.5+ PHASE III

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 Air Force).

What is the total obligated amount?

The obligated amount is $43.6 million.

What is the period of performance?

Start: 2012-11-16. End: 2016-07-29.

What specific engineering services did Lockheed Martin provide under this contract, and how critical were they to the Air Force's mission?

The provided data indicates the contract was for 'Engineering Services' (NAICS 541330) and was awarded by the Department of the Air Force. While the specific nature of the engineering services is not detailed, this category typically encompasses a wide range of activities such as design, development, testing, and technical support for complex systems. Given the award to Lockheed Martin, a major defense contractor, and the contract's value ($43.6M), it is highly probable that these services were critical to supporting advanced aerospace platforms, weapon systems, or related defense technologies. These could include areas like aircraft design modifications, system integration, simulation, or lifecycle support, all essential for maintaining the Air Force's technological edge and operational readiness.

How does the Cost Plus Incentive Fee (CPIF) contract type typically function, and what are its implications for cost control in this specific $43.6M award?

A Cost Plus Incentive Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and also receives a fee that is adjusted based on performance against a target. In this $43.6M award to Lockheed Martin, the CPIF structure likely means that both the government and the contractor agreed on a target cost and a target fee. If Lockheed Martin performs better than the target (e.g., completes the work under budget or ahead of schedule), they receive a higher fee, up to a pre-defined maximum. Conversely, if performance is worse than the target, their fee is reduced, potentially below the target fee, but typically not below zero. This structure aims to incentivize the contractor to control costs and meet performance objectives. However, it also means the final cost is not fixed and can vary, requiring diligent government oversight to ensure costs remain reasonable and performance targets are met effectively.

Given this was a sole-source award, what are the potential risks associated with the lack of competition for this $43.6M engineering services contract?

The primary risk associated with a sole-source award for this $43.6M contract is the potential for inflated pricing. Without competitive bids, the government lacks a benchmark to ensure it is receiving the best value for its money. Lockheed Martin, as the sole provider, may have less incentive to offer the most cost-effective solution. Furthermore, sole-source awards can sometimes indicate a lack of market research or an over-reliance on a single contractor, which can create long-term dependencies and limit future sourcing options. There's also a risk that the government may not be aware of innovative or more cost-effective solutions available from other potential providers who were not given an opportunity to bid.

What does the contract's duration of 1351 days (approximately 3.7 years) suggest about the nature of the engineering services and the program it supports?

A contract duration of approximately 3.7 years for engineering services suggests a long-term, potentially complex project or ongoing support requirement. This timeframe is typical for programs involving significant research and development, system sustainment, modernization efforts, or the integration of new technologies into existing defense infrastructure. It implies that the engineering tasks are not short-term or ad-hoc but rather integral to a larger, sustained defense initiative. Such durations often require substantial planning, resource allocation, and continuous oversight from the awarding agency to ensure milestones are met and the project remains aligned with strategic defense objectives throughout its lifecycle.

How might the performance location in Texas (ST: TX) impact the local economy and the Department of Defense's operational reach?

Performance in Texas suggests that a significant portion of the $43.6M federal spending flowed into the local economy through Lockheed Martin's operations and potential subcontracting. This likely created or sustained jobs for engineers, technicians, and support staff within the state. For the Department of Defense, having critical engineering services performed in Texas could be linked to proximity to key military installations, research facilities, or existing aerospace industry hubs in the region. This geographic concentration might facilitate collaboration, reduce travel costs, and leverage the skilled workforce available in Texas's robust defense and aerospace sector, potentially enhancing program efficiency and responsiveness.

Industry Classification

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

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 1 LOCKHEED BLVD, FORT WORTH, TX, 76108

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $54,586,781

Exercised Options: $54,586,781

Current Obligation: $43,582,597

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: F4262001D0058

IDV Type: IDC

Timeline