DoD's $38M Lockheed Martin contract for Joint Air to Ground Missile engineering services lacked competition

Contract Overview

Contract Amount: $38,268,831 ($38.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-09-20

End Date: 2022-03-07

Contract Duration: 1,264 days

Daily Burn Rate: $30.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: JOINT AIR TO GROUND MISSILE ENGINEERING SERVICES TASKS ARE TO MAINTAIN THE REQUIRED PERFORMANCE OF THE JAGM SYSTEM.

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $38.3 million to LOCKHEED MARTIN CORPORATION for work described as: JOINT AIR TO GROUND MISSILE ENGINEERING SERVICES TASKS ARE TO MAINTAIN THE REQUIRED PERFORMANCE OF THE JAGM SYSTEM. Key points: 1. Contract awarded to a single, large defense contractor, raising questions about competitive pricing. 2. Engineering services are critical for maintaining the performance of a key missile system. 3. The contract duration of 1264 days suggests a long-term need for these specialized services. 4. Awarded as a sole-source contract, limiting opportunities for other firms to bid. 5. The cost-plus-fixed-fee structure may incentivize cost increases, requiring close oversight. 6. Geographic focus on Florida for service delivery.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to the lack of competitive bids. The total award of $38.3 million over approximately 3.5 years for engineering services on a specific missile system suggests a significant investment. Without comparable contract data or a competitive bidding process, it's difficult to definitively assess if the pricing represents fair market value or if taxpayers received the best possible deal. The cost-plus-fixed-fee (CPFF) contract type, while common for complex R&D, can lead to higher costs if not managed diligently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Lockheed Martin Corporation, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple companies vying for the contract. While sole-source awards can be justified for unique capabilities or urgent needs, they inherently reduce price competition and may lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: The lack of competition means taxpayers may have paid a premium for these engineering services, as there was no market pressure to drive down costs. Opportunities for small businesses to participate through subcontracting were also likely limited.

Public Impact

The primary beneficiary is the Department of the Army, which relies on the Joint Air to Ground Missile (JAGM) system for its operations. The services delivered are crucial for maintaining the performance and readiness of the JAGM system, ensuring its effectiveness in the field. The contract has a geographic impact primarily in Florida, where the services are likely performed or managed. The contract supports specialized engineering roles within Lockheed Martin, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Lack of transparency in the sole-source justification process.
Potential for contractor lock-in due to specialized knowledge of the JAGM system.
Limited opportunities for small businesses to participate in this significant contract.

Positive Signals

Contract ensures continued support and maintenance for a critical defense system (JAGM).
Award to a known entity (Lockheed Martin) suggests a level of established capability and reliability.
Engineering services are vital for system upgrades and long-term operational effectiveness.
Contract provides stability for a specific segment of the defense engineering workforce.

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 substantial, driven by the continuous need to develop, maintain, and upgrade complex military systems. Companies like Lockheed Martin are major players in this sector, often holding significant contracts for specific weapon systems. Benchmarking spending in this area requires comparing similar engineering support contracts for major defense platforms, considering factors like system complexity and contract type.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have explicit subcontracting requirements for small businesses mentioned in the provided data. As a sole-source award to a large prime contractor, the direct opportunities for small businesses to participate are likely minimal unless they are existing suppliers to Lockheed Martin or are brought in as subcontractors without a formal set-aside. This could limit the broader impact on the small business defense ecosystem for this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. As a Cost Plus Fixed Fee (CPFF) contract, rigorous financial oversight is necessary to monitor costs and ensure they align with the fixed fee and the contract's objectives. Transparency is limited due to the sole-source nature. Inspector General (IG) jurisdiction would apply if any fraud, waste, or abuse were suspected or reported.

Related Government Programs

Joint Air to Ground Missile (JAGM) Program
Department of Defense Engineering Services
Lockheed Martin Defense Contracts
Cost-Plus-Fixed-Fee Contracts
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $38.3 million to LOCKHEED MARTIN CORPORATION. JOINT AIR TO GROUND MISSILE ENGINEERING SERVICES TASKS ARE TO MAINTAIN THE REQUIRED PERFORMANCE OF THE JAGM SYSTEM.

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 Army).

What is the total obligated amount?

The obligated amount is $38.3 million.

What is the period of performance?

Start: 2018-09-20. End: 2022-03-07.

What is the track record of Lockheed Martin Corporation in delivering engineering services for complex defense systems?

Lockheed Martin Corporation is a major global security and aerospace company with an extensive track record in developing, manufacturing, and supporting complex defense systems, including missiles, aircraft, and space systems. They have historically been awarded numerous large, sole-source, and competitive contracts by various branches of the U.S. military and international allies. Their experience encompasses the full lifecycle of defense products, from research and development to sustainment and upgrades. While their capabilities are generally recognized as high, the scale and nature of their contracts, particularly sole-source awards, often draw scrutiny regarding cost-effectiveness and competition. Specific performance metrics for individual contracts would require deeper analysis of contract performance reports and government assessments.

How does the $38.3 million cost compare to similar engineering support contracts for missile systems?

Directly comparing the $38.3 million cost is difficult without knowing the specific scope, duration, and complexity of the engineering services provided for the JAGM system. Missile system engineering support contracts can vary widely. For instance, contracts for initial development or major upgrades might cost hundreds of millions or even billions, while sustainment and basic engineering tasks for mature systems could be significantly less. The provided data indicates this contract ran for 1264 days (approx. 3.5 years). A rough annual cost of around $11 million ($38.3M / 3.5 years) for engineering services on a major missile system might be considered reasonable in the defense sector, but this is highly dependent on the specific tasks performed. The lack of competition makes a true value assessment problematic.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for engineering services?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than if multiple bidders had competed. The government lacks the benefit of market forces driving efficiency and cost reduction. Secondly, the CPFF structure, while providing flexibility for evolving requirements, carries an inherent risk of cost escalation. The contractor is reimbursed for allowable costs plus a predetermined fixed fee. If costs increase, the contractor's profit (the fixed fee) remains the same, but the total contract value rises. This can reduce the contractor's incentive to control costs rigorously, necessitating robust government oversight to scrutinize expenditures and prevent unnecessary spending.

How effective is the JAGM system, and how critical are these engineering services to its operational readiness?

The Joint Air to Ground Missile (JAGM) system is designed to be a multi-platform, multi-target missile system providing close air support and precision strike capabilities. It aims to replace older systems like the Hellfire, Maverick, and Stinger missiles, offering improved performance against a wider range of targets. Its effectiveness is crucial for modern warfare, enabling pilots and ground forces to engage threats accurately and with reduced risk to friendly forces. The engineering services covered by this contract are vital for maintaining the JAGM system's required performance. This includes tasks such as diagnostics, troubleshooting, technical support, system analysis, and potentially minor modifications or updates, all of which are essential for ensuring the missile system remains operational, reliable, and effective in meeting its mission requirements.

What are the historical spending patterns for engineering services related to the JAGM program or similar missile systems?

Historical spending patterns for the JAGM program and similar missile systems typically show significant investment during development and initial fielding phases, followed by sustained spending on sustainment, upgrades, and engineering support throughout the system's lifecycle. For the JAGM, initial development contracts would have been substantial. Post-award, contracts like the one awarded to Lockheed Martin focus on maintaining operational capability. Annual spending can fluctuate based on modernization needs, threat changes, and depot-level maintenance cycles. Without access to specific historical contract databases for JAGM sustainment or comparable missile programs, precise figures are unavailable, but it's common for such programs to involve tens to hundreds of millions of dollars in cumulative engineering and sustainment costs over their operational lives.

What is the significance of the contract being awarded in Florida (ST/SN)?

The indication that the contract's service delivery point or performance location is in Florida (ST/SN) suggests that Lockheed Martin's relevant engineering or support facilities are located there. Florida has a significant presence in the aerospace and defense industry, hosting numerous defense contractors and military installations. This geographic detail implies that the economic impact, such as job creation and utilization of local resources, would be concentrated in Florida. It may also indicate specific logistical advantages or existing infrastructure that made Florida a suitable location for performing these specialized engineering tasks for the JAGM system.

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: W31P4Q17R0019

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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: $79,183,651

Exercised Options: $38,268,831

Current Obligation: $38,268,831

Actual Outlays: $1,707,475

Subaward Activity

Number of Subawards: 82

Total Subaward Amount: $33,689,571

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline