DoD awards $106.7M contract for industrial engineering services to Lockheed Martin, with no competition

Contract Overview

Contract Amount: $106,699,233 ($106.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-05-27

End Date: 2024-04-30

Contract Duration: 1,434 days

Daily Burn Rate: $74.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: INDUSTRIAL ENGINEERING SERVICES FOR ARTILLERY FAMILY OF VEHICLES AND MUNITIONS.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $106.7 million to LOCKHEED MARTIN CORPORATION for work described as: INDUSTRIAL ENGINEERING SERVICES FOR ARTILLERY FAMILY OF VEHICLES AND MUNITIONS. Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential for overpayment. 2. Significant contract value suggests critical support for artillery systems, but lack of competition limits benchmarking. 3. Performance period spans over three years, indicating a long-term need for these specialized engineering services. 4. The 'Cost Plus Fixed Fee' pricing structure can incentivize cost overruns if not closely monitored. 5. Contractor is a major defense prime, suggesting established relationship and potential barriers to entry for competitors. 6. Geographic location in Texas may indicate specific facility or workforce requirements.

Value Assessment

Rating: questionable

The contract's value of $106.7 million for industrial engineering services is substantial. However, without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The 'Cost Plus Fixed Fee' (CPFF) structure, while common in complex defense procurements, carries inherent risks of cost escalation if not rigorously managed. The absence of competition means taxpayers may not be receiving the best possible value, as there was no pressure from competing bids to drive down costs.

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 solicited. This approach is typically used when only one responsible source is available or when there is a compelling justification for not seeking competition. The lack of multiple bidders means there was no opportunity for price discovery through a competitive process, potentially leading to a higher price than if multiple firms had vied for the contract.

Taxpayer Impact: The absence of competition means taxpayers did not benefit from the cost savings that typically arise from a competitive bidding environment. This could result in a higher overall expenditure for these essential engineering services.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches utilizing artillery systems, receiving specialized industrial engineering support. Services delivered include critical industrial engineering expertise for artillery family of vehicles and munitions, ensuring operational readiness and efficiency. The contract's impact is primarily concentrated in Texas, where the contractor's facility is located, potentially supporting local jobs and the regional economy. Workforce implications include the utilization of specialized engineering talent within Lockheed Martin, contributing to the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits transparency and potential for cost savings.
Cost-plus-fixed-fee contract type can lead to cost overruns if not managed effectively.
Lack of competition may indicate barriers to entry for smaller or specialized firms in this niche.
Contract duration of over three years requires sustained oversight to ensure value.

Positive Signals

Award to a major defense contractor suggests established expertise and capability.
Contract addresses critical industrial engineering needs for artillery systems, vital for national defense.
Long-term contract provides stability for essential services and contractor planning.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense-related industrial operations. The defense industrial base relies heavily on specialized engineering firms for the design, sustainment, and improvement of complex weapon systems. Spending in this area is often characterized by long-term contracts, high technical requirements, and a significant portion of work being performed by large, established defense contractors. Benchmarking is challenging due to the unique nature of defense requirements and the limited number of qualified providers.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses within the provided data. The award to a large prime contractor like Lockheed Martin suggests that the primary focus is on leveraging established capabilities rather than promoting small business participation through this specific procurement. Further analysis would be needed to determine if any small business subcontracting opportunities exist within the execution of this contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Army contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of costs, performance, and adherence to the fixed fee is crucial. Transparency may be limited due to the lack of competitive proposals. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Artillery Systems Procurement
Defense Industrial Base Support
Engineering and Technical Services
Lockheed Martin Defense Contracts
Army Weapon Systems Sustainment

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $106.7 million to LOCKHEED MARTIN CORPORATION. INDUSTRIAL ENGINEERING SERVICES FOR ARTILLERY FAMILY OF VEHICLES AND MUNITIONS.

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 $106.7 million.

What is the period of performance?

Start: 2020-05-27. End: 2024-04-30.

What is Lockheed Martin's track record with similar sole-source engineering contracts for the Department of Defense?

Lockheed Martin Corporation, as a major defense contractor, has a long history of receiving sole-source and competitively awarded contracts across various defense platforms, including artillery systems. Analyzing their past performance on similar sole-source contracts would involve reviewing contract histories for cost overruns, schedule delays, and overall performance ratings. While specific data on 'similar' sole-source industrial engineering contracts is not provided here, their extensive portfolio suggests a capacity to manage complex projects. However, the absence of competition in this instance means that direct comparisons of pricing and efficiency against alternative providers are not readily available, making a definitive assessment of their track record in this specific context challenging without deeper investigation into past contract performance metrics and any associated audits or reviews.

How does the 'Cost Plus Fixed Fee' pricing structure compare to other contract types for engineering services in the defense sector?

The 'Cost Plus Fixed Fee' (CPFF) contract type is common in defense procurements, especially for research, development, and complex services where the scope of work may evolve or is not fully defined at the outset. In CPFF, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This differs from 'Fixed Price' contracts, where the price is set regardless of costs incurred, offering greater cost certainty to the government but potentially higher risk for the contractor. 'Cost Plus Incentive Fee' (CPIF) contracts share costs and fees based on performance targets. For engineering services, CPFF can be advantageous when innovation or adaptation is key, but it places a significant burden on the government to meticulously monitor costs to prevent overruns. Without competition, the fixed fee itself may not be optimized, unlike in a competitive fixed-price scenario.

What are the potential risks associated with awarding a $106.7 million contract on a sole-source basis?

The primary risk of a sole-source award, especially for a contract valued at $106.7 million, is the lack of price competition. This can lead to the government paying a higher price than necessary, as there is no market pressure to drive down costs. It also reduces transparency in the procurement process and may signal potential barriers to entry for other qualified firms, potentially stifling innovation and competition in the long run. Furthermore, without the vetting process of multiple proposals, there's a slightly elevated risk of selecting a contractor whose capabilities might not be the absolute best fit or most cost-effective, although this is mitigated by the contractor's established presence. Robust oversight is critical to manage these risks.

What does the duration of this contract (over three years) imply about the nature of the industrial engineering services required?

A contract duration of over three years (1434 days, approximately 3.9 years) for industrial engineering services suggests that the requirements are long-term and integral to the ongoing operations or sustainment of artillery systems. This extended period implies a need for sustained expertise in areas such as process improvement, manufacturing efficiency, supply chain optimization, or lifecycle support for these weapon platforms. It indicates that these services are not a one-time fix but rather a continuous requirement for maintaining readiness, enhancing performance, or managing the production and support infrastructure for artillery. Such long-term engagements often reflect the complex and enduring nature of defense systems.

Are there any indications of potential cost overruns given the contract type and sole-source nature?

The 'Cost Plus Fixed Fee' (CPFF) contract type inherently carries a risk of cost overruns because the contractor is reimbursed for actual costs incurred, plus a predetermined profit. While the 'fixed fee' component aims to cap the profit, the total cost can still escalate significantly if allowable costs increase. This risk is amplified in a sole-source award, as there is no competitive pressure to ensure the initial cost estimates are lean or that the contractor is incentivized to find the most cost-effective solutions. Without detailed cost breakdowns and rigorous government oversight of expenditures, the potential for cost overruns on this $106.7 million contract is a significant concern that requires diligent management by the Department of the Army.

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: W31P4Q19R0038

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1701 W MARSHALL DR, GRAND PRAIRIE, TX, 75051

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: $108,096,215

Exercised Options: $106,699,233

Current Obligation: $106,699,233

Actual Outlays: $7,190

Subaward Activity

Number of Subawards: 65

Total Subaward Amount: $22,277,126

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline