Lockheed Martin awarded $130M for Army modernization development, raising value-for-money questions

Contract Overview

Contract Amount: $129,618,023 ($129.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-10-30

End Date: 2026-01-16

Contract Duration: 1,904 days

Daily Burn Rate: $68.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: TASK ORDER AWARD OF MODERNIZATION DEVELOPMENT EFFORT (MDE) III

Place of Performance

Location: LIVERPOOL, ONONDAGA County, NEW YORK, 13088

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $129.6 million to LOCKHEED MARTIN CORPORATION for work described as: TASK ORDER AWARD OF MODERNIZATION DEVELOPMENT EFFORT (MDE) III Key points: 1. The contract's cost-plus-fixed-fee structure may incentivize cost overruns. 2. Lack of competition suggests potential for suboptimal pricing. 3. The long performance period increases risk exposure. 4. This award is part of a broader trend in defense modernization spending. 5. The contractor has a significant presence in the defense sector. 6. The contract's focus on system development aligns with current military needs.

Value Assessment

Rating: questionable

The $129.6 million award to Lockheed Martin for modernization development lacks a clear benchmark for value. As a cost-plus-fixed-fee contract, it offers less incentive for the contractor to control costs compared to fixed-price arrangements. Without competitive bidding, it is difficult to assess if the pricing is fair market value. The extended performance period of over 1900 days further complicates value assessment, as costs can escalate significantly over time. Comparisons to similar modernization efforts are needed to determine if this represents a prudent use of taxpayer funds.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when a specific contractor possesses unique capabilities or when urgency dictates a rapid award. However, the absence of multiple bidders limits the government's ability to leverage market forces to achieve the best possible price and terms. The justification for this sole-source award would need to be thoroughly reviewed to ensure it was appropriate.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government does not benefit from competitive pressure driving down prices. This limits the potential for cost savings and efficient allocation of resources.

Public Impact

The U.S. Army benefits from the development of modernized systems. Services delivered include modernization development efforts for critical systems. The geographic impact is primarily within New York, where the contractor is located. Workforce implications include employment for engineers and technical staff at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs.
Cost-plus-fixed-fee structure offers limited incentive for cost control.
Long contract duration increases exposure to cost escalation and changing requirements.
Potential for scope creep without robust oversight.

Positive Signals

Contractor is a major defense industry player with established expertise.
Focus on modernization aligns with strategic defense objectives.
Clear performance period and delivery schedule outlined.

Sector Analysis

The defense sector is characterized by long-term, high-value contracts for research, development, and procurement of advanced technologies. Spending in this sector is driven by national security imperatives and technological advancements. This contract for modernization development fits within the broader landscape of defense IT and systems manufacturing, where companies like Lockheed Martin are key players. Comparable spending benchmarks would typically involve other large-scale system development contracts within the Department of Defense.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. There is no information provided regarding subcontracting plans for small businesses. This suggests that the primary focus is on the large prime contractor's capabilities, potentially limiting opportunities for small businesses to participate in this specific award.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the Department of the Army's contracting officers and program managers. Accountability measures would be tied to the achievement of development milestones and adherence to the contract's terms. Transparency is often limited in sole-source defense contracts, but reporting requirements may exist. The Inspector General's office for the Department of Defense would have jurisdiction for audits and investigations.

Related Government Programs

Department of Defense Research and Development
Army Systems Modernization Programs
Lockheed Martin Defense Contracts
Information Technology Development Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $129.6 million to LOCKHEED MARTIN CORPORATION. TASK ORDER AWARD OF MODERNIZATION DEVELOPMENT EFFORT (MDE) 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 Army).

What is the total obligated amount?

The obligated amount is $129.6 million.

What is the period of performance?

Start: 2020-10-30. End: 2026-01-16.

What is Lockheed Martin's track record with similar modernization development contracts for the Department of the Army?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing complex systems for the U.S. military, including the Army. They have a history of managing large-scale modernization and development efforts, often involving advanced technologies in areas such as aerospace, defense electronics, and information systems. While specific details on past performance for identical 'MDE III' type contracts are not provided here, their overall portfolio suggests a capacity to handle such complex undertakings. However, past performance on similar contracts, including any issues related to cost, schedule, or quality, would be a critical factor in assessing the risk and value of this current award. A review of past performance evaluations and any contract disputes or terminations would offer deeper insight.

How does the cost-plus-fixed-fee (CPFF) pricing structure compare to other contract types for similar defense development efforts?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common in research and development efforts where the scope of work is not precisely defined at the outset, making it difficult to establish a firm fixed price. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This structure shifts much of the cost risk to the government. Compared to Fixed-Price contracts (like FFP or FP-EPA), CPFF offers less incentive for the contractor to control costs, as their profit is fixed regardless of the final cost. However, it can be advantageous when innovation and flexibility are paramount and the final technical outcome is uncertain. Other contract types like Cost Plus Incentive Fee (CPIF) or Cost Plus Award Fee (CPAF) attempt to better align contractor incentives with government goals by adjusting the fee based on performance.

What are the primary risks associated with a sole-source award for a modernization development effort of this magnitude?

The primary risks associated with a sole-source award for a large modernization development effort include a lack of price competition, which can lead to higher costs for the government compared to a competitively bid contract. There's also a reduced incentive for the contractor to innovate or be highly efficient, as they face no direct competition. Furthermore, without the vetting process of a competitive bid, there's a risk that the chosen contractor might not be the most capable or cost-effective option available. The government may also be locked into a specific technology or vendor, limiting future flexibility. Ensuring robust contract oversight and clear performance metrics becomes even more critical in sole-source situations to mitigate these risks.

What is the historical spending trend for 'Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing' (NAICS 334511) by the Department of the Army?

Analyzing historical spending trends for NAICS code 334511 by the Department of the Army requires access to detailed federal procurement data. Generally, this sector encompasses a wide range of sophisticated equipment crucial for military operations. Spending in this area is often characterized by large, multi-year contracts for system development, upgrades, and sustainment. Trends can be influenced by geopolitical events, technological advancements, and evolving military strategies. For the Army, significant investments are typically made in areas like radar systems, navigation aids, targeting systems, and related instrumentation. Without specific data for this NAICS code and agency, it's difficult to pinpoint precise historical spending patterns, but it is reasonable to assume consistent and substantial investment given the nature of defense requirements.

What are the potential implications of the long contract duration (1904 days) on program effectiveness and cost control?

A contract duration of 1904 days (approximately 5.2 years) for a modernization development effort presents both opportunities and significant risks. On the positive side, it allows for a sustained focus on complex development tasks, potentially leading to more robust and thoroughly tested systems. It also provides the contractor with a stable planning horizon. However, the extended duration significantly increases the risk of cost escalation due to inflation, changing labor rates, and material costs. Furthermore, technology can rapidly evolve over such a long period, potentially rendering the developed systems obsolete or requiring costly modifications before they are fully deployed. Program effectiveness can also be impacted if requirements change significantly during development, necessitating rework or scope adjustments. Robust change management and regular re-evaluation of requirements are crucial to mitigate these risks.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 497 ELECTRONICS PKWY BLDG 5, 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: $129,618,023

Exercised Options: $129,618,023

Current Obligation: $129,618,023

Subaward Activity

Number of Subawards: 184

Total Subaward Amount: $36,960,020

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W56KGY17D0005

IDV Type: IDC

Timeline