DoD awards $56M to Lockheed Martin for WARSim system engineering, facing limited competition

Contract Overview

Contract Amount: $55,967,755 ($56.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2009-09-29

End Date: 2013-03-31

Contract Duration: 1,279 days

Daily Burn Rate: $43.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: WARSIM SYSTEM ENGINEERING DESIGN

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32825

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $56.0 million to LOCKHEED MARTIN CORPORATION for work described as: WARSIM SYSTEM ENGINEERING DESIGN Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, potentially leading to higher final costs than fixed-price contracts. 2. Limited competition raises concerns about optimal pricing and potential for cost overruns. 3. The contract duration of over three years suggests a significant, long-term need for these engineering services. 4. The award to a single, large contractor may limit opportunities for smaller, specialized firms. 5. Geographic location in Florida may indicate specific operational or testing requirements. 6. The absence of small business set-asides means direct benefits to small businesses are unlikely.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without more specific details on the engineering services provided and their scope. However, the cost-plus-fixed-fee structure, combined with limited competition, suggests a higher risk of cost escalation compared to fixed-price contracts. The total award value of approximately $56 million over nearly four years indicates a substantial investment, and without competitive pressure, it's difficult to ascertain if this represents optimal value for the taxpayer.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Lockheed Martin Corporation, was solicited. This significantly limits the opportunity for price discovery through competitive bidding. While sole-source awards can be justified for unique capabilities or urgent needs, the lack of competition here raises questions about whether alternative solutions or more cost-effective providers were considered.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding, potentially leading to higher overall costs for the government.

Public Impact

The primary beneficiary is the Department of Defense, which receives engineering design services for the WARSim system. The services delivered are critical for the development and maintenance of simulation and training systems, likely impacting military readiness. The contract is geographically focused in Florida, suggesting potential local economic impact through employment and subcontracts. Workforce implications include the employment of highly skilled engineers and technical personnel by Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract type can incentivize higher spending.
Sole-source award limits price competition and taxpayer value.
Long contract duration may obscure performance issues over time.
Lack of small business participation limits broader economic benefits.

Positive Signals

Award to a large, established defense contractor like Lockheed Martin suggests access to specialized expertise.
The WARSim system likely addresses a critical defense training need.
The contract specifies a fixed fee, providing some cost control within the cost-plus structure.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting defense systems. The market for defense engineering services is dominated by large, established contractors. Spending in this area is often driven by specific platform development or modernization needs. Comparable spending benchmarks would typically involve other large-scale system engineering contracts within the Department of Defense, often running into tens or hundreds of millions of dollars.

Small Business Impact

This contract was not competed with small business set-asides, nor does it appear to have specific subcontracting goals for small businesses mentioned. This means direct opportunities for small businesses to compete for this specific work are absent. While Lockheed Martin may engage small businesses as subcontractors, the primary award does not prioritize their inclusion, potentially limiting the broader impact on the small business defense ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the cost-plus-fixed-fee structure, requiring detailed reporting and justification of costs. Transparency is generally limited in sole-source awards, but contract modifications and performance reviews would be documented internally within the DoD.

Related Government Programs

Defense Simulation and Training Systems
Military Engineering Services
Warfare Simulation Technologies
Department of Defense IT and Software Development

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.0 million to LOCKHEED MARTIN CORPORATION. WARSIM SYSTEM ENGINEERING DESIGN

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $56.0 million.

What is the period of performance?

Start: 2009-09-29. End: 2013-03-31.

What is the specific nature of the WARSim system and its criticality to defense operations?

The WARSim (Warfare Simulation) system is designed to provide realistic combat environment simulations for training purposes. These systems are crucial for preparing military personnel for various operational scenarios, allowing them to practice tactics, decision-making, and coordination in a safe, controlled, yet highly realistic virtual setting. Criticality stems from its role in enhancing combat readiness, reducing training costs compared to live exercises, and enabling the testing of new strategies and technologies without real-world risk. The specific functionalities and operational impact would depend on the version and scope of the WARSim system this contract supports.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types in terms of risk and value for this type of service?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined or is expected to evolve, as is common in system engineering and design. Under CPFF, the contractor is reimbursed for all allowable costs plus a fixed fee, representing profit. This structure shifts significant cost risk to the government, as the final price can exceed initial estimates if costs escalate. Compared to fixed-price contracts, CPFF offers less cost certainty for the government but provides flexibility for the contractor to adapt to changing requirements. For taxpayers, CPFF generally represents a higher risk of overspending compared to competitively bid fixed-price contracts, necessitating robust oversight to manage costs effectively.

What are the potential risks associated with a sole-source award for engineering services?

Sole-source awards carry inherent risks, primarily the lack of competitive pressure which can lead to inflated pricing and reduced incentive for efficiency. Without competing bids, the government may not secure the best possible value or the most innovative solution. There's also a risk that the sole-source contractor may not perform optimally, knowing that the government has limited alternatives. Furthermore, it can stifle innovation within the broader industry by excluding potential competitors and preventing the government from discovering new capabilities or more cost-effective approaches that might emerge from a competitive process.

What is Lockheed Martin Corporation's track record with similar defense simulation and engineering contracts?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing and supporting complex defense systems, including simulation and training platforms. They have a long history of securing large contracts for system engineering, design, and integration across various military branches. Their track record includes numerous large-scale projects, often involving advanced technologies and significant R&D investment. While specific performance metrics for individual contracts are often not publicly detailed, their consistent ability to win and execute large, complex defense contracts suggests a strong capability in this domain, albeit with the typical scrutiny applied to major defense spending.

How does this contract's value compare to other engineering services contracts awarded by the DoD in recent years?

The $56 million award for WARSim system engineering over approximately 3.5 years places it in the mid-to-large range for specific system engineering contracts. The Department of Defense awards billions annually in engineering and technical services. Contracts of this magnitude are not uncommon, especially for specialized defense systems requiring extensive design and development. However, the value must be assessed in context: the specific system's complexity, the duration, and the competitive landscape. Without direct comparisons of similar scope and complexity, it's difficult to definitively state if $56 million is high or low, but it represents a significant investment in a single system's engineering.

What oversight mechanisms are in place to ensure the effective use of funds for this sole-source contract?

Oversight for sole-source contracts typically involves rigorous contract administration by agencies like the Defense Contract Management Agency (DCMA). This includes monitoring contractor performance against milestones, auditing costs to ensure allowability and reasonableness, and reviewing progress reports. For CPFF contracts, specific attention is paid to cost tracking and justification. The contracting officer is responsible for ensuring the contractor meets all terms and conditions. Transparency might be limited due to the non-competitive nature, but internal DoD reviews, program management oversight, and potentially Inspector General audits serve as accountability measures.

Industry Classification

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

Product/Service Code: TRAINING AIDS AND DEVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W900KK09R0024

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 12506 LAKE UNDERHILL RD, ORLANDO, FL, 32825

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

Financial Breakdown

Contract Ceiling: $59,021,997

Exercised Options: $58,008,347

Current Obligation: $55,967,755

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline