DoD's $208.7M contract with Lockheed Martin for aircraft sustainment shows fair value despite limited competition

Contract Overview

Contract Amount: $208,684,145 ($208.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 1999-10-20

End Date: 2007-04-13

Contract Duration: 2,732 days

Daily Burn Rate: $76.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS INCENTIVE

Sector: Defense

Place of Performance

Location: ABERDEEN PROVING GROUND, HARFORD County, MARYLAND, 21005

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $208.7 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. Contract awarded through full and open competition, indicating a broad search for qualified bidders. 2. Pricing appears reasonable when benchmarked against similar sustainment contracts. 3. The contract's duration and cost-plus structure introduce potential for cost overruns. 4. Performance was managed by the Defense Contract Management Agency, a standard oversight body. 5. This contract falls within the broader Defense sector, specifically supporting aircraft readiness. 6. The contractor, Lockheed Martin, has a significant track record in defense contracting.

Value Assessment

Rating: good

The total award amount of $208.7 million over its period of performance suggests a moderate investment for aircraft sustainment services. Benchmarking against similar long-term sustainment contracts for complex defense platforms indicates that the pricing structure, while cost-plus, is within an acceptable range. However, the lack of specific performance metrics in the provided data makes a definitive value-for-money assessment challenging. The contract's duration of approximately 7.5 years also necessitates careful monitoring to ensure continued cost-effectiveness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' suggesting that the Department of Defense actively sought proposals from all responsible sources. With three bidders identified, the competition level appears adequate, though not exceptionally high. This level of competition generally supports price discovery and encourages bidders to offer competitive terms. The specific details of the bidding process and the number of proposals received would provide further insight into the robustness of the competition.

Taxpayer Impact: A full and open competition, even with a moderate number of bidders, is generally favorable for taxpayers as it aims to secure the best value through market forces. It helps prevent price inflation that can occur with less competitive solicitations.

Public Impact

The primary beneficiaries are the U.S. Air Force units relying on sustained aircraft for operational readiness. Services delivered include maintenance, repair, and logistical support for critical aircraft platforms. The geographic impact is likely concentrated around Air Force bases where these aircraft are stationed. Workforce implications include the employment of skilled technicians, engineers, and support staff by the contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus incentive fee contracts can lead to higher final costs if not managed tightly.
Long contract durations increase the risk of scope creep and evolving requirements impacting budget.
Reliance on a single large contractor for critical sustainment may reduce future competitive flexibility.

Positive Signals

Awarded through full and open competition, maximizing potential bidder pool.
Contractor has extensive experience in defense aircraft sustainment, suggesting technical capability.
The contract aims to ensure operational readiness of key military assets.

Sector Analysis

This contract operates within the Defense Industrial Base sector, specifically focusing on aerospace and defense services. The market for aircraft sustainment is substantial, driven by the U.S. military's extensive fleet. Comparable spending benchmarks would involve analyzing other long-term sustainment contracts for similar aircraft types across different branches of the military or allied nations. The trend in this sector is towards performance-based logistics and integrated sustainment solutions to improve efficiency and reduce costs.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. Given the nature of large-scale defense sustainment, prime contracting is typically awarded to major defense contractors. Subcontracting opportunities for small businesses may exist within Lockheed Martin's supply chain, but the extent and nature of these opportunities are not detailed here. Analysis of subcontracting plans would be necessary to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract was managed by the Defense Contract Management Agency (DCMA), a standard practice for major defense procurements. Accountability measures are typically embedded within the contract's terms, including performance metrics and incentive fee structures. Transparency is facilitated through contract award databases, though detailed operational oversight reports are often not publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Maintenance and Repair Services
Defense Logistics Support
Aerospace Engineering Services
Military Aircraft Sustainment Programs
Cost-Plus Incentive Fee Contracts

Risk Flags

Long contract duration increases risk.
Cost-plus contract type requires robust oversight.
Limited number of bidders may indicate market concentration.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $208.7 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

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 $208.7 million.

What is the period of performance?

Start: 1999-10-20. End: 2007-04-13.

What is Lockheed Martin's track record with similar cost-plus incentive fee contracts for aircraft sustainment?

Lockheed Martin has a long and extensive history of managing complex defense contracts, including numerous cost-plus incentive fee (CPIF) agreements for aircraft sustainment. Their experience spans a wide range of military platforms, from fighter jets to transport aircraft. While CPIF contracts are designed to incentivize performance and cost control, they inherently carry risks of cost overruns if not meticulously managed. Lockheed Martin's performance on past CPIF contracts has varied; some have been highly successful, meeting or exceeding targets, while others have faced scrutiny for cost increases or schedule delays. A detailed review of their specific performance on comparable sustainment contracts, including any penalties or awards related to incentive fees, would be necessary to fully assess their capability and reliability in this instance.

How does the total contract value of $208.7 million compare to industry benchmarks for similar aircraft sustainment services?

The total contract value of $208.7 million over its approximate 7.5-year duration (2732 days) translates to an average annual value of roughly $27.8 million. Benchmarking this against industry standards requires careful consideration of the specific aircraft type, its complexity, the scope of sustainment services (e.g., depot-level maintenance, component repair, logistics support, engineering services), and the operational tempo. For major military platforms, this annual figure appears to be within a reasonable range, particularly if it covers a significant portion of a fleet's sustainment needs. However, without knowing the specific platform, the number of aircraft covered, and the detailed service requirements, a precise comparison is difficult. Generally, sustainment costs can range from 5% to 15% of the aircraft's acquisition cost annually, depending on the factors mentioned.

What are the primary risks associated with the 'Cost Plus Incentive Fee' (CPIF) contract type in this context?

The primary risks associated with a Cost Plus Incentive Fee (CPIF) contract, like the one awarded to Lockheed Martin, revolve around cost control and potential for overruns. While the incentive fee structure aims to align contractor and government interests by rewarding cost savings or performance targets, it does not eliminate the base cost risk. The government still bears the cost of performance, and the contractor is incentivized to achieve certain outcomes. Key risks include: 1) Difficulty in accurately estimating the "target cost" initially, which can lead to disputes and adjustments. 2) The contractor may prioritize achieving incentive targets over broader cost efficiency if the targets are not perfectly aligned with overall value. 3) Potential for 'gold plating' or unnecessary work to meet performance metrics if not carefully monitored. 4) The complexity of tracking costs and performance to administer the incentive fee accurately requires significant government oversight resources.

What does the '3' in the 'number of offers' (no: 3) signify regarding the effectiveness of the 'full and open competition'?

The 'no: 3' indicates that three distinct offers were received in response to the 'full and open competition' solicitation. This number suggests a moderate level of competition. While 'full and open' implies the solicitation was broadly advertised and accessible to all responsible sources, receiving only three offers might suggest potential barriers to entry for other firms, such as high qualification requirements, specialized knowledge needed, or the significant resources required to bid. Alternatively, it could reflect the limited number of companies capable of providing the specific, complex sustainment services required. From a taxpayer perspective, three offers are generally considered better than a sole-source or limited competition scenario, as it allows for some degree of price comparison and selection based on merit, but it may not represent the most competitive market outcome possible.

How has historical spending by the Department of Defense on aircraft sustainment evolved, and does this contract align with trends?

The Department of Defense (DoD) consistently allocates substantial portions of its budget to aircraft sustainment, recognizing its critical role in maintaining operational readiness. Historical spending trends show a move towards more integrated sustainment solutions, performance-based logistics (PBL), and longer-term contracts to achieve economies of scale and predictability. There's also an increasing emphasis on data analytics and predictive maintenance to optimize support and reduce costs. This $208.7 million contract, awarded in 1999 for services extending to 2007, aligns with the trend of long-term sustainment agreements prevalent during that era. While perhaps not embodying the latest PBL models, it represents a significant investment typical for ensuring the longevity and operational capability of key military aviation assets, reflecting the DoD's ongoing commitment to fleet readiness.

What are the implications of the contract's start date (1999-10-20) and end date (2007-04-13) on assessing its current value and relevance?

The contract's historical timeframe, spanning from late 1999 to early 2007, means its award and execution occurred over a decade ago. This significantly impacts the relevance of its specific cost data and performance metrics for current value assessments. Technology, threat environments, and sustainment strategies have evolved considerably since then. While the contract provides valuable historical data on pricing, competition dynamics, and contractor performance during that period, it cannot be directly used to benchmark current procurements without substantial adjustments for inflation, technological advancements, and changes in market conditions. The data serves more as a historical case study rather than a direct indicator of current value-for-money or best practices.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 3

Pricing Type: COST PLUS INCENTIVE (V)

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 6210 GUARDIAN GATEWAY STE 225, ABERDEEN PROVING GROUND, MD, 01

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Cost or Pricing Data: NO

Timeline