DoD's $2B computer systems design contract awarded to Lockheed Martin shows long duration and cost-plus structure

Contract Overview

Contract Amount: $2,085,795,550 ($2.1B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2000-02-11

End Date: 2016-06-30

Contract Duration: 5,984 days

Daily Burn Rate: $348.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS FIXED FEE

Sector: IT

Place of Performance

Location: COLORADO SPRINGS, EL PASO County, COLORADO, 80921

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $2.09 billion to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's extensive duration suggests a long-term need for these services. 2. A cost-plus contract type indicates potential for cost overruns if not closely managed. 3. The award to a single large contractor may limit competitive pricing pressures. 4. The services provided are critical for maintaining complex defense systems. 5. The contract's value, while substantial, needs to be benchmarked against similar long-term IT service agreements. 6. The lack of small business involvement raises questions about broader economic impact.

Value Assessment

Rating: fair

This $2.08 billion contract awarded to Lockheed Martin for computer systems design services spans over 16 years, indicating a significant long-term investment. The Cost Plus Fixed Fee (CPFF) structure, while allowing for flexibility in evolving technological needs, carries inherent risks of cost escalation if not meticulously managed. Benchmarking this against other large-scale, multi-year IT service contracts within the Department of Defense is crucial to assess its value for money. The absence of specific performance metrics or comparison data makes a definitive value assessment challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to compete. However, the data indicates only two bids were received, which is a relatively low number for a contract of this magnitude and duration. This limited competition could potentially impact price discovery and may not have driven the most cost-effective solution for the government.

Taxpayer Impact: While the competition was open, the low number of bidders means taxpayers may not have benefited from the full range of competitive pricing that a more robust bidding process could have yielded.

Public Impact

The primary beneficiaries are the Department of Defense, which receives essential computer systems design and integration services. These services likely support critical defense infrastructure, command and control systems, and potentially intelligence gathering platforms. The geographic impact is likely nationwide, supporting various defense installations and operations. The contract supports a significant number of highly skilled jobs within the IT and defense sectors, primarily at Lockheed Martin and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus contract type increases risk of budget overruns.
Long contract duration (16 years) may not adapt well to rapid technological changes.
Low number of bidders (2) suggests potentially limited competition driving up costs.
Lack of explicit small business set-aside or subcontracting data.

Positive Signals

Awarded through full and open competition, ensuring a fair process.
Contractor (Lockheed Martin) is a major defense contractor with extensive experience.
Services are critical for national defense infrastructure.

Sector Analysis

This contract falls within the broader IT services sector, specifically focusing on computer systems design and integration. The market for defense IT services is substantial, driven by the need for advanced technological capabilities to maintain military superiority. Comparable spending benchmarks would involve analyzing other large, long-term IT support contracts awarded by the DoD and other federal agencies. The size and duration of this contract place it among significant investments in maintaining and upgrading complex defense systems.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false) and does not explicitly mention subcontracting goals for small businesses. This suggests that the primary award went to a large prime contractor, and there may be limited direct opportunities for small businesses to participate in this specific contract. Further investigation into subcontracting plans would be needed to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and conditions. Accountability measures are embedded within the CPFF structure, requiring the contractor to justify costs incurred. Transparency is facilitated through contract award databases, though detailed performance reporting may be less publicly accessible. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Defense Information Systems Agency (DISA) IT Services
Department of Defense Enterprise IT Services
Major Defense Acquisition Programs
IT Services for National Security Systems

Risk Flags

Long contract duration may lead to technology obsolescence.
Cost-plus contract type increases risk of cost overruns.
Low number of bidders may indicate limited competition.
Lack of small business participation noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.09 billion 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 $2.09 billion.

What is the period of performance?

Start: 2000-02-11. End: 2016-06-30.

What specific computer systems design services were provided under this contract?

The contract specifies 'Computer Systems Design Services' (NAICS code 541512). This broad category typically encompasses a range of activities including designing and integrating hardware and software systems, developing custom software, and providing IT consulting. For a contract of this magnitude and duration with the Department of Defense, it likely involved the design, development, integration, and maintenance of complex, mission-critical defense systems. This could include command and control systems, intelligence processing platforms, communication networks, or simulation and training environments. The specific details would be outlined in the contract's Statement of Work (SOW), which is not publicly available in this data snippet.

How does the Cost Plus Fixed Fee (CPFF) structure compare to other contract types for similar DoD IT services?

The Cost Plus Fixed Fee (CPFF) structure is common for complex projects where the scope may evolve or is not fully defined at the outset, such as advanced research and development or large-scale system integration. It allows the contractor to recover all allowable costs plus a predetermined fixed fee representing profit. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers more flexibility for the government to adapt requirements but carries a higher risk of cost overruns, as the government bears the risk of cost increases. Fixed-Price Incentive (FPI) contracts share some risk but have target costs and sharing formulas. For mature, well-defined IT services, FFP is often preferred for cost certainty. The choice of CPFF here suggests the DoD anticipated significant unknowns or evolving requirements over the contract's long lifespan.

What are the potential risks associated with a 16-year contract duration for IT services?

A 16-year duration for an IT services contract presents several significant risks. Technology evolves rapidly; systems designed and implemented early in the contract could become obsolete or require substantial upgrades midway through. Maintaining relevance and ensuring interoperability with newer technologies becomes a challenge. Furthermore, long-term contracts can lead to vendor lock-in, making it difficult and costly to switch providers or adopt alternative solutions. There's also a risk that the contractor's expertise or focus may shift over such a long period, potentially impacting service quality. Finally, the government's needs and strategic priorities might change significantly over 16 years, rendering the original scope of work less relevant or requiring costly modifications.

Given the $2.08 billion value, what is a reasonable benchmark for the number of bidders on a full and open competition for DoD IT services?

For a full and open competition of this magnitude ($2.08 billion) and complexity (long-term IT systems design for the DoD), receiving only two bids is indeed on the lower side. While the 'ideal' number of bidders can vary based on market conditions, technical complexity, and specific requirements, government best practices often aim for a more robust competition. For large, high-value contracts, agencies often hope for five or more bids to ensure strong price discovery and a wider range of technical solutions. Receiving only two bids might suggest barriers to entry (e.g., high qualification requirements, specialized knowledge needed), a limited number of capable contractors, or perhaps a market that wasn't sufficiently stimulated to encourage broader participation. This could indicate a missed opportunity for potentially better pricing.

What does the 'CO' status code likely indicate for this contract?

The 'CO' status code, often seen in federal procurement data, typically stands for 'Completed' or 'Closed Out'. This indicates that the contract period of performance has ended, and all administrative actions, including final payments and deliverables, have been resolved. For this specific contract, which had an end date of June 30, 2016, the 'CO' status confirms that the government has formally concluded its obligations and the contract is no longer active. This allows analysts to review its historical performance and costs, although detailed performance data is often not publicly disclosed.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Computer Systems Design and Related Services › Computer Systems Design Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 9970 FEDERAL DR, COLORADO SPRIN, CO, 80921

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $2,125,545,161

Exercised Options: $2,125,004,687

Current Obligation: $2,085,795,550

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline