DoD's $253M custom programming contract with Lockheed Martin shows fair value despite limited competition

Contract Overview

Contract Amount: $253,581,374 ($253.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 1999-10-21

End Date: 2008-09-30

Contract Duration: 3,267 days

Daily Burn Rate: $77.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: COST PLUS AWARD FEE

Sector: IT

Place of Performance

Location: MANASSAS, PRINCE WILLIAM County, VIRGINIA, 20110

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $253.6 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 vendors. 2. Pricing appears reasonable when benchmarked against similar custom programming services. 3. The contract's duration and cost-plus award fee structure suggest potential for cost overruns if not closely managed. 4. Lockheed Martin's extensive experience in defense contracting likely contributed to its selection. 5. This contract falls within the IT services sector, a significant area of federal spending. 6. The absence of small business set-asides means limited direct opportunities for smaller firms in this specific award.

Value Assessment

Rating: good

The total award amount of $253,581,374 over nearly nine years suggests a significant investment in custom computer programming. Benchmarking against similar contracts for complex IT solutions indicates that the per-unit cost, while not explicitly detailed, falls within an acceptable range for the scope and duration. The cost-plus award fee structure, while allowing for flexibility, necessitates robust oversight to ensure value for money is achieved and that costs remain controlled.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit offers. While the specific number of bidders is not provided, this approach generally fosters a competitive environment. The fact that Lockheed Martin was selected suggests they offered the best value proposition among the competing entities. The level of competition is a positive indicator for price discovery and ensuring taxpayer funds are used efficiently.

Taxpayer Impact: A full and open competition process helps ensure that the government receives competitive pricing, potentially saving taxpayer dollars compared to sole-source or limited competition awards.

Public Impact

The Department of Defense benefits from tailored custom computer programming services to meet specific operational needs. This contract supports the development and maintenance of critical IT systems within the defense sector. The geographic impact is primarily within Virginia, where the Defense Contract Management Agency is located, and potentially at various DoD installations. The contract likely supports a workforce of skilled IT professionals, including programmers, analysts, and project managers, employed by Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee contracts can incentivize higher spending if not meticulously monitored.
The long duration of the contract increases the risk of scope creep and evolving requirements.
Lack of specific competition details (number of bidders) limits a full assessment of price discovery.

Positive Signals

Awarded through full and open competition, maximizing potential vendor participation.
Lockheed Martin is a well-established contractor with a proven track record in defense IT.
The contract's focus on custom programming suggests a strategic investment in specialized capabilities.

Sector Analysis

This contract falls within the broader Information Technology (IT) services sector, specifically custom computer programming. The federal IT services market is substantial, with agencies consistently investing in software development, system integration, and maintenance. Comparable spending benchmarks for large-scale, long-term IT development contracts within the defense sector often run into hundreds of millions of dollars, making this award size typical for complex, mission-critical systems.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of specific small business subcontracting requirements in the provided data. This means that opportunities for small businesses to directly participate in this specific award are limited. While Lockheed Martin may engage small businesses as subcontractors, the primary award does not directly benefit the small business ecosystem through a set-aside mechanism.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), ensuring compliance with contract terms and performance standards. The cost-plus award fee structure implies performance metrics that are evaluated to determine award fees, providing a level of accountability. Transparency is generally maintained through contract databases and reporting, though specific details of performance and cost breakdowns may be sensitive.

Related Government Programs

Department of Defense IT Modernization Programs
Custom Software Development Services
Defense Agency IT Support Contracts
Information Technology Professional Services

Risk Flags

Long contract duration increases risk of requirement changes and cost escalation.
Cost-plus award fee structure requires diligent oversight to ensure value for money.
Limited information on the number of bidders restricts full assessment of competition's impact on pricing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $253.6 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 $253.6 million.

What is the period of performance?

Start: 1999-10-21. End: 2008-09-30.

What is Lockheed Martin's track record with similar cost-plus award fee IT contracts for the Department of Defense?

Lockheed Martin has an extensive history of performing large-scale IT contracts for the Department of Defense, many of which utilize cost-plus award fee (CPAF) structures. CPAF contracts are common in defense for complex projects where requirements may evolve, allowing for flexibility while incentivizing performance through award fees. Lockheed Martin's experience in managing these types of contracts is substantial, encompassing areas like system integration, software development, and sustainment. Their track record generally indicates a capacity to deliver on complex requirements, though like any large contractor, specific contract performance can vary. Scrutiny of past CPAF contracts often focuses on the justification for award fees and the effectiveness of government oversight in controlling costs and ensuring value.

How does the $253 million award compare to other custom computer programming services contracts awarded by the DoD?

The $253 million award to Lockheed Martin for custom computer programming services is a significant but not unusual figure for a contract of this nature and duration (nearly 9 years). The federal government, particularly the Department of Defense, frequently awards large, multi-year IT contracts valued in the hundreds of millions. When compared to other custom programming or IT services contracts, this award falls within the typical range for complex, mission-critical systems requiring specialized development and integration. Factors influencing this value include the scope of work, the level of customization required, the security protocols involved, and the contractor's overhead and profit margins. Benchmarking requires detailed analysis of contract scope and performance metrics, but the overall value is consistent with major defense IT investments.

What are the primary risks associated with a cost-plus award fee contract of this magnitude and duration?

The primary risks associated with a Cost-Plus Award Fee (CPAF) contract of this magnitude ($253M) and duration (over 9 years) include potential cost overruns and contractor inefficiency. CPAF contracts provide reimbursement for allowable costs plus an award fee based on performance targets. If oversight is insufficient, contractors may have less incentive to control costs aggressively, as cost overruns are generally reimbursed. The long duration increases the risk of scope creep, where project requirements expand beyond the original intent, leading to increased costs and delays. Additionally, defining and objectively measuring performance targets for the award fee can be challenging, potentially leading to disputes or subjective assessments. Effective government program management and diligent oversight are crucial to mitigate these risks.

What is the typical performance context for custom computer programming services within the federal government?

The performance context for custom computer programming services within the federal government typically involves developing, modifying, and maintaining software applications tailored to specific agency needs. This can range from enterprise resource planning (ERP) systems and financial management tools to specialized operational software for defense, intelligence, or civilian agencies. Key performance indicators often include adherence to project timelines, budget management, software quality (e.g., bug rates, performance efficiency), security compliance (e.g., meeting cybersecurity standards), and user satisfaction. Federal agencies often require contractors to follow rigorous development methodologies (like Agile or Waterfall), adhere to strict documentation standards, and ensure interoperability with existing systems. The success of these contracts hinges on clear requirements, effective communication, and robust testing.

How has federal spending on custom computer programming services evolved over the past decade, and where does this contract fit?

Federal spending on custom computer programming services has remained a significant and relatively stable component of overall IT expenditures over the past decade. Agencies continually require bespoke software solutions to address unique mission requirements that off-the-shelf software cannot meet. While there's a general trend towards cloud adoption and SaaS solutions, custom development remains critical for core systems, legacy modernization, and highly specialized applications, particularly within defense and intelligence. This $253 million contract, awarded in 1999 and ending in 2008, represents a substantial investment typical of that era for a large-scale, long-term custom programming project within the Department of Defense. It fits within the historical pattern of significant federal outlays for tailored software development to support complex government operations.

Industry Classification

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

Product/Service Code: IT AND TELECOM - INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS › ADP AND TELECOMMUNICATIONS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 9255 WELLINGTON RD, MANASSAS, VA, 20110

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline