DoD's $649M Aircraft Contract with Lockheed Martin: A 20-Year Fixed-Price Deal with Economic Adjustments
Contract Overview
Contract Amount: $1,723,931,938 ($1.7B)
Contractor: Lockheed Martin Corp
Awarding Agency: Department of Defense
Start Date: 2000-12-22
End Date: 2008-03-31
Contract Duration: 2,656 days
Daily Burn Rate: $649.1K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Defense
Place of Performance
Location: MARIETTA, COBB County, GEORGIA, 30063
State: Georgia Government Spending
Plain-Language Summary
Department of Defense obligated $1.72 billion to LOCKHEED MARTIN CORP for work described as: Key points: 1. Significant long-term commitment of $649 million over 20 years. 2. Sole-source award raises questions about competition and potential price inflation. 3. Economic price adjustment clause introduces risk of cost overruns. 4. Aircraft manufacturing sector is critical for national defense.
Value Assessment
Rating: questionable
The contract's long duration and fixed-price with economic adjustment structure make direct value comparison difficult. The lack of competition further obscures whether the government secured the best possible price.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, indicating a lack of competitive bidding. This significantly limits price discovery and may lead to higher costs for taxpayers.
Taxpayer Impact: The absence of competition and the inclusion of economic price adjustments suggest potential for inflated costs, impacting taxpayer funds.
Public Impact
Taxpayers may be paying a premium due to the lack of competitive bidding. Long-term commitment ties significant funds to a single contractor for two decades. Economic price adjustments could lead to unpredictable cost increases over the contract's life. Dependence on a single supplier for critical aircraft manufacturing.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award
- Long contract duration
- Economic price adjustment
- Lack of small business participation
Positive Signals
- Critical defense capability
- Established contractor relationship
Sector Analysis
This contract falls within the aircraft manufacturing sector, a vital component of the defense industry. Spending in this area is typically high due to the specialized nature and strategic importance of the products.
Small Business Impact
The data indicates no specific small business participation in this contract. This suggests a missed opportunity to support small businesses within the defense supply chain.
Oversight & Accountability
The sole-source nature of this award warrants close oversight to ensure fair pricing and performance. The long duration necessitates ongoing monitoring of contract modifications and economic adjustments.
Related Government Programs
- Aircraft Manufacturing
- Department of Defense Contracting
- Defense Contract Management Agency Programs
Risk Flags
- Lack of competition
- Potential for cost overruns due to economic price adjustment
- Long contract duration increases risk of obsolescence
- No stated small business participation
- High dollar value contract
Tags
aircraft-manufacturing, department-of-defense, ga, dca, billion-dollar
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $1.72 billion to LOCKHEED MARTIN CORP. See the official description on USAspending.
Who is the contractor on this award?
The obligated recipient is LOCKHEED MARTIN CORP.
Which agency awarded this contract?
Awarding agency: Department of Defense (Defense Contract Management Agency).
What is the total obligated amount?
The obligated amount is $1.72 billion.
What is the period of performance?
Start: 2000-12-22. End: 2008-03-31.
What was the justification for awarding this contract on a sole-source basis, and were alternative competitive strategies considered?
The justification for a sole-source award typically involves unique capabilities, proprietary technology, or urgent needs that cannot be met by other sources. Without specific details, it's difficult to assess if alternative competitive strategies were thoroughly explored. A competitive process, even if challenging, could have potentially yielded better pricing and terms for the government.
How will the economic price adjustment clause be managed to mitigate potential cost overruns and protect taxpayer interests?
Effective management of the economic price adjustment (EPA) clause requires clear, objective indices for price changes and stringent review processes. The contracting agency must actively monitor market fluctuations and ensure that any price increases are directly tied to documented economic factors, not contractor inefficiencies. Regular audits and transparent reporting are crucial to prevent unwarranted cost escalation.
What is the long-term strategic value and potential obsolescence risk associated with this 20-year aircraft manufacturing contract?
The long-term strategic value depends on the evolving needs of the Department of Defense and the technological relevance of the aircraft produced. A 20-year commitment carries a significant risk of technological obsolescence, potentially leaving the DoD with outdated assets. Continuous assessment of future requirements and flexibility in contract terms are essential to mitigate this risk.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing
Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 86 SOUTH COBB DRIVE, MARIETTA, GA, 11
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $1,722,085,374
Exercised Options: $1,722,085,374
Current Obligation: $1,723,931,938
Contract Characteristics
Cost or Pricing Data: NO
Timeline
Start Date: 2000-12-22
Current End Date: 2008-03-31
Potential End Date: 2008-03-31 00:00:00
Last Modified: 2013-05-23
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