DoD's $1.33B aircraft manufacturing contract with Lockheed Martin saw limited competition, raising value concerns

Contract Overview

Contract Amount: $1,327,477,971 ($1.3B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 1999-11-15

End Date: 2014-07-31

Contract Duration: 5,372 days

Daily Burn Rate: $247.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $1.33 billion to LOCKHEED MARTIN CORP for work described as: Key points: 1. The contract's significant value suggests a substantial investment in national defense capabilities. 2. Limited competition for this large award may indicate specialized requirements or a concentrated market. 3. The long duration of the contract (over 14 years) implies a need for sustained support and development. 4. The firm fixed-price structure aims to transfer risk to the contractor, potentially stabilizing costs. 5. The contract's performance context is within the critical aircraft manufacturing sector for the Department of Defense. 6. The geographic location in Texas may point to specific manufacturing or operational hubs.

Value Assessment

Rating: questionable

Benchmarking the value of this $1.33 billion contract is challenging without specific details on the aircraft and services procured. However, the lack of robust competition for such a large award raises questions about whether the government achieved optimal pricing. Comparing it to similar large-scale aircraft manufacturing contracts would be necessary to assess if the pricing is in line with market rates for comparable defense systems and sustainment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one bidder was considered capable of fulfilling the requirement. This often occurs when a contractor possesses unique technology, intellectual property, or has a long-standing relationship with the agency for a specific system. The lack of competition means that price discovery through a bidding process was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to secure the best possible prices, potentially resulting in less efficient use of taxpayer funds for this significant defense expenditure.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical aircraft manufacturing capabilities. The contract supports the production and sustainment of advanced aircraft essential for national security. The geographic impact is concentrated in Texas, where the contractor is located, potentially supporting local and regional economies. The contract likely has significant workforce implications, supporting jobs in specialized manufacturing, engineering, and technical fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price negotiation and potentially increases costs for taxpayers.
Long contract duration (over 14 years) may lead to cost overruns if not managed effectively.
Lack of transparency in sole-source justification could obscure potential inefficiencies.
Concentration of defense spending with a single large contractor can reduce market dynamism.

Positive Signals

Firm fixed-price contract structure aims to control costs and transfer risk to the contractor.
Sustained contract provides long-term capability and predictability for the Department of Defense.
Award to a major defense contractor suggests access to advanced technology and manufacturing expertise.

Sector Analysis

The aircraft manufacturing sector is a critical component of the defense industrial base, characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract falls within a segment of the market dominated by a few large, established players due to the complexity and scale of military aircraft production. Comparable spending benchmarks would involve analyzing other major defense aircraft procurement or sustainment contracts, which often run into billions of dollars over many years.

Small Business Impact

This contract does not appear to have a small business set-aside component, nor is there explicit information regarding subcontracting plans for small businesses. Large sole-source awards to major prime contractors can sometimes limit opportunities for small businesses to participate directly, although they may be involved further down the supply chain. Further analysis would be needed to determine the extent of small business participation through subcontracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contract management and inspection agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures would be driven by the contract terms, performance metrics, and reporting requirements. Transparency is limited due to the sole-source nature, but contract awards are generally reported in federal databases. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

F-35 Lightning II Program
F-16 Fighting Falcon Sustainment
Advanced Tactical Aircraft Procurement
Defense Logistics Agency Aircraft Parts

Risk Flags

Sole-source award may limit price competition.
Long contract duration increases risk of cost overruns and technological obsolescence.
Lack of specific details on aircraft/services hinders detailed value assessment.
Potential for contractor to leverage market dominance due to specialized capabilities.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.33 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 $1.33 billion.

What is the period of performance?

Start: 1999-11-15. End: 2014-07-31.

What specific aircraft or systems were procured under this contract, and what was the justification for a sole-source award?

The provided data does not specify the exact aircraft or systems. However, the justification for a sole-source award typically stems from unique capabilities, proprietary technology, or the contractor's exclusive role in the development and production of a particular defense asset. For a contract of this magnitude and duration, it is likely related to a major platform or a comprehensive sustainment package for an existing fleet where Lockheed Martin is the sole or primary manufacturer. Detailed justification documents, often classified or sensitive, would outline the specific reasons why other sources were deemed unsuitable.

How does the $1.33 billion total award compare to historical spending on similar aircraft manufacturing contracts?

Comparing this $1.33 billion contract requires context on the specific type of aircraft and services. Large-scale defense aircraft contracts, especially for major platforms or long-term sustainment, frequently reach or exceed this figure. For instance, multi-year procurements for fighter jets or bombers, or comprehensive support packages for existing fleets, can span over a decade and accumulate costs in the billions. Without knowing the precise nature of the procurement (e.g., new production vs. sustainment, specific aircraft model), a direct comparison is difficult, but the amount is substantial and aligns with the high costs associated with advanced military aviation.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this long-term contract?

Key performance indicators for such a contract would likely include on-time delivery of aircraft or components, adherence to quality standards, meeting technical specifications, and cost control within the firm fixed-price framework. Risk mitigation strategies would involve robust program management by the Department of Defense, regular performance reviews, audits, and contractual clauses that allow for adjustments or penalties in case of non-performance. Given the sole-source nature, emphasis would be placed on ensuring the contractor meets all contractual obligations and maintains the required operational readiness and technological superiority of the assets.

What is Lockheed Martin's track record with the Department of Defense for aircraft manufacturing contracts of this scale?

Lockheed Martin is a major defense contractor with an extensive track record in aircraft manufacturing for the Department of Defense. They are the prime contractor for several high-profile programs, including the F-35 Lightning II Joint Strike Fighter and various other fighter, transport, and reconnaissance aircraft. Their history includes managing large, complex, and long-duration contracts. While generally successful in delivering advanced capabilities, they have also faced scrutiny regarding cost overruns and schedule delays on some major programs, which is common in the defense industry for highly complex systems.

What are the potential implications of this contract's duration (over 14 years) on technological obsolescence and future defense needs?

A contract duration exceeding 14 years for aircraft manufacturing presents a significant risk of technological obsolescence. Military aviation technology evolves rapidly, and systems procured or sustained over such extended periods may become outdated before the contract concludes or shortly thereafter. To mitigate this, contracts often include provisions for upgrades, modernization, or phased replacements. However, the core platform's design might limit future adaptability. This long duration necessitates careful planning by the DoD to ensure the acquired capabilities remain relevant and effective against evolving threats throughout their lifecycle and beyond.

How does the firm fixed-price (FFP) contract type influence cost control and contractor incentives in this specific award?

The Firm Fixed-Price (FFP) contract type places the primary cost risk on the contractor, Lockheed Martin. This means the agreed-upon price is generally not subject to adjustment based on the contractor's actual costs. This structure incentivizes the contractor to manage costs efficiently and control expenditures to maximize profit. For the government, it provides cost certainty, assuming the initial price negotiated is fair. However, in complex, long-term defense contracts, the initial price negotiation is critical, and unforeseen issues could still arise, potentially leading to requests for contract modifications or disputes if not managed proactively.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 86 SOUTH COBB DRIVE, MARIETTA, GA, 30063

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline