DoD awards $1.21B to Lockheed Martin for aircraft manufacturing, a sole-source contract with a long history

Contract Overview

Contract Amount: $1,213,912,351 ($1.2B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 1999-12-30

End Date: 1998-12-31

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: AVONDALE ESTATES, DEKALB County, GEORGIA, 30002

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $1.21 billion to LOCKHEED MARTIN CORP for work described as: Key points: 1. Contract awarded to a single, established provider, raising questions about potential price efficiencies. 2. Long-standing relationship suggests potential for institutional knowledge but also risks of complacency. 3. The firm-fixed-price structure aims to control costs, but the absence of competition limits direct price comparison. 4. Aircraft manufacturing is a critical defense sector, indicating strategic importance of this award. 5. The contract's duration and value warrant close monitoring for performance and cost overruns. 6. No small business set-aside noted, suggesting prime contractor will manage all aspects.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and long history, making direct comparisons difficult. The firm-fixed-price contract type provides some cost certainty. However, without competitive bidding, it's hard to definitively assess if the $1.21 billion represents optimal value for money. The historical nature of the award suggests a potentially established pricing structure that may or may not reflect current market efficiencies.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when a specific contractor possesses unique capabilities or when it is deemed not to be in the government's best interest to compete. The lack of competition means there was no direct price discovery through a bidding process.

Taxpayer Impact: Sole-source awards can potentially lead to higher prices for taxpayers as there is no competitive pressure to drive down costs. It also limits opportunities for new or smaller businesses to enter the market.

Public Impact

The primary beneficiary is the Department of Defense, ensuring continued access to critical aircraft manufacturing capabilities. Services delivered include the manufacturing of aircraft, essential for national defense operations. The geographic impact is likely concentrated where Lockheed Martin's manufacturing facilities are located, primarily in Georgia (ST). Workforce implications include the continued employment and potential expansion of skilled labor in the aerospace and defense industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs over the contract's life.
Long-term sole-source awards can stifle innovation from other potential suppliers.
Dependency on a single contractor poses a risk if performance issues arise.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Established relationship with a major defense contractor likely ensures continuity of supply.
Contractor's long history in aircraft manufacturing suggests deep expertise and capability.

Sector Analysis

This contract falls within the Aircraft Manufacturing sector, a key component of the broader aerospace and defense industry. This sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. The total market for defense aircraft manufacturing is substantial, with major players like Lockheed Martin holding significant shares. This award represents a substantial portion of spending within this specialized niche, reflecting the strategic importance of maintaining domestic aircraft production capabilities.

Small Business Impact

The contract data indicates no small business set-aside (ss: false, sb: false). This suggests that the prime contract is not specifically designated for small businesses, and subcontracting opportunities for small businesses would depend on Lockheed Martin's internal procurement strategies and the nature of the work required. Without a set-aside, the primary focus is on the capabilities of the large prime contractor.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. Accountability measures are inherent in the firm-fixed-price structure, which places cost risk on the contractor. Transparency may be limited due to the sole-source nature, but contract awards and basic details are publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Aircraft Procurement, Air Force
Combat Aircraft Manufacturing
Defense Industrial Base
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
Long-term contract
High dollar value
Potential for cost creep despite FFP
Aging technology risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.21 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 $1.21 billion.

What is the period of performance?

Start: 1999-12-30. End: 1998-12-31.

What is Lockheed Martin's track record with similar sole-source defense contracts?

Lockheed Martin has a long and extensive history of receiving sole-source contracts from the Department of Defense and other government agencies, particularly for major defense platforms like aircraft, missiles, and spacecraft. Their track record often involves complex, high-value, long-term programs where they are the sole or primary developer and manufacturer. While this provides continuity and leverages deep expertise, it also means that the government relies heavily on their performance and pricing. Analysis of past sole-source awards to Lockheed Martin would involve reviewing historical performance metrics, cost overruns or underruns on similar programs, and any documented issues related to quality or delivery. The sheer volume and scale of their sole-source awards underscore their critical role in the defense industrial base, but also highlight the importance of robust government oversight to ensure fair pricing and effective execution.

How does the $1.21 billion award compare to historical spending on this specific aircraft program or similar aircraft manufacturing contracts?

To compare the $1.21 billion award, one would need to examine historical spending data for the specific aircraft program it supports, if identifiable, or for comparable aircraft manufacturing contracts awarded by the DoD. Given the contract's start date (1998/1999) and its significant value, it likely represents a continuation or major production phase of an existing program. Historical spending would reveal trends in cost escalation, production volume, and contract modifications over time. Comparing it to other sole-source awards for similar platforms (e.g., other fighter jets or large transport aircraft) would provide a benchmark for pricing and scope. Without more specific program details, a precise comparison is difficult, but the magnitude suggests a significant, long-term commitment to a key defense asset. The absence of competition makes direct cost-per-unit benchmarking against competitively bid programs less meaningful, but overall program cost trends are crucial for assessing value.

What are the primary risks associated with a sole-source contract of this magnitude and duration?

The primary risks associated with a sole-source contract of this magnitude and duration include potential for cost escalation without competitive pressure, reduced incentive for innovation, and contractor lock-in. Without competing bids, the government may not achieve the lowest possible price. The long-term nature can lead to complacency or a lack of urgency in adopting new technologies or efficiencies. Furthermore, the government becomes highly dependent on the single contractor; any performance issues, financial instability, or supply chain disruptions at the contractor's end can have severe consequences for national security. There's also a risk that the contractor may prioritize other, more competitive programs if resources become constrained. Robust contract management, performance monitoring, and clear exit strategies or contingency plans are essential to mitigate these risks.

How effective is the firm-fixed-price (FFP) contract type in managing costs for complex aircraft manufacturing?

The firm-fixed-price (FFP) contract type is generally considered effective in managing costs for complex aircraft manufacturing because it shifts the majority of the cost risk from the government to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This incentivizes the contractor to control expenses, improve efficiency, and manage resources effectively to maximize their profit margin. For complex projects like aircraft manufacturing, where cost uncertainties can be high, FFP provides budget predictability for the government. However, it requires careful initial negotiation of the price to ensure it is fair and reflects realistic cost estimates. If the initial price is set too high, the government may overpay. Conversely, if it's too low and the contractor faces unforeseen difficulties, they might seek contract modifications or face financial distress, potentially impacting delivery schedules or quality.

What are the implications of this contract's long history (awarded in 1998/1999) on current pricing and technological relevance?

A contract awarded in 1998/1999 implies a long-standing relationship and likely a mature program. For pricing, this could mean that the initial cost structure established over two decades ago is still in place, potentially not reflecting current market rates or efficiencies gained through technological advancements or scaled production elsewhere. While FFP aims for price stability, the baseline price might have been set when costs were different. Technologically, a program initiated that long ago might be based on older designs. While upgrades and modifications are common, the fundamental platform could be nearing the end of its optimal lifecycle, raising questions about future relevance and the cost-effectiveness of continued investment compared to developing newer platforms. The government would need to ensure that ongoing modifications and sustainment costs remain justified relative to the platform's capabilities and strategic needs.

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, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline