DoD's $803M aircraft manufacturing contract to Lockheed Martin shows long-term commitment with fixed pricing

Contract Overview

Contract Amount: $803,512,986 ($803.5M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 1999-12-10

End Date: 2014-05-04

Contract Duration: 5,259 days

Daily Burn Rate: $152.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $803.5 million to LOCKHEED MARTIN CORP for work described as: Key points: 1. Contract awarded under full and open competition, suggesting a competitive bidding process. 2. The firm fixed-price structure aims to provide cost certainty for the government. 3. Long contract duration of over 5000 days indicates a significant, ongoing requirement. 4. The contract's value places it among substantial defense procurements. 5. Focus on aircraft manufacturing aligns with core defense capabilities. 6. No small business set-aside noted, potentially limiting direct participation for smaller firms.

Value Assessment

Rating: good

The contract's value of over $800 million over its extended period suggests a significant investment. While specific pricing benchmarks are not provided, the firm fixed-price (FFP) nature of the contract is generally favorable for the government, as it shifts cost overrun risks to the contractor. Comparing this to similar long-term, high-value aircraft manufacturing contracts would be necessary for a precise value-for-money assessment. However, the FFP structure and competitive award are positive indicators.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of two bids suggests a degree of competition, though the exact number of potential bidders in the specialized aircraft manufacturing market is unknown. A higher number of bidders typically leads to more competitive pricing and better value for the government.

Taxpayer Impact: Full and open competition is the most advantageous for taxpayers as it maximizes the potential for competitive pricing and ensures the government receives the best possible value by considering all qualified offerors.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical aircraft manufacturing services. This contract supports the production and sustainment of essential military aviation assets. The geographic impact is likely concentrated around Lockheed Martin's manufacturing facilities and associated supply chains. Significant workforce implications are expected within the aerospace and defense sector, supporting skilled labor jobs.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to potential cost creep if not managed effectively.
Reliance on a single large contractor for a significant duration may reduce future competitive flexibility.
Lack of small business set-aside may limit opportunities for smaller, innovative firms in the supply chain.

Positive Signals

Firm fixed-price contract provides cost predictability for the government.
Awarded through full and open competition, suggesting a competitive process.
Long-term nature indicates a stable, ongoing need for these critical assets.
Contractor's established presence in aircraft manufacturing suggests technical capability.

Sector Analysis

This contract falls within the aerospace and defense manufacturing sector, a critical industry for national security. The market is characterized by high barriers to entry, significant R&D investment, and long product development cycles. Spending in this area is often driven by specific defense requirements and technological advancements. Comparable spending benchmarks would typically involve other large-scale aircraft procurement or sustainment contracts within the DoD.

Small Business Impact

The contract does not indicate any small business set-aside provisions, nor does it explicitly mention subcontracting goals for small businesses. This suggests that the primary awardee is a large corporation, and opportunities for small businesses would likely be through the prime contractor's supply chain. Without specific subcontracting plans, the direct impact on the small business ecosystem is unclear, though large prime contracts often generate downstream opportunities.

Oversight & Accountability

Oversight for this contract would typically be managed by the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance, quality, and compliance. The firm fixed-price nature provides a degree of financial oversight by locking in costs. Transparency is generally maintained through contract reporting mechanisms, though specific details of performance metrics and oversight activities are often internal to the agency and contractor.

Related Government Programs

F-35 Lightning II Program
F-16 Fighting Falcon Production
C-130 Hercules Transport Aircraft
Defense Production Act Investments

Risk Flags

Long contract duration
High contract value
Single large prime contractor
No explicit small business participation noted

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $803.5 million 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 $803.5 million.

What is the period of performance?

Start: 1999-12-10. End: 2014-05-04.

What is the historical spending trend for aircraft manufacturing contracts awarded by the Department of Defense over the last decade?

The Department of Defense (DoD) consistently allocates substantial funding towards aircraft manufacturing, reflecting its critical role in national security. Over the last decade, spending has fluctuated based on geopolitical events, modernization priorities, and specific program lifecycles. Major programs like the F-35 Joint Strike Fighter, upgrades to existing fleets (e.g., F-16, F-15), and development of new platforms contribute significantly to this spending. While specific aggregate figures require detailed analysis of federal procurement data, it's evident that aircraft manufacturing remains a multi-billion dollar annual expenditure for the DoD. Factors influencing trends include the retirement of older platforms, the need for advanced capabilities (like stealth and network-centric warfare), and sustainment requirements for the existing inventory. The $803 million awarded in this specific contract is a notable, but not unprecedented, figure within this broader context of sustained high-level investment in military aviation.

How does the firm fixed-price (FFP) contract type compare to other pricing arrangements in terms of risk and cost control for the government in long-term defense contracts?

Firm Fixed Price (FFP) contracts are generally favored by the government for long-term defense procurements due to their inherent cost control benefits. Under an FFP agreement, the contractor assumes the majority of the cost risk, agreeing to a set price regardless of their actual costs incurred. This provides the government with maximum price certainty and predictability, making budgeting more straightforward. Compared to Cost-Plus contracts, where the government reimburses the contractor's allowable costs plus a fee, FFP significantly reduces the risk of cost overruns for the government. However, FFP contracts require well-defined requirements upfront, as scope changes can be costly and difficult to manage. If the contractor significantly underestimates costs or encounters unforeseen issues, they bear the loss, which can sometimes lead to contractor financial distress or pressure to cut corners on quality if not rigorously overseen. For long-term, complex projects like aircraft manufacturing, FFP is often used when requirements are stable and well-understood, balancing cost certainty with the potential need for careful performance monitoring.

What is Lockheed Martin's track record with large-scale aircraft manufacturing contracts awarded by the Department of Defense?

Lockheed Martin Corporation has an extensive and well-established track record in large-scale aircraft manufacturing for the Department of Defense (DoD). As a primary defense contractor, the company has been instrumental in producing some of the most advanced military aircraft in the U.S. inventory. Key examples include the F-35 Lightning II Joint Strike Fighter program, which is one of the largest and most complex defense programs in history, involving significant manufacturing and sustainment efforts. Lockheed Martin also has a long history with the F-16 Fighting Falcon and F-22 Raptor fighter jets, as well as various transport and special mission aircraft. Their performance on these programs generally demonstrates significant technical capability and the capacity to manage large, complex manufacturing operations. While large programs inevitably face challenges related to cost, schedule, and technical development, Lockheed Martin's sustained role as a prime contractor for critical aviation platforms underscores its deep experience and capability in meeting the DoD's demanding requirements.

What are the potential risks associated with a single, long-duration contract for aircraft manufacturing, even if competitively awarded?

Even when awarded through full and open competition, a single, long-duration contract for aircraft manufacturing carries several potential risks. Firstly, there's the risk of contractor complacency or reduced innovation over time; once a contractor secures a lengthy commitment, the incentive to aggressively pursue cost efficiencies or introduce cutting-edge improvements might diminish, especially if follow-on competition is unlikely. Secondly, long-term reliance on one supplier can create vendor lock-in, making it difficult and costly for the government to switch providers or adopt alternative technologies should circumstances change or if the contractor's performance falters significantly. Thirdly, the contractor's financial health or strategic priorities could shift over the contract's lifespan, potentially impacting their commitment or ability to deliver. Finally, unforeseen technological advancements or changes in military strategy could render the contracted platform or system less relevant, yet the government might be obligated to continue funding under the existing long-term agreement, representing a potential misallocation of resources.

How does the 'Aircraft Manufacturing' NAICS code (336411) typically relate to government spending patterns and defense procurement?

The North American Industry Classification System (NAICS) code 336411, 'Aircraft Manufacturing,' is a critical indicator of government spending, particularly within the Department of Defense (DoD) and related agencies like NASA. This code encompasses establishments primarily engaged in manufacturing complete aircraft, aircraft parts, and auxiliary equipment. Government contracts under this NAICS code often represent substantial investments due to the high cost of research, development, testing, and production of sophisticated aerospace systems. Spending patterns within this sector are heavily influenced by national security requirements, defense modernization programs, and the lifecycle of major aircraft platforms (fighters, bombers, transports, helicopters). Contracts can range from the initial development and procurement of new aircraft to sustainment, upgrades, and spare parts for existing fleets. The high barriers to entry, advanced technology requirements, and stringent quality standards mean that a significant portion of government spending under NAICS 336411 is directed towards a limited number of large, specialized aerospace corporations.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

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

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $11,697,285

Exercised Options: $11,335,973

Current Obligation: $803,512,986

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline