DoD's $836M IT contract to Lockheed Martin shows long-term IT service needs and potential for cost overruns

Contract Overview

Contract Amount: $679,473,791 ($679.5M)

Contractor: Lockheed Martin Integrated Systems, LLC

Awarding Agency: Department of Defense

Start Date: 2003-11-21

End Date: 2014-08-08

Contract Duration: 3,913 days

Daily Burn Rate: $173.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 7

Pricing Type: FIXED PRICE INCENTIVE

Sector: IT

Official Description: 200407!000098!5700!LA01 !11 CONS/LGCW !FA701204C0003 !A!N! !N! ! !20031121!20130630!836196972!805258373!834951691!N!LOCKHEED MARTIN INTEGRATED SYS!6801 ROCKLEDGE DRIVE !BETHESDA !NJ!20817!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000010350876!N!N!000530185344!D399!OTHER ADP&TELECOMMUNICATION SERVICES !S1 !SERVICES !000 !* !541690!A!B!3! ! ! ! ! !99990909!B!B!Y!B! !A!N!L!2!007!B! !C!Y!F! ! !N!C!N! ! ! !B!Z!A!A!000!A!B!N! ! ! !Y! ! !0001! !

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20301

State: District of Columbia Government Spending

Plain-Language Summary

Department of Defense obligated $679.5 million to LOCKHEED MARTIN INTEGRATED SYSTEMS, LLC for work described as: 200407!000098!5700!LA01 !11 CONS/LGCW !FA701204C0003 !A!N! !N! ! !20031121!20130630!836196972!805258373!834951691!N!LOCKHEED MARTIN INTEGRATED SYS!6801 ROCKLEDGE DRIVE !BETHESDA !NJ!20817!50000!001!11!WASHINGTON !DIST… Key points: 1. This contract represents a significant investment in IT services, highlighting the sustained demand for advanced technological support within the Department of Defense. 2. The fixed-price incentive contract structure suggests an attempt to balance cost control with performance incentives, though the potential for cost overruns remains a key risk. 3. Lockheed Martin's extensive experience in defense contracting positions them as a capable provider, but also raises questions about market concentration. 4. The contract's duration and substantial value indicate a critical role in supporting ongoing defense operations and modernization efforts. 5. Benchmarking against similar large-scale IT service contracts is crucial to assess the value for money delivered over its lifecycle. 6. The 'Other ADP & Telecommunication Services' classification suggests a broad scope, potentially encompassing a wide range of IT infrastructure and support functions.

Value Assessment

Rating: fair

The total obligated amount of $836,196,972.85 over approximately 10 years suggests a substantial but potentially variable cost. Without specific performance metrics or detailed breakdowns of services rendered, it's challenging to definitively benchmark the value for money. Comparing this to similar long-term, large-scale IT support contracts for defense agencies would be necessary to assess if the pricing is competitive and if the contractor is delivering optimal value. The fixed-price incentive structure implies that cost savings shared between the government and contractor could lead to efficiencies, but also carries the risk of exceeding initial estimates if performance targets are not met efficiently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. The presence of 7 bidders suggests a reasonably competitive environment for this type of large-scale IT service contract. However, the ultimate award to Lockheed Martin implies they offered the best value proposition among the competitors. Further analysis would be needed to understand the specific evaluation criteria and how the competition translated into price discovery and innovation.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to lower prices and better service quality. It ensures that the government explores a wide range of options before selecting a contractor.

Public Impact

The primary beneficiaries are the Department of Defense and its various branches, which receive essential IT and telecommunication services to support national security operations. Services delivered likely include IT infrastructure management, network support, telecommunications, and potentially advanced technology integration critical for modern defense capabilities. The geographic impact is likely nationwide, supporting military bases and operational centers across the United States and potentially overseas. Workforce implications could include direct employment by Lockheed Martin and its subcontractors, as well as indirect impacts on military and civilian personnel who rely on these IT services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the fixed-price incentive structure if performance targets are not met efficiently.
Long contract duration (over 10 years) increases the risk of technology obsolescence or changing requirements not being adequately addressed.
Concentration of a large IT services contract with a single major defense contractor could limit future competition or flexibility.
The broad 'Other ADP & Telecommunication Services' category might obscure specific performance issues or cost drivers.
Dependence on a single contractor for critical IT infrastructure could pose a risk if the contractor faces financial or operational difficulties.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Fixed-price incentive contract aims to align contractor performance with government cost objectives.
Lockheed Martin is a well-established defense contractor with significant experience in large-scale IT projects.
The contract's substantial value indicates a critical need for these services, suggesting high strategic importance.
Long-term nature allows for sustained support and potential for deep integration with DoD systems.

Sector Analysis

This contract falls within the Information Technology (IT) sector, specifically focusing on IT and telecommunication services. The IT services market for the federal government is substantial, with significant portions allocated to defense agencies. Comparable spending benchmarks would involve analyzing other large, multi-year IT support contracts awarded by the DoD or other federal agencies to major defense contractors. The market is characterized by a mix of large prime contractors and numerous subcontractors, with a trend towards consolidation and specialization in areas like cloud computing, cybersecurity, and data analytics.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). While the prime contractor is a large entity, there may be opportunities for small businesses to participate as subcontractors. The extent of small business subcontracting would depend on Lockheed Martin's subcontracting plan and the specific requirements of the contract. Without explicit subcontracting goals or reporting, it's difficult to assess the direct impact on the small business ecosystem, though large prime contracts often involve a tiered subcontracting structure.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The fixed-price incentive structure implies performance monitoring to ensure cost and delivery targets are met. Transparency would be facilitated through contract award databases and potentially through Inspector General reports if specific issues arise. Accountability measures are inherent in the contract terms, with potential for financial penalties or adjustments based on performance outcomes. The duration of the contract necessitates ongoing oversight to adapt to evolving technological landscapes and mission requirements.

Related Government Programs

DoD IT Modernization Programs
Defense Information Systems Agency (DISA) Contracts
Federal Civilian IT Spending
Large-Scale IT Services Contracts
Telecommunications Services Contracts
ADP Equipment and Software Contracts

Risk Flags

Long contract duration may lead to technology obsolescence.
Fixed-price incentive structure carries risk of cost overruns.
Broad service category may obscure specific performance issues.
Potential for contractor lock-in due to scale and duration.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $679.5 million to LOCKHEED MARTIN INTEGRATED SYSTEMS, LLC. 200407!000098!5700!LA01 !11 CONS/LGCW !FA701204C0003 !A!N! !N! ! !20031121!20130630!836196972!805258373!834951691!N!LOCKHEED MARTIN INTEGRATED SYS!6801 ROCKLEDGE DRIVE !BETHESDA !NJ!20817!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !+000010350876!N!N!000530185344!D399!OTHER ADP&TELECOMMUNICATION SERVICES !S1 !SERVICES !000 !* !541690!A!B!3! ! ! ! ! !99990

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN INTEGRATED SYSTEMS, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $679.5 million.

What is the period of performance?

Start: 2003-11-21. End: 2014-08-08.

What specific IT and telecommunication services are covered under this contract, and how have they evolved since its inception?

The contract is classified under PSC 541690, 'Other Scientific and Technical Consulting Services,' and specifically noted as 'OTHER ADP & TELECOMMUNICATION SERVICES.' This broad classification suggests a wide range of potential services, likely encompassing IT infrastructure management, network operations, telecommunications support, system integration, and possibly consulting on technology adoption. Given the contract's duration from 2003 to 2014, the services would have evolved significantly to keep pace with technological advancements, moving from legacy systems support to potentially incorporating early stages of cloud computing, enhanced cybersecurity measures, and data management solutions. Detailed service delivery reports and contract modifications would be necessary to track this evolution precisely.

How does the total obligated amount of $836 million compare to the initial contract value and subsequent modifications?

The initial contract value is not explicitly stated in the provided data, but the total obligated amount reached $836,196,972.85. The contract duration was from November 21, 2003, to June 30, 2013 (with an extended end date to August 8, 2014), spanning over 10 years. The difference between the initial value and the final obligated amount would indicate the extent of contract growth through modifications, potentially due to scope changes, inflation adjustments, or additional requirements. A significant increase from the initial award value to the final obligated amount could suggest scope creep or successful negotiation of additional services, but also warrants scrutiny regarding cost control over the contract's lifecycle.

What was the competitive landscape like for this contract, and how did it influence pricing?

This contract was awarded under 'FULL AND OPEN COMPETITION,' with 7 bidders participating. This level of competition for a large-scale IT services contract is generally considered healthy. Full and open competition allows the government to solicit proposals from all responsible sources, fostering a robust marketplace. The presence of multiple bidders typically drives down prices as companies compete to offer the most attractive value proposition. While the specific pricing strategies of the bidders are not detailed, the competitive process likely pressured Lockheed Martin to offer competitive rates and terms to secure the award, contributing to the final negotiated price.

What are the key performance indicators (KPIs) associated with this fixed-price incentive contract, and how was performance measured?

The contract type is 'FIXED PRICE INCENTIVE' (FPI), which means the final price is based on the negotiated target cost and target profit, with incentives for meeting or exceeding certain performance targets. Specific KPIs for this contract are not detailed in the provided data. However, for an FPI contract of this nature, KPIs would typically relate to service availability, system uptime, response times for technical support, project delivery schedules, and potentially cybersecurity metrics. Performance measurement would involve regular reporting by the contractor, government acceptance of deliverables, and audits. The incentive structure would link contractor profit to achieving these KPIs, aiming to align the contractor's interests with the government's objectives for cost, schedule, and performance.

How does Lockheed Martin's track record with similar large DoD IT contracts inform the assessment of this contract's success?

Lockheed Martin is a major defense contractor with extensive experience in delivering large-scale IT and systems integration services to the DoD. Their track record includes numerous complex programs involving IT infrastructure, C4ISR systems, and cybersecurity solutions. Assessing this specific contract's success in light of their broader performance requires examining past project delivery, cost performance on similar contracts, and any history of contract disputes or overruns. A history of successful, on-time, and on-budget delivery for comparable contracts would suggest a higher likelihood of success for this one. Conversely, a pattern of issues on similar contracts might raise concerns about potential risks.

What is the historical spending trend for 'Other ADP & Telecommunication Services' within the Department of Defense, and how does this contract fit?

The Department of Defense is consistently one of the largest federal agencies for IT spending, and 'ADP & Telecommunication Services' (often categorized under IT services) represents a significant portion of that expenditure. Historical spending trends show a sustained and often increasing demand for these services due to the critical role of technology in modern military operations, intelligence gathering, and command and control. This $836 million contract, awarded over a decade, fits within the pattern of large, long-term IT service procurements by the DoD. It reflects the agency's ongoing need for robust and evolving IT infrastructure to maintain its operational capabilities and technological edge.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Other Scientific and Technical Consulting 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: 7

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 6801 ROCKLEDGE DRIVE, BETHESDA, NJ, 20817

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $800,715,627

Exercised Options: $768,656,565

Current Obligation: $679,473,791

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: YES

Timeline