DoD awards $372M for C-130J aircraft manufacturing to Lockheed Martin, raising questions about competition

Contract Overview

Contract Amount: $372,434,941 ($372.4M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2017-09-28

End Date: 2020-10-30

Contract Duration: 1,128 days

Daily Burn Rate: $330.2K/day

Competition Type: NOT COMPETED

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: C-130J, ACAT I, FYOC FIVE AIRCRAFT BUY

Place of Performance

Location: MARIETTA, COBB County, GEORGIA, 30063

State: Georgia Government Spending

Plain-Language Summary

Department of Defense obligated $372.4 million to LOCKHEED MARTIN CORP for work described as: C-130J, ACAT I, FYOC FIVE AIRCRAFT BUY Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant investment in a critical military aircraft platform, indicating ongoing strategic importance. 3. The firm-fixed-price contract type shifts cost risk to the contractor, but sole-sourcing mitigates competitive pressure. 4. Performance period spans over three years, suggesting a substantial and complex delivery schedule. 5. Focus on aircraft manufacturing highlights the defense sector's reliance on established prime contractors. 6. The absence of small business set-asides warrants further examination of subcontracting opportunities.

Value Assessment

Rating: questionable

The contract's value of $372.4 million for C-130J aircraft manufacturing is substantial. However, without competitive bidding, it is difficult to benchmark the value for money. The firm-fixed-price structure is generally favorable for the government in managing cost overruns, but the lack of competition means the government may not be achieving the lowest possible price. Comparisons to similar sole-source awards for specialized aircraft would be necessary for a more precise assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corp., was solicited. This approach bypasses the standard competitive procurement process, which typically involves multiple bids to ensure the best price and value. The lack of competition here suggests potential barriers to entry for other manufacturers or specific justifications for a non-competitive award, which could lead to higher prices for taxpayers.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to drive down prices, potentially resulting in higher expenditures for the C-130J aircraft than if multiple bidders had been involved.

Public Impact

The U.S. Air Force benefits from the acquisition of C-130J Super Hercules aircraft, crucial for tactical airlift and global mobility. This contract supports the continued production and delivery of a key military transport aircraft. The geographic impact is primarily at Lockheed Martin's facilities, likely in Georgia, supporting a skilled manufacturing workforce. Workforce implications include the employment of engineers, technicians, and assembly line workers involved in advanced aircraft manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for money.
Lack of transparency in the justification for sole-sourcing.
Potential for cost overruns if not rigorously managed, despite firm-fixed-price.
Absence of small business participation goals may limit broader economic impact.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
Award to a known, experienced manufacturer of the C-130J platform.
Ensures continued availability of a critical military asset.

Sector Analysis

The aerospace and defense sector is characterized by high barriers to entry, significant R&D investment, and long production cycles. Aircraft manufacturing, particularly for military platforms like the C-130J, is dominated by a few large prime contractors. This contract represents a portion of the Department of Defense's ongoing investment in its airlift capabilities, a segment where specialized, high-value production is common. Benchmarking would require comparing this award to other sole-source or limited-competition contracts for similar military aircraft.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there an indication of specific small business subcontracting goals. Given the nature of large-scale aircraft manufacturing, prime contractors like Lockheed Martin often engage a complex supply chain. The absence of explicit small business provisions in the primary award warrants scrutiny to ensure that opportunities for small businesses within the subcontracting ecosystem are maximized.

Oversight & Accountability

Oversight for this contract would fall under the Department of Defense's existing procurement regulations and the specific oversight mechanisms of the Department of the Air Force. The firm-fixed-price nature provides some cost control, but the sole-source award necessitates robust performance monitoring and potential audits to ensure fair pricing and adherence to contract terms. Inspector General involvement would be triggered by any allegations of fraud, waste, or abuse.

Related Government Programs

C-130 Hercules Program
Tactical Airlift Aircraft Procurement
Defense Production Act Investments
Aerospace Manufacturing Contracts

Risk Flags

Sole-source award
Lack of competitive bidding
Potential for inflated pricing
Limited small business participation visibility

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $372.4 million to LOCKHEED MARTIN CORP. C-130J, ACAT I, FYOC FIVE AIRCRAFT BUY

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

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 $372.4 million.

What is the period of performance?

Start: 2017-09-28. End: 2020-10-30.

What is the historical spending pattern for C-130J aircraft procurement by the Department of Defense?

The Department of Defense has consistently procured C-130J aircraft over several fiscal years to maintain and modernize its tactical airlift fleet. Historical data indicates multi-year procurement strategies, often involving significant annual outlays. For instance, prior to this specific award, the Air Force had already received numerous C-130J variants. Analyzing past contract awards, including their values, competition levels, and delivery schedules, reveals a sustained commitment to this platform. This particular $372.4 million award for five aircraft represents a continuation of that investment, though the sole-source nature distinguishes it from potentially more competitive earlier buys. Understanding the total fleet size and planned attrition rates provides further context for this ongoing expenditure.

What specific justifications were provided for awarding this contract on a sole-source basis?

Sole-source awards are typically justified under specific circumstances outlined in federal acquisition regulations, such as when only one responsible source is available or when a public exigency requires immediate action. For a specialized aircraft like the C-130J, the justification might stem from Lockheed Martin's unique capabilities, proprietary technology, or the need for commonality with an existing fleet, making another source impractical or excessively costly. The specific justification document, often referred to as a Justification and Approval (J&A), would detail these reasons. Without access to that document, it's presumed that the government determined Lockheed Martin was the only viable source capable of meeting the requirements within the necessary timeframe and technical specifications for these particular aircraft.

How does the firm-fixed-price (FFP) contract type mitigate risk for the government in this sole-source award?

The firm-fixed-price (FFP) contract type is advantageous for the government, especially in sole-source situations, because it establishes a ceiling price that is not subject to adjustment based on the contractor's cost experience. This means Lockheed Martin bears the primary responsibility for any cost overruns incurred during production. While the government benefits from cost certainty, the absence of competition in a sole-source award means the initial FFP price might be higher than it would be in a competitive scenario. Therefore, while FFP mitigates cost overrun risk, the overall value for money is still influenced by the non-competitive nature of the award.

What is the typical performance period and delivery schedule for C-130J aircraft procurements of this size?

The performance period for this contract, spanning from September 28, 2017, to October 30, 2020, covers approximately 1,128 days, or just over three years. This duration is typical for the production and delivery of a small batch of complex military aircraft like the C-130J. Procurements of this nature involve extensive manufacturing processes, quality assurance checks, and final testing. Larger orders or multi-year contracts might extend over longer periods, but for five aircraft, a three-year window allows for efficient production without excessive lead times, balancing the need for timely delivery with the complexities of the manufacturing process.

Are there any known issues or performance concerns associated with Lockheed Martin's production of the C-130J?

The C-130J Super Hercules has generally been a reliable and successful platform for the U.S. Air Force and allied nations. Lockheed Martin has a long history with the C-130 family, and production has been ongoing for decades. While specific program performance can vary, major issues are typically addressed through sustainment contracts and engineering change proposals. Publicly available information does not indicate widespread, systemic performance concerns directly attributable to Lockheed Martin's production of the C-130J that would fundamentally question the award itself. However, like any complex defense program, ongoing monitoring of production quality, delivery schedules, and operational readiness is standard practice.

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

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $372,434,941

Exercised Options: $372,434,941

Current Obligation: $372,434,941

Subaward Activity

Number of Subawards: 27

Total Subaward Amount: $3,765,871

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA862516D6458

IDV Type: IDC

Timeline