DoD's $853M AMF JTRS SDD contract to Lockheed Martin shows cost-plus award fee structure

Contract Overview

Contract Amount: $852,873,475 ($852.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-03-28

End Date: 2017-07-29

Contract Duration: 3,410 days

Daily Burn Rate: $250.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: AMF JTRS SDD

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92131

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $852.9 million to LOCKHEED MARTIN CORPORATION for work described as: AMF JTRS SDD Key points: 1. The contract utilized a Cost Plus Award Fee (CPAF) structure, which incentivizes contractor performance through award fees tied to specific criteria. 2. Awarded under full and open competition, the contract saw two bidders, suggesting a competitive landscape for this type of defense system. 3. The duration of the contract (3410 days) indicates a long-term development and production effort for a complex defense system. 4. The contract's primary focus on Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing (NAICS 334220) places it within a specialized technology sector. 5. The significant value of the contract points to a major defense program with substantial resource allocation. 6. The contract was managed by the Defense Contract Management Agency (DCMA), a common oversight body for large defense contracts.

Value Assessment

Rating: fair

The Cost Plus Award Fee (CPAF) structure can lead to higher overall costs compared to fixed-price contracts if award criteria are not tightly managed. Benchmarking the specific award fees against similar complex defense system development contracts would be necessary for a precise value-for-money assessment. Without detailed performance metrics and the actual award fees paid, it's difficult to definitively assess if the final cost represented excellent value. However, the competitive nature of the bidding process suggests an attempt to secure reasonable pricing.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. Two bids were received, which suggests a moderate level of competition for this specialized defense system. While two bidders are better than one, a higher number of bidders could potentially drive prices down further and foster greater innovation.

Taxpayer Impact: The full and open competition, despite receiving only two bids, aimed to ensure fair pricing for taxpayers. The presence of multiple bidders, even if limited, provides a basis for negotiation and prevents a single source from dictating terms.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, which receives advanced wireless communication capabilities. The contract delivers critical components and systems for the Airborne Multi-Function Joint Tactical Radio System (AMF JTRS). The geographic impact is national, supporting military operations across various theaters. The contract likely supported a specialized workforce within Lockheed Martin and its subcontractors, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee contracts can sometimes lead to cost overruns if not meticulously managed and if award criteria are too easily met.
The long contract duration (over 9 years) increases the risk of scope creep and potential for evolving technological requirements to impact final costs.
Limited competition (2 bidders) might have constrained the potential for achieving the lowest possible price point.
The specific nature of advanced military communications equipment can be prone to high research and development costs.

Positive Signals

Awarded through full and open competition, indicating an effort to achieve a competitive price.
The use of an award fee structure incentivizes contractor performance and potentially higher quality outcomes.
The contract was awarded to a major defense contractor with a proven track record in complex systems integration.
The contract addresses a critical need for modernizing military communication systems.

Sector Analysis

The contract falls within the 'Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing' sector (NAICS 334220). This sector is characterized by high R&D investment, rapid technological advancements, and significant government procurement, particularly for defense applications. The market size for defense communications equipment is substantial, driven by the need for secure, interoperable, and advanced systems. This contract represents a significant investment in a key component of modern military C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) capabilities.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). As a large-scale, complex defense system development contract awarded to a major prime contractor, the primary impact on small businesses would likely be through subcontracting opportunities. Lockheed Martin would be expected to engage small businesses for specialized components, manufacturing, or services, contributing to the small business ecosystem. However, the specific subcontracting plan and its effectiveness are not detailed in the provided data.

Oversight & Accountability

Oversight for this contract was provided by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor compliance with contract terms, quality standards, and delivery schedules. The Cost Plus Award Fee (CPAF) structure implies performance monitoring against defined criteria to determine award fees. Transparency regarding the specific award fee criteria and the amounts paid would be crucial for a full assessment of accountability. Inspector General involvement would typically occur if specific allegations of fraud, waste, or abuse arise.

Related Government Programs

Joint Tactical Radio System (JTRS)
Department of Defense C4ISR Programs
Advanced Military Communications Systems
Defense Contract Management Agency Oversight

Risk Flags

Potential for cost overruns due to CPAF structure
Risk of scope creep given long contract duration
Limited competition may impact price optimization
Complexity of technology may lead to high R&D costs

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $852.9 million to LOCKHEED MARTIN CORPORATION. AMF JTRS SDD

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $852.9 million.

What is the period of performance?

Start: 2008-03-28. End: 2017-07-29.

What was the specific performance criteria used to determine award fees for Lockheed Martin under the AMF JTRS SDD contract?

The provided data does not specify the exact performance criteria used for award fees. Typically, for Cost Plus Award Fee (CPAF) contracts like this one, award fees are tied to achieving specific technical milestones, meeting delivery schedules, maintaining cost control within defined parameters, and demonstrating exceptional performance in areas such as system reliability, interoperability, and user satisfaction. The criteria would have been detailed in the contract's Statement of Work (SOW) and Performance Requirements Document (PRD). Without access to these documents or the contractor's performance reports, a precise evaluation of the award fee structure's effectiveness in driving desired outcomes cannot be made. However, the objective is to incentivize the contractor beyond minimum contract requirements.

How does the per-unit cost of the AMF JTRS SDD components compare to similar systems developed by other defense contractors?

A direct per-unit cost comparison is challenging without knowing the specific units being produced and their complexity. The provided data indicates a total contract value of $852,873,475.24 over a period of 3410 days (approximately 9.3 years). This suggests a long-term development and production effort for a complex system. Benchmarking would require identifying comparable systems (e.g., other tactical radio systems, communication suites) and their associated development and production costs, adjusted for factors like technological sophistication, quantity, and contract type. Given the specialized nature of JTRS and its advanced capabilities, its per-unit cost might be higher than less sophisticated communication devices but potentially competitive within its niche for advanced, secure, and interoperable military-grade systems.

What are the primary risks associated with the long duration and cost-plus nature of this contract?

The primary risks associated with a long-duration, cost-plus award fee (CPAF) contract like the AMF JTRS SDD are twofold. Firstly, the extended timeline (over 9 years) increases the likelihood of scope creep, where requirements evolve or expand beyond the original intent, potentially leading to cost increases and schedule delays. Secondly, the CPAF structure, while incentivizing performance, carries the inherent risk of cost overruns if the award criteria are not rigorously defined and monitored, or if the contractor prioritizes achieving award fees over strict cost control. There's also a risk that the 'award' portion of the fee might be paid even if performance is merely adequate, rather than truly exceptional, potentially inflating the final cost without a commensurate increase in value.

What is the historical spending trend for the AMF JTRS program or similar JTRS variants prior to and during this contract?

The provided data focuses solely on the AMF JTRS SDD contract awarded to Lockheed Martin. It does not offer historical spending trends for the broader JTRS program or other variants. The JTRS program itself has a long and complex history, marked by numerous contract awards, program restructurings, and evolving requirements. Understanding the historical spending would necessitate a broader analysis of multiple JTRS-related contracts across different program phases and contractors. This specific contract, valued at approximately $853 million, represents a significant investment within the JTRS initiative, likely focused on a specific set of capabilities or a particular platform integration (Airborne Multi-Function).

How effectively did the two-bidder competition ensure fair pricing and value for the taxpayer on this $853 million contract?

The effectiveness of a two-bidder competition in ensuring fair pricing and taxpayer value is inherently limited compared to scenarios with more bidders. While full and open competition was utilized, receiving only two proposals suggests that the market for this specific, highly specialized defense system may be concentrated among a few large contractors. This limited competition provides a baseline for price negotiation but may not drive the aggressive cost reductions or innovative solutions that could emerge from a more robustly competitive environment. The CPAF structure also plays a role; if award criteria are well-defined and performance is rigorously assessed, value can be maximized. However, without more bidders, the government has less leverage to negotiate the absolute lowest price, and the potential for higher-than-optimal costs exists.

Industry Classification

NAICS: Manufacturing › Communications Equipment Manufacturing › Radio and Television Broadcasting and Wireless Communications Equipment Manufacturing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 4770 EASTGATE MALL LOCATION A, SAN DIEGO, CA, 92121

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

Financial Breakdown

Contract Ceiling: $1,456,463,712

Exercised Options: $1,043,478,668

Current Obligation: $852,873,475

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline