DoD's $1.59B Lockheed Martin contract for MH-60R avionics advanced acquisition protects delivery schedule

Contract Overview

Contract Amount: $1,589,570,894 ($1.6B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-01-05

End Date: 2020-06-30

Contract Duration: 3,464 days

Daily Burn Rate: $458.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ADVANCE ACQUISITION CONTRACT TO PROCURE LONG-LEAD ITEMS FOR FY12 MH-60R MISSION AVIONICS SYSTEMS AND MH-60R/S COMMON COCKPITS, AS WELL AS END-OF-LIFE COMPONENTS TO PROTECT DELIVERY SCHEDULE REQUIREMENTS.

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $1.59 billion to LOCKHEED MARTIN CORPORATION for work described as: ADVANCE ACQUISITION CONTRACT TO PROCURE LONG-LEAD ITEMS FOR FY12 MH-60R MISSION AVIONICS SYSTEMS AND MH-60R/S COMMON COCKPITS, AS WELL AS END-OF-LIFE COMPONENTS TO PROTECT DELIVERY SCHEDULE REQUIREMENTS. Key points: 1. Contract awarded to Lockheed Martin for long-lead items and end-of-life components for MH-60R/S aircraft. 2. The acquisition aims to safeguard the delivery schedule for critical mission avionics and common cockpits. 3. This contract represents a significant investment in maintaining and upgrading naval aviation capabilities. 4. The firm-fixed-price structure aims to provide cost certainty for the government. 5. Awarded as a definitive contract, indicating a commitment to a specific scope of work. 6. The duration of the contract spans nearly 9.5 years, reflecting the complexity and long-term nature of the program.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specific nature as an advance acquisition for long-lead items and end-of-life components. The total obligation of $1.59 billion over a nearly decade-long period suggests a substantial investment in maintaining naval aviation readiness. Without direct comparisons for similar advance acquisition contracts for these specific components, assessing precise value-for-money is difficult. However, the firm-fixed-price nature provides some cost control.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often taken for specialized components or when a specific contractor possesses unique capabilities or intellectual property essential for the program. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple bidders had participated.

Taxpayer Impact: Taxpayers may not have received the benefit of competitive pricing, as the government did not solicit bids from multiple vendors. This could result in a higher overall expenditure for these critical components.

Public Impact

The primary beneficiaries are the U.S. Navy's aviation units operating the MH-60R/S Seahawk helicopters. Services delivered include the procurement of long-lead time materials and end-of-life components essential for aircraft sustainment and modernization. The geographic impact is primarily within the United States, supporting naval bases and maintenance facilities. Workforce implications include sustaining jobs within Lockheed Martin and its supply chain, particularly in areas related to aerospace manufacturing and engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced cost efficiency.
Long contract duration could lead to scope creep or unforeseen cost increases if not managed diligently.
Reliance on a single source for critical components may create supply chain vulnerabilities.

Positive Signals

Advance acquisition of long-lead items ensures critical components are available to maintain aircraft production and sustainment schedules.
Firm-fixed-price contract provides a degree of cost predictability for the government.
Focus on end-of-life components addresses obsolescence issues, ensuring continued operational capability.

Sector Analysis

The aerospace and defense sector is characterized by high R&D costs, long product development cycles, and significant government procurement. This contract falls within the aircraft manufacturing sub-sector, specifically focusing on specialized avionics and cockpit systems for naval helicopters. The market for such components is often dominated by a few large prime contractors and their specialized suppliers due to the stringent requirements and certifications involved. Comparable spending benchmarks would typically involve other major defense aircraft sustainment and upgrade programs.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the nature of procuring specialized avionics and long-lead items, it is likely that Lockheed Martin will subcontract portions of this work. The extent to which small businesses will participate will depend on Lockheed Martin's subcontracting strategy and the availability of qualified small business suppliers for specific components or services within the aerospace manufacturing ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the contract terms, including performance requirements and payment schedules. Transparency is facilitated through contract databases like FPDS-NG. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

MH-60R Seahawk Helicopter Program
Naval Aviation Sustainment Programs
Aerospace Component Manufacturing
Defense Advanced Procurement

Risk Flags

Sole-source award
Long contract duration
Advance acquisition for long-lead items

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.59 billion to LOCKHEED MARTIN CORPORATION. ADVANCE ACQUISITION CONTRACT TO PROCURE LONG-LEAD ITEMS FOR FY12 MH-60R MISSION AVIONICS SYSTEMS AND MH-60R/S COMMON COCKPITS, AS WELL AS END-OF-LIFE COMPONENTS TO PROTECT DELIVERY SCHEDULE REQUIREMENTS.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $1.59 billion.

What is the period of performance?

Start: 2011-01-05. End: 2020-06-30.

What is Lockheed Martin's track record with the MH-60R program and similar defense contracts?

Lockheed Martin has a long-standing and extensive track record with the MH-60R Seahawk helicopter program, serving as the prime contractor for its production and sustainment. The company has consistently delivered these multi-mission naval helicopters to the U.S. Navy and allied nations. Their experience spans decades, encompassing complex systems integration, avionics development, and lifecycle support for rotary-wing aircraft. This includes managing large-scale, multi-year contracts with firm-fixed-price and cost-plus-incentive-fee structures. Their performance on similar large defense contracts, particularly those involving advanced aircraft systems and long-lead item procurement, is generally characterized by meeting delivery schedules and technical specifications, though like many large defense programs, they have also faced scrutiny regarding cost and schedule adjustments over time. The company's deep integration with the MH-60R platform suggests a high degree of familiarity and capability in fulfilling this specific advance acquisition contract.

How does the pricing of this contract compare to similar advance acquisition contracts for aircraft components?

Directly comparing the pricing of this $1.59 billion advance acquisition contract for MH-60R avionics and cockpit components to similar contracts is challenging without access to detailed pricing breakdowns and specific contract terms for comparable procurements. Advance acquisition contracts, especially for long-lead items and end-of-life components, are highly specialized. Factors influencing price include the complexity of the technology, the volume of items procured, the specific end-of-life component needs, and the market dynamics for those particular parts. The firm-fixed-price nature of this contract aims to cap the government's liability, but the initial price is set based on estimates and projections. Without a benchmark of other sole-source, long-duration advance acquisition contracts for similar high-value aerospace systems, a definitive value-for-money assessment based solely on price is difficult. The lack of competition further complicates direct price benchmarking.

What are the primary risks associated with this contract, and how are they being mitigated?

The primary risks associated with this contract include potential cost overruns due to the long duration and the nature of advance acquisition, supply chain disruptions for specialized components, and the risk of obsolescence if technology evolves rapidly. The lack of competition also presents a risk of suboptimal pricing. Mitigation strategies likely include robust program management by the Department of the Navy to monitor progress and costs, strict adherence to the firm-fixed-price terms to limit cost increases, and proactive engagement with Lockheed Martin to manage the supply chain and address any emerging obsolescence issues. The contract's focus on securing long-lead items inherently mitigates the risk of delivery schedule delays, which is a stated objective. However, the inherent risks of a sole-source, long-term procurement remain.

How effective is this contract in ensuring the long-term operational readiness of the MH-60R fleet?

This contract is designed to be highly effective in ensuring the long-term operational readiness of the MH-60R fleet by proactively addressing two critical areas: long-lead time components and end-of-life parts. By securing these items in advance, the Navy mitigates the risk of production or sustainment delays that could arise from component shortages or extended manufacturing times. Addressing end-of-life components is crucial for preventing obsolescence, which can render aircraft systems inoperable or unsupportable. This advance acquisition strategy allows for the integration of necessary upgrades and replacements, thereby extending the service life and maintaining the mission capability of the MH-60R helicopters. The substantial investment reflects a commitment to sustained operational capability for this vital naval asset.

What are the historical spending patterns for MH-60R avionics and related components, and how does this contract fit?

Historical spending patterns for MH-60R avionics and related components typically involve a mix of production contracts, sustainment contracts, and specific upgrade programs. The U.S. Navy has consistently invested in the MH-60R fleet, which is a cornerstone of its maritime helicopter operations. Spending has historically been directed towards acquiring new aircraft, procuring spare parts, and implementing avionics modernization efforts to keep pace with technological advancements and evolving threats. This particular advance acquisition contract fits into the sustainment and modernization aspect of historical spending. It represents a strategic allocation of funds to secure critical long-lead items and address obsolescence proactively, rather than reacting to immediate needs. This approach aims to smooth out procurement, potentially achieve better pricing through advance commitment, and ensure the continuous availability of essential parts, aligning with a long-term strategy for fleet readiness.

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

Solicitation ID: N0001910R0009

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1801 STATE RT 17 C, OWEGO, NY, 13827

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: $1,591,770,421

Exercised Options: $1,589,570,894

Current Obligation: $1,589,570,894

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline