Navy awards $144M for MK 41 Vertical Launcher System, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $143,959,742 ($144.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-06-10

End Date: 2016-07-01

Contract Duration: 1,848 days

Daily Burn Rate: $77.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: MK 41 MOD 15 VERTICAL LAUNCHER SYSTEM REQUIREMENTS FOR FY10-11

Place of Performance

Location: MIDDLE RIVER, BALTIMORE County, MARYLAND, 21220

State: Maryland Government Spending

Plain-Language Summary

Department of Defense obligated $144.0 million to LOCKHEED MARTIN CORPORATION for work described as: MK 41 MOD 15 VERTICAL LAUNCHER SYSTEM REQUIREMENTS FOR FY10-11 Key points: 1. Contract awarded for essential naval defense hardware, indicating a critical need for the MK 41 system. 2. Sole-source award to Lockheed Martin suggests a lack of readily available alternatives or specialized expertise. 3. The contract duration of over 5 years points to a long-term requirement and potential for follow-on work. 4. Fixed-price contract type aims to control costs, but sole-sourcing may limit competitive pressure on pricing. 5. The award is for requirements in FY10-11, with a completion date in 2016, suggesting a lengthy procurement and execution cycle. 6. The specific Product Service Code (PSC) is not provided, making direct comparison to similar procurements challenging.

Value Assessment

Rating: fair

Benchmarking the value of this contract is difficult without more detailed cost breakdowns or comparisons to similar sole-source awards for defense systems. The fixed-price nature is a positive indicator for cost control. However, the lack of competition inherent in a sole-source award raises concerns about whether the government achieved the best possible price. The raw dollar amount of $144 million is substantial, but its value is contingent on the system's criticality and performance.

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 Corporation, was solicited. This typically occurs when a specific capability is unique to a single provider, or in situations where full and open competition is not feasible or in the government's best interest. The lack of competition means there was no direct price comparison from multiple vendors, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without competing the requirement, the government had less leverage to negotiate the lowest possible price for the MK 41 Vertical Launcher System.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical components for its fleet's combat systems. The contract delivers requirements for the MK 41 Vertical Launcher System, a key element in naval warfare capabilities. Geographic impact is likely concentrated around Lockheed Martin's manufacturing facilities and Navy installations where the systems are deployed. Workforce implications include sustained employment at Lockheed Martin and its subcontractors involved in the production of these specialized components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (over 5 years) could lead to cost overruns if not managed effectively.
Lack of detailed cost breakdowns makes independent value assessment challenging.

Positive Signals

Fixed-price contract type provides cost certainty for the government.
Award to a known prime contractor with experience in this system suggests a lower technical risk.
The contract addresses a critical defense requirement, ensuring operational readiness for the Navy.

Sector Analysis

The defense manufacturing sector, particularly ordnance and accessories, is characterized by high barriers to entry, specialized technology, and significant government investment. Contracts like this are crucial for maintaining the technological edge and operational capacity of the armed forces. The MK 41 Vertical Launching System is a widely adopted and critical component for modern naval vessels, making its continued supply essential. Spending in this sub-sector is often driven by strategic defense priorities and platform modernization efforts.

Small Business Impact

Information regarding small business subcontracting plans or set-asides is not detailed in the provided data. As a sole-source award to a large prime contractor, the direct impact on small business set-asides is likely minimal unless specific subcontracting goals were mandated. However, Lockheed Martin may engage small businesses as subcontractors for various components or services, contributing indirectly to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature, scrutiny might focus on justification for the award and adherence to the fixed-price terms. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected. Transparency is limited by the sole-source justification and the proprietary nature of defense manufacturing costs.

Related Government Programs

Naval Surface Warfare Systems
Ship Combat Systems
Ordnance Manufacturing
Defense Logistics Agency
Missile Systems Procurement

Risk Flags

Sole-source justification requires careful review.
Potential for higher-than-market pricing due to lack of competition.
Long contract duration may introduce execution risks.
Limited public data on specific performance metrics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $144.0 million to LOCKHEED MARTIN CORPORATION. MK 41 MOD 15 VERTICAL LAUNCHER SYSTEM REQUIREMENTS FOR FY10-11

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 $144.0 million.

What is the period of performance?

Start: 2011-06-10. End: 2016-07-01.

What is the historical spending trend for the MK 41 Vertical Launcher System with Lockheed Martin?

Analyzing historical spending requires access to prior contract awards for the MK 41 Vertical Launcher System. This specific award covers FY10-11 requirements. To understand trends, one would need to examine contract databases for previous and subsequent awards to Lockheed Martin (or other potential sources, though unlikely given the sole-source nature) for the same or similar systems. Factors influencing trends could include fleet modernization, new ship construction, upgrades to existing systems, and changes in defense budgets. Without a broader dataset, it's impossible to definitively state the historical spending trend, but this $144 million award represents a significant investment over its execution period.

How does the pricing of this contract compare to similar sole-source defense system procurements?

Direct price comparison for sole-source contracts is inherently difficult because there is no competitive baseline. However, analysts can benchmark against similar sole-source awards for complex defense systems of comparable scale and technological sophistication. Factors such as the system's criticality, the level of customization required, and the contractor's market dominance play a role. The fixed-price nature of this contract suggests an attempt to cap costs. A thorough assessment would involve comparing the per-unit cost (if determinable) or total value against other sole-source awards for major weapon systems, adjusted for inflation and system complexity. The absence of competition implies a potential for higher pricing than a competed contract.

What are the key performance indicators (KPIs) used to measure the success of this contract?

Key performance indicators for a contract like this would likely focus on delivery schedule adherence, quality of manufactured components, and compliance with technical specifications. For the MK 41 Vertical Launcher System, KPIs might include the number of systems delivered on time, the defect rate of manufactured parts, successful integration testing, and meeting reliability standards. The contract type (Firm Fixed Price) incentivizes the contractor to meet these performance targets within the agreed-upon budget. Performance would be monitored by the Navy's program office and quality assurance representatives.

What is Lockheed Martin's track record with the MK 41 Vertical Launcher System and similar defense contracts?

Lockheed Martin has a long and established history as a prime contractor for major defense systems, including the MK 41 Vertical Launcher System, which is a cornerstone of naval surface warfare. Their track record with this specific system is generally considered strong, as it is a mature and widely deployed technology. The company consistently wins large sole-source or limited-competition contracts due to its expertise, existing infrastructure, and established relationships with the Department of Defense. While specific performance metrics for past contracts are not detailed here, Lockheed Martin's position as a leading defense contractor suggests a history of meeting contractual obligations, though like any large contractor, they may have faced challenges on specific programs.

What are the potential risks associated with this sole-source award, and how are they mitigated?

The primary risk of a sole-source award is the potential for inflated pricing due to the lack of competition. Other risks include vendor lock-in, where the government becomes dependent on a single supplier, potentially limiting future flexibility and innovation. Mitigation strategies often involve rigorous negotiation of contract terms, detailed cost analysis by the government, and strong oversight to ensure the contractor meets all specifications and delivery schedules. The government may also conduct market research to ensure sole-sourcing is truly the only viable option. For this contract, the fixed-price structure helps mitigate cost overrun risks, while the long-standing nature of the MK 41 system suggests technical risks are relatively low.

Industry Classification

NAICS: Manufacturing › Other Fabricated Metal Product Manufacturing › Other Ordnance and Accessories Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002410R5352

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 2323 EASTERN BLVD, BALTIMORE, MD, 21220

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: $154,295,620

Exercised Options: $143,959,742

Current Obligation: $143,959,742

Subaward Activity

Number of Subawards: 79

Total Subaward Amount: $34,875,765

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline