DoD's $864.8M engineering services contract with Lockheed Martin awarded via sole-source negotiation

Contract Overview

Contract Amount: $864,767,200 ($864.8M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2006-07-26

End Date: 2011-12-31

Contract Duration: 1,984 days

Daily Burn Rate: $435.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $864.8 million to LOCKHEED MARTIN CORP for work described as: Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, suggesting potential for cost overruns if not managed closely. 2. Sole-source award indicates a lack of competitive bidding, raising questions about price discovery and potential value for money. 3. The contract duration of 1984 days (over 5 years) suggests a long-term need for these engineering services. 4. The contract was awarded by the Defense Contract Management Agency, a key oversight body within the DoD. 5. The North American Industry Classification System (NAICS) code 541330 points to a focus on engineering services. 6. The contract's base value is $435.9M, with the total award value reaching $864.8M, indicating significant potential for growth.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the absence of competitive bids. The cost-plus-incentive-fee structure means the final price is tied to performance and cost targets, which can lead to higher-than-expected costs if not rigorously managed. Without comparable contract data from a competitive process, it's difficult to definitively assess if the government received optimal value for the $864.8 million obligated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when only one responsible source can provide the required services. The lack of competition means there was no opportunity for multiple bidders to offer proposals, which could have driven down prices and spurred innovation. The government did not benefit from the price discovery mechanisms inherent in a competitive bidding process.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competition. Without a bidding process, there's less pressure on the contractor to offer the most cost-effective solution, potentially leading to higher overall expenditure.

Public Impact

The Department of Defense benefits from specialized engineering services crucial for its operations. This contract supports the development and maintenance of defense systems, contributing to national security. The services are likely delivered within California, as indicated by the 'SN' field. The contract supports a significant workforce of engineers and technical specialists employed by Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost-plus-incentive-fee structure requires robust oversight to control spending.
Long contract duration increases exposure to potential cost escalations over time.

Positive Signals

Award to a major defense contractor like Lockheed Martin suggests access to specialized expertise.
The incentive fee structure, if well-defined, can align contractor and government interests towards performance.
The contract is managed by the Defense Contract Management Agency, indicating established oversight processes.

Sector Analysis

The engineering services sector is a critical component of the defense industrial base, providing essential support for complex weapon systems and platforms. This contract falls within the broader professional, scientific, and technical services industry. Spending in this sector is often characterized by long-term relationships, specialized knowledge, and significant contract values, particularly when serving government clients with unique and demanding requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the prime contractor being Lockheed Martin, it is unlikely that significant subcontracting opportunities for small businesses were mandated through a competitive set-aside. However, the prime contractor may still engage small businesses as subcontractors based on their own procurement strategies.

Oversight & Accountability

The contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for overseeing contract performance and ensuring compliance. The cost-plus-incentive-fee (CPIF) structure necessitates close monitoring of costs and performance against established targets. Transparency would be enhanced by public reporting on cost performance and achievement of incentive goals, though specific oversight details are not provided in this data.

Related Government Programs

Defense Engineering Services
Lockheed Martin Contracts
Department of Defense Procurement
Cost-Plus-Incentive-Fee Contracts

Risk Flags

Sole-source award
Cost-plus-incentive-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $864.8 million to LOCKHEED MARTIN CORP. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $864.8 million.

What is the period of performance?

Start: 2006-07-26. End: 2011-12-31.

What is the historical spending trend for engineering services under NAICS code 541330 within the Department of Defense?

Analyzing historical spending trends for engineering services (NAICS 541330) within the Department of Defense (DoD) reveals a consistent and substantial investment. The DoD is a major procurer of these services, essential for research, development, testing, and sustainment of complex military systems. Over the past decade, annual spending has typically ranged in the billions of dollars, fluctuating based on defense budgets, strategic priorities, and the lifecycle of major defense programs. Contracts are often awarded to large, established defense contractors, but also to specialized engineering firms. The trend shows a persistent demand for advanced engineering capabilities, particularly in areas like aerospace, cybersecurity, and advanced materials, indicating that engineering services remain a critical and significant expenditure category for the DoD.

How does the awarded amount of $864.8 million compare to other large engineering services contracts awarded by the DoD in recent years?

The $864.8 million awarded to Lockheed Martin for engineering services is a substantial sum, placing it among significant contract awards within the Department of Defense (DoD). While not the absolute largest, it is indicative of the high-value, long-term nature of critical defense engineering support. Comparable contracts in recent years for similar services have often ranged from several hundred million to over a billion dollars, especially those involving major platform development, sustainment, or modernization efforts. For instance, contracts for aircraft sustainment, missile system development, or advanced research projects frequently reach these magnitudes. The sole-source nature of this award, however, distinguishes it from many larger contracts that are typically awarded after extensive competitive bidding processes, which often aim to secure more favorable pricing through market forces.

What are the primary risks associated with a sole-source, cost-plus-incentive-fee contract of this magnitude?

Sole-source, cost-plus-incentive-fee (CPIF) contracts of this magnitude carry several inherent risks. The primary risk of a sole-source award is the lack of competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to achieve efficiencies. Taxpayers may not receive the best possible value. For CPIF contracts, the risk lies in cost overruns. While the incentive fee aims to align contractor and government goals, if the cost targets are poorly defined or if the government's oversight is insufficient, costs can escalate beyond initial projections. The contractor is reimbursed for allowable costs plus a fee that is adjusted based on performance against targets. This structure requires robust government oversight to ensure costs are reasonable and allocable, and that performance metrics are accurately assessed. The long duration also increases the risk of scope creep and changing requirements, which can further impact costs and timelines.

What is Lockheed Martin's track record with similar large-scale engineering services contracts for the DoD?

Lockheed Martin has an extensive and well-established track record of performing large-scale engineering services contracts for the Department of Defense (DoD). As one of the largest defense contractors globally, the company routinely handles complex, multi-billion dollar programs spanning aircraft, missile defense, space systems, and more. Their history includes numerous contracts involving research, development, integration, sustainment, and modernization of sophisticated military hardware and software. While specific performance metrics and cost histories for individual contracts vary, Lockheed Martin is generally recognized for its technical capabilities and ability to deliver on complex defense requirements. However, like many large contractors, they have also faced scrutiny regarding contract costs and performance on certain programs, underscoring the importance of diligent oversight regardless of the contractor's reputation.

How does the 'Engineering Services' classification (NAICS 541330) typically translate into specific deliverables or services for a defense contract?

The 'Engineering Services' classification (NAICS 541330) for a defense contract encompasses a broad spectrum of technical and professional services crucial for the design, development, testing, and sustainment of military systems. Specific deliverables can include conceptual design, detailed engineering drawings, systems integration, performance analysis, simulation and modeling, technical documentation, prototyping, and lifecycle support. For a contract like this with the DoD and Lockheed Martin, it likely involves highly specialized engineering expertise related to aerospace, electronics, software, or complex weapon systems. This could range from initial concept development for new platforms to ensuring the operational readiness and upgrades of existing fleets or systems. The services are foundational to maintaining technological superiority and operational effectiveness for the armed forces.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 1111 LOCKHEED MARTIN WAY BLDG 157, SUNNYVALE, CA, 94089

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $883,281,947

Exercised Options: $82,800,876

Current Obligation: $864,767,200

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline