DoD awards $442M THAAD missile defense system to Lockheed Martin for UAE foreign military sale

Contract Overview

Contract Amount: $442,451,200 ($442.5M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2011-12-30

End Date: 2021-05-31

Contract Duration: 3,440 days

Daily Burn Rate: $128.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE UNITED STATES GOVERNMENT S (USG) TERMINAL HIGH ALTITUDE AREA DEFENSE (THAAD) PROJECT OFFICE HAS THE REQUIREMENT TO PROCURE TWO THAAD BATTERIES WEAPON SYSTEMS IN SUPPORT OF A FOREIGN MILITARY SALES (FMS) CASE ESTABLISHED WITH THE GOVERNMENT OF THE UNITED ARAB EMIRATES (UAE).

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $442.5 million to LOCKHEED MARTIN CORP for work described as: THE UNITED STATES GOVERNMENT S (USG) TERMINAL HIGH ALTITUDE AREA DEFENSE (THAAD) PROJECT OFFICE HAS THE REQUIREMENT TO PROCURE TWO THAAD BATTERIES WEAPON SYSTEMS IN SUPPORT OF A FOREIGN MILITARY SALES (FMS) CASE ESTABLISHED WITH THE GOVERNMENT OF THE UNITED ARAB EMIRATES (UAE). Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant investment in advanced missile defense capabilities for a key ally. 3. Long contract duration (over 9 years) suggests complex integration and support needs. 4. Foreign Military Sales case indicates international cooperation and geopolitical strategy. 5. Focus on guided missile and space vehicle manufacturing sector. 6. Potential for follow-on sustainment and training contracts.

Value Assessment

Rating: fair

The contract value of $442.5 million for two THAAD batteries is substantial, reflecting the advanced technology and strategic importance of the system. Benchmarking this specific FMS case is challenging due to unique international requirements and limited public data on comparable sales. However, the cost-plus-fixed-fee (CPFF) contract type suggests that while the contractor's fee is fixed, the total cost can fluctuate, potentially leading to cost overruns if not managed closely. The absence of competition inherently reduces the government's ability to negotiate the lowest possible price.

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 used for highly specialized systems where only one manufacturer possesses the necessary technology and expertise, or in cases of urgent need or foreign military sales requirements that dictate a specific provider. The lack of competition means that the government did not benefit from a bidding process that could have driven down prices through market forces.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive bidding. Without competing offers, there is less assurance that the price reflects the best possible value achievable in a competitive market.

Public Impact

The United Arab Emirates (UAE) benefits from enhanced national security through the acquisition of advanced missile defense capabilities. The contract delivers two THAAD battery weapon systems, a critical component of ballistic missile defense. Geographic impact is primarily focused on the UAE, bolstering its defense infrastructure. Workforce implications include employment for skilled engineers, technicians, and manufacturing personnel within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential savings.
Cost-plus-fixed-fee contract type carries inherent risk of cost escalation.
Long contract duration increases exposure to potential scope creep or unforeseen technical challenges.
Reliance on a single contractor for critical defense technology can create vendor lock-in.
Foreign Military Sales add complexity in terms of coordination and potential political factors.

Positive Signals

Procures a highly advanced and proven missile defense system essential for national security.
Supports a key U.S. ally, strengthening diplomatic and security relationships.
Leverages existing, mature technology, potentially reducing development risks.
Contract awarded to a prime contractor with extensive experience in missile defense systems.
Delivery order structure implies a phased approach to acquisition and deployment.

Sector Analysis

The Terminal High Altitude Area Defense (THAAD) system falls within the broader aerospace and defense sector, specifically focusing on missile defense technologies. This market is characterized by high barriers to entry due to significant R&D investment, complex manufacturing processes, and stringent government oversight. Major defense contractors like Lockheed Martin dominate this space. Spending in this sector is driven by national security priorities and geopolitical threats, with significant government funding allocated to developing and procuring advanced defensive systems. Comparable spending benchmarks are difficult to establish precisely due to the specialized nature of THAAD and the FMS context.

Small Business Impact

This contract does not appear to have a specific small business set-aside component. As a sole-source award to a large prime contractor, Lockheed Martin, the primary focus is on the prime's capabilities. However, large defense contracts often involve significant subcontracting opportunities, and it is possible that small businesses could be involved further down the supply chain. The extent of small business participation would depend on Lockheed Martin's subcontracting plan and adherence to federal small business utilization goals.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management structures, specifically the Missile Defense Agency (MDA). Given it's a Foreign Military Sales case, oversight also involves coordination with the Defense Security Cooperation Agency (DSCA) and potentially the State Department. Accountability measures would be embedded within the contract terms, including performance metrics and reporting requirements. Transparency may be limited due to the classified nature of some defense technologies and the FMS context, although standard contract reporting mechanisms would apply.

Related Government Programs

Missile Defense Systems
Ballistic Missile Defense
Foreign Military Sales
Ground-Based Midcourse Defense (GMD)
Patriot Missile System
Aegis Ballistic Missile Defense System

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Foreign Military Sales complexity

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $442.5 million to LOCKHEED MARTIN CORP. THE UNITED STATES GOVERNMENT S (USG) TERMINAL HIGH ALTITUDE AREA DEFENSE (THAAD) PROJECT OFFICE HAS THE REQUIREMENT TO PROCURE TWO THAAD BATTERIES WEAPON SYSTEMS IN SUPPORT OF A FOREIGN MILITARY SALES (FMS) CASE ESTABLISHED WITH THE GOVERNMENT OF THE UNITED ARAB EMIRATES (UAE).

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Missile Defense Agency).

What is the total obligated amount?

The obligated amount is $442.5 million.

What is the period of performance?

Start: 2011-12-30. End: 2021-05-31.

What is Lockheed Martin's track record with the THAAD system and similar defense contracts?

Lockheed Martin is the prime contractor and manufacturer for the THAAD system, possessing extensive experience and a strong track record in its development, production, and integration. The company has been involved with THAAD since its inception, delivering numerous systems to the U.S. Army and several international partners. Their experience extends to other complex missile defense programs, including the PAC-3 Patriot missile interceptor and the Terminal Doppler Weather Radar. This deep institutional knowledge and established production capability are key factors often cited in sole-source justifications for THAAD-related procurements. Their performance history on these programs generally indicates successful delivery of complex technological systems, though like many large defense programs, THAAD has faced developmental challenges and cost adjustments over its lifecycle.

How does the $442.5 million cost compare to other THAAD procurements or similar missile defense systems?

Directly comparing the $442.5 million cost for two THAAD batteries in this Foreign Military Sales (FMS) case to other procurements is challenging due to several factors. FMS cases often include additional costs beyond the system itself, such as training, support, logistics, and specific modifications tailored to the recipient nation's requirements, which can inflate the total package value. Furthermore, pricing can vary based on the specific configuration, quantity, and the year of procurement. However, historical data suggests that individual THAAD batteries, including interceptors and associated ground equipment, can range from tens to hundreds of millions of dollars. The cost per battery in this contract appears to be in the lower to mid-range of reported figures for system procurement, but without a detailed breakdown of what is included (e.g., number of interceptors, support elements), a precise value-for-money assessment against other deals is difficult. The absence of competition for this specific FMS award further complicates direct price benchmarking.

What are the primary risks associated with this sole-source contract for the U.S. Government and taxpayers?

The primary risk associated with this sole-source contract is the lack of competitive pressure, which can lead to suboptimal pricing and reduced incentive for cost efficiency. Taxpayers may bear a higher cost than if the contract had been competed. Another risk stems from the Cost Plus Fixed Fee (CPFF) contract type; while the contractor's fee is fixed, the total project cost is not, leaving room for potential cost overruns if project management or unforeseen technical issues arise. The long duration (over 9 years) increases the exposure to these risks. Furthermore, reliance on a single supplier for such a critical defense asset can create vendor lock-in and potential supply chain vulnerabilities. Finally, managing an FMS case adds layers of complexity involving international coordination, differing requirements, and potential political sensitivities that could impact program execution and cost.

How effective is the THAAD system in its intended role, and what is the expected impact of this sale?

The THAAD system is widely regarded as a highly effective, technologically advanced component of U.S. and allied missile defense architecture. Its primary role is to intercept short-, medium-, and intermediate-range ballistic missiles in their terminal phase of flight, just before they impact their targets. The system has undergone numerous successful flight tests and has been operationally deployed. This sale to the UAE is expected to significantly enhance their defensive capabilities against regional ballistic missile threats, contributing to regional stability and strengthening the security partnership between the U.S. and the UAE. The deployment of THAAD by an ally also extends the U.S. missile defense umbrella and interoperability within allied defense networks.

What are the historical spending patterns for the THAAD program, and how does this contract fit within that trend?

Historical spending on the THAAD program, managed by the Missile Defense Agency (MDA), has been substantial, reflecting the program's complexity, technological innovation, and strategic importance. Billions of dollars have been invested over decades in research, development, testing, and procurement of THAAD batteries for the U.S. Army. Procurement costs for U.S. Army batteries have varied, with estimates for a full battery (including launchers, radar, fire control, and interceptors) often cited in the hundreds of millions of dollars. This $442.5 million contract for two batteries for the UAE represents a significant, but not unprecedented, procurement action within the broader THAAD spending trend. It aligns with the program's ongoing lifecycle of production and international sales, indicating continued investment in this critical defense capability.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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

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

Financial Breakdown

Contract Ceiling: $476,408,654

Exercised Options: $472,176,542

Current Obligation: $442,451,200

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ014712G9000

IDV Type: BOA

Timeline