DoD's $380M Lockheed Martin contract for guided missiles shows long-term commitment with cost-plus award fee structure

Contract Overview

Contract Amount: $379,950,537 ($380.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 1999-11-02

End Date: 2017-09-30

Contract Duration: 6,542 days

Daily Burn Rate: $58.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: LITTLETON, DOUGLAS County, COLORADO, 80125

State: Colorado Government Spending

Plain-Language Summary

Department of Defense obligated $380.0 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's cost-plus award fee structure incentivizes performance while managing costs over its extended duration. 2. Competition was full and open, suggesting a robust bidding process for this significant defense procurement. 3. The long performance period (nearly 18 years) indicates a sustained need for these guided missile systems. 4. The contractor, Lockheed Martin, is a major player in the aerospace and defense sector, suggesting established capabilities. 5. The contract falls under the Guided Missile and Space Vehicle Manufacturing NAICS code, placing it within a critical defense industrial base segment. 6. The absence of small business set-asides suggests the scope and nature of the work were not conducive to smaller enterprise participation.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without specific performance metrics and award fee payouts. The cost-plus award fee (CPAF) structure aims to balance cost control with contractor incentive, but its effectiveness depends heavily on the defined award criteria and the agency's oversight. Given the long duration and the nature of guided missile manufacturing, the pricing is likely complex and subject to change. Comparing it to similar, long-term, high-value defense contracts would be necessary for a more precise value assessment.

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. The presence of two bids suggests a competitive environment, though the exact number of bidders can influence price discovery. A higher number of bidders typically leads to more competitive pricing, while fewer bidders might result in less downward pressure on costs.

Taxpayer Impact: Taxpayers benefit from full and open competition as it generally drives more competitive pricing and encourages efficient use of funds by requiring contractors to offer their best value proposals.

Public Impact

The primary beneficiaries are the Department of Defense, which receives critical guided missile and space vehicle systems. The contract supports the production and sustainment of advanced weaponry essential for national security. Geographic impact is likely concentrated around Lockheed Martin's manufacturing facilities, primarily in Colorado. The contract supports a specialized workforce within the aerospace and defense industry, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The long contract duration and CPAF structure could lead to cost overruns if not rigorously managed.
Reliance on a single large contractor for critical defense components may pose supply chain risks.
The complexity of guided missile technology necessitates continuous oversight to ensure quality and performance.

Positive Signals

Full and open competition suggests a potentially competitive pricing environment.
The CPAF structure provides incentives for contractor performance and cost efficiency.
Lockheed Martin's established presence in the sector indicates a high likelihood of technical capability and delivery.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of the defense industrial base. This sector is characterized by high R&D investment, stringent quality control, and long production cycles. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would involve analyzing other major defense contracts for similar weapon systems, considering factors like technological sophistication and production volume.

Small Business Impact

The contract data indicates that small business participation was not a primary consideration, as the 'sb' field is false and there is no indication of a small business set-aside. This suggests the nature of the work, requiring specialized manufacturing capabilities and large-scale production, was likely beyond the scope or capacity of most small businesses. Subcontracting opportunities for small businesses may exist but are not explicitly detailed in this summary data.

Oversight & Accountability

Oversight for this contract is managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance, quality, and compliance. The CPAF structure implies performance monitoring against defined metrics. Transparency is facilitated through contract awards databases, though specific details on award fee determinations and cost breakdowns may be limited. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Missile Defense Systems
Aerospace Manufacturing
Naval Weapon Systems
Air Force Munitions
Strategic Weapons Programs

Risk Flags

Long contract duration may increase risk of cost escalation.
Cost-Plus Award Fee structure requires diligent oversight to ensure value.
Concentration of manufacturing in one region could pose supply chain risks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $380.0 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

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 $380.0 million.

What is the period of performance?

Start: 1999-11-02. End: 2017-09-30.

What is the historical spending trend for guided missile and space vehicle manufacturing contracts awarded to Lockheed Martin by the Department of Defense?

Analyzing historical spending trends for guided missile and space vehicle manufacturing contracts awarded to Lockheed Martin by the Department of Defense requires access to comprehensive contract databases. However, this specific contract, awarded in 1999 and ending in 2017 with a value of approximately $380 million, represents a significant, long-term investment. Lockheed Martin is a dominant contractor in this space, consistently securing large-value contracts due to its technological expertise and established production capabilities. Trends likely show a sustained demand for advanced missile systems, with spending fluctuating based on geopolitical factors, technological upgrades, and specific program requirements. The significant value of this single contract suggests a substantial portion of DoD's budget in this category was allocated to Lockheed Martin over its duration.

How does the cost-plus award fee (CPAF) structure of this contract compare to other similar defense contracts for weapon system development and production?

The Cost-Plus Award Fee (CPAF) structure is a common contracting method used by the Department of Defense for complex, high-risk, or developmental programs where the final cost is uncertain. In a CPAF contract, the contractor is reimbursed for allowable costs plus a fee that is composed of a fixed base amount and an award amount. The award amount is earned based on the contractor's performance against pre-defined criteria, incentivizing efficiency and quality. Compared to other defense contracts, such as Firm-Fixed-Price (FFP) contracts, CPAF offers more flexibility in managing cost uncertainty but requires robust government oversight to ensure the award fee is justified and costs are controlled. It differs from Cost Plus Incentive Fee (CPIF) by having a potentially larger variable component tied to subjective performance assessments rather than purely objective cost targets.

What are the key performance indicators (KPIs) typically used to evaluate contractor performance under a CPAF contract for guided missile manufacturing?

Key Performance Indicators (KPIs) for a CPAF contract in guided missile manufacturing typically focus on a range of technical, schedule, and cost-related metrics. Technical KPIs might include system reliability, accuracy, yield rates in production, adherence to stringent quality standards (e.g., ISO certifications, AS9100), and successful integration of components. Schedule KPIs would involve on-time delivery of milestones, production ramp-up rates, and overall program completion within projected timelines. Cost KPIs, while managed through the cost reimbursement aspect, would focus on the contractor's ability to manage costs within projected budgets and demonstrate efficiency improvements. The award fee would be determined by the government's assessment of the contractor's performance against these, and potentially other, specific criteria outlined in the contract.

What is the assessed risk level associated with Lockheed Martin as a contractor for this type of defense procurement, considering their track record?

Lockheed Martin is a well-established and highly experienced prime contractor within the defense industry, possessing a strong track record in developing and producing complex weapon systems, including guided missiles. Their extensive experience, technological capabilities, and existing infrastructure generally mitigate many risks associated with such procurements. However, risks inherent in large-scale, long-duration defense contracts remain. These can include potential cost growth due to evolving requirements or unforeseen technical challenges, schedule delays stemming from supply chain disruptions or complex integration issues, and performance risks related to achieving desired operational capabilities. The CPAF structure is partly designed to manage performance and cost risks by incentivizing the contractor. Government oversight and robust program management are crucial to further mitigate these residual risks.

How does the geographic concentration of this contract (Colorado) impact the broader defense industrial base and supply chain resilience?

The geographic concentration of this contract with Lockheed Martin in Colorado highlights the importance of specific regions within the defense industrial base. While it fosters economic activity and specialized expertise in that area, it also raises questions about supply chain resilience. Over-reliance on a single geographic location for critical manufacturing can create vulnerabilities to regional disruptions, whether from natural disasters, labor issues, or other unforeseen events. A robust defense industrial base typically benefits from geographic diversification to ensure continuity of operations. While Lockheed Martin likely has a distributed supply chain, the primary manufacturing hub's location is a factor in assessing overall supply chain risk and resilience for these vital defense assets.

Industry Classification

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

Address: 230 MALL BLVD, KING OF PRUSSI, PA, 19406

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $22,513,054

Exercised Options: $54,490,086

Current Obligation: $379,950,537

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline