Air Force awards $1.2B EMD contract for MK21A Re-entry Vehicle to Lockheed Martin

Contract Overview

Contract Amount: $1,199,349,263 ($1.2B)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2023-10-27

End Date: 2025-12-17

Contract Duration: 782 days

Daily Burn Rate: $1.5M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: MK21A RE-ENTRY VEHICLE -ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) EARLY PRODUCTION AND DEPLOYMENT (P&D)

Place of Performance

Location: KING OF PRUSSIA, MONTGOMERY County, PENNSYLVANIA, 19406

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $1.20 billion to LOCKHEED MARTIN CORP for work described as: MK21A RE-ENTRY VEHICLE -ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) EARLY PRODUCTION AND DEPLOYMENT (P&D) Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, allowing for shared risk and reward. 2. Significant investment in critical defense modernization for strategic deterrence. 3. Long-term contract duration suggests a complex and lengthy development cycle. 4. Early production and deployment phase indicates progress beyond initial design. 5. Sole contractor for this specific phase may limit immediate cost-saving competition. 6. Focus on engineering and manufacturing development highlights technological advancement.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specialized nature and the early stage of production. The cost-plus-incentive-fee structure aims to control costs by incentivizing the contractor to stay within budget while allowing for flexibility in development. However, without detailed cost breakdowns or comparisons to similar, recent EMD contracts for strategic weapon systems, a definitive value-for-money assessment is difficult. The significant dollar amount reflects the complexity and criticality of the MK21A program.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders had the opportunity to submit proposals. However, the specific details of the competition, such as the number of bidders and the evaluation process, are not provided in the summary data. The award to a single contractor for this phase suggests they were deemed the most capable or offered the best value after the competitive process.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it encourages multiple companies to bid, potentially driving down costs and fostering innovation. However, the long-term nature and specialized requirements of defense contracts can sometimes limit the number of truly competitive bids.

Public Impact

Enhances U.S. strategic nuclear deterrence capabilities. Supports the modernization of the nation's intercontinental ballistic missile (ICBM) arsenal. Ensures the continued viability and effectiveness of the Minuteman III replacement program. Sustains high-skilled engineering and manufacturing jobs within the aerospace and defense sector. Primarily benefits national security and defense infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost overruns are a potential risk in cost-plus contracts, especially for complex R&D programs.
Program delays could impact the overall modernization timeline for strategic forces.
Dependence on a single prime contractor for this critical phase could pose supply chain risks.
Technological challenges in developing advanced re-entry vehicles could lead to increased costs or schedule slips.

Positive Signals

Awarded under full and open competition, suggesting a robust selection process.
Cost-plus-incentive-fee structure incentivizes contractor performance and cost control.
Long-term contract duration provides stability for program execution and workforce planning.
Lockheed Martin's extensive experience in aerospace and defense likely brings significant expertise.

Sector Analysis

The MK21A Re-entry Vehicle program falls within the highly specialized and critical segment of the aerospace and defense sector focused on strategic weapons systems. This market is characterized by high barriers to entry, significant R&D investment, and long procurement cycles, often dominated by a few large, established prime contractors. Spending in this area is driven by national security imperatives and the need to maintain technological superiority and deterrence.

Small Business Impact

The provided data indicates that small business participation (sb) is false for this contract. This suggests that the prime contract was not set aside for small businesses, and there is no explicit indication of subcontracting requirements for small businesses within the summary. Consequently, the direct impact on the small business ecosystem for this specific award appears limited, though Lockheed Martin may engage small businesses as subcontractors through its own supply chain.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Air Force's contracting and program management offices. The cost-plus-incentive-fee structure necessitates close monitoring of costs and performance to ensure adherence to contract terms and objectives. Inspector General (IG) investigations could be initiated if any irregularities or fraud are suspected. Transparency may be limited due to the classified nature of strategic weapon systems.

Related Government Programs

Ground-Based Strategic Deterrent (GBSD)
Minuteman III ICBM Sustainment
ICBM Re-entry Systems
Ballistic Missile Defense Systems
Aerospace Engineering Services

Risk Flags

Potential for cost overruns due to CPIF structure.
Risk of schedule delays in complex R&D and production.
Dependence on a single prime contractor for critical technology.
Supply chain vulnerabilities for specialized components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.20 billion to LOCKHEED MARTIN CORP. MK21A RE-ENTRY VEHICLE -ENGINEERING AND MANUFACTURING DEVELOPMENT (EMD) EARLY PRODUCTION AND DEPLOYMENT (P&D)

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Air Force).

What is the total obligated amount?

The obligated amount is $1.20 billion.

What is the period of performance?

Start: 2023-10-27. End: 2025-12-17.

What is Lockheed Martin's track record with similar re-entry vehicle development programs?

Lockheed Martin has a long and extensive history in developing and manufacturing complex aerospace and defense systems, including strategic missile programs. They have been a key player in the development and sustainment of U.S. intercontinental ballistic missiles (ICBMs) for decades, including previous re-entry vehicle programs and associated missile systems. Their experience with programs like the Trident II (D5) missile and various components of the Minuteman III system provides a strong foundation for undertaking the MK21A EMD contract. This established expertise suggests a lower technical risk profile compared to a less experienced contractor, though it also implies a significant portion of the market is captured by a few established players.

How does the cost-plus-incentive-fee (CPIF) structure compare to other contract types for this stage of development?

The Cost-Plus-Incentive-Fee (CPIF) contract type is common for research, development, and complex engineering projects where the final costs are uncertain. It allows the government to pay the contractor's actual costs plus a negotiated fee that is adjusted based on performance against targets (e.g., cost, schedule, technical performance). This contrasts with Fixed-Price contracts, which offer more cost certainty for the government but shift more risk to the contractor, or Cost-Plus-Fixed-Fee (CPFF) contracts, where the fee is fixed regardless of performance. For an Engineering and Manufacturing Development (EMD) phase like the MK21A, CPIF provides flexibility to adapt to technical challenges while incentivizing the contractor to achieve program objectives efficiently, balancing risk between the government and Lockheed Martin.

What are the primary risks associated with the early production and deployment (P&D) phase of this contract?

The Early Production and Deployment (P&D) phase, following Engineering and Manufacturing Development (EMD), carries risks related to scaling up production, ensuring manufacturing quality and consistency, and integrating newly produced components into operational systems. Key risks include potential manufacturing defects that may not have been apparent during EMD, supply chain disruptions for specialized materials or components, and challenges in achieving production rates that meet program schedules. Furthermore, unforeseen technical issues discovered during initial production runs could necessitate design modifications, leading to schedule delays and cost increases. Ensuring interoperability with existing or planned infrastructure also presents a risk during this phase.

What is the historical spending trend for re-entry vehicle development and production within the Department of Defense?

Historical spending on re-entry vehicle (RV) development and production within the Department of Defense has been substantial and cyclical, driven by the need to modernize strategic deterrent forces. Major programs like the development of new RVs for ICBMs or submarine-launched ballistic missiles (SLBMs) represent multi-billion dollar investments over many years. Spending typically increases during the EMD and P&D phases of new systems and then shifts towards sustainment and upgrades for fielded systems. The current focus on replacing aging ICBMs, including the Minuteman III, indicates a period of increased investment in this specific area of defense spending.

How does the geographic location of the contractor (Pennsylvania) impact contract performance and oversight?

The contractor, Lockheed Martin, is located in Pennsylvania. This geographic location is relevant for contract performance and oversight primarily in terms of site visits, audits, and the physical presence of government representatives. While modern communication technologies facilitate remote oversight, on-site inspections of manufacturing facilities, testing, and program progress are often crucial, especially for complex defense programs. The distance from potential government oversight offices may necessitate more planning for physical inspections, but Lockheed Martin's extensive experience with government contracts suggests established protocols for managing such relationships regardless of location. Pennsylvania has a significant aerospace and defense industrial base, which can be advantageous for workforce availability and specialized suppliers.

Industry Classification

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

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

Solicitation ID: FA820422R7000

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

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

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: $2,034,341,621

Exercised Options: $2,034,341,621

Current Obligation: $1,199,349,263

Subaward Activity

Number of Subawards: 169

Total Subaward Amount: $245,409,769

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline