DoD awards $220M for JASSM missiles, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $219,809,627 ($219.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-04-04

End Date: 2016-12-31

Contract Duration: 2,098 days

Daily Burn Rate: $104.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: JASSM LOT 9

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $219.8 million to LOCKHEED MARTIN CORPORATION for work described as: JASSM LOT 9 Key points: 1. This contract represents a significant investment in air-launched cruise missile technology. 2. The sole-source nature of this award warrants scrutiny regarding price justification and potential for cost overruns. 3. Performance context is limited due to the lack of competitive bidding, making value assessment challenging. 4. The contract falls within the defense sector, specifically guided missile manufacturing. 5. The duration of the contract suggests a long-term commitment to this specific weapon system.

Value Assessment

Rating: questionable

Assessing the value for money is difficult without competitive benchmarks. The cost-plus-fixed-fee (CPFF) contract type can incentivize contractors to increase costs to maximize their fixed fee, especially when the base for the fee is not clearly defined or controlled. Without comparable sole-source awards or detailed cost breakdowns, it's hard to determine if the $220 million is a fair price for the JASSM LOT 9 missiles. Further analysis of the contractor's cost proposals and historical performance on similar contracts would be necessary for a more definitive value assessment.

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 approach is typically used when a unique capability is required, or when only one source can provide the necessary goods or services. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competition. Without competing offers, there is less pressure on the contractor to offer the lowest possible price, and the government has limited leverage to negotiate favorable terms.

Public Impact

The primary beneficiaries are the U.S. Air Force, which receives advanced air-launched cruise missiles. The services delivered include the manufacturing and delivery of JASSM missiles, enhancing strategic deterrence and strike capabilities. The geographic impact is primarily within the United States, with potential deployment to various operational theaters globally. Workforce implications include skilled manufacturing jobs in the aerospace and defense sector, particularly at Lockheed Martin facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can create incentives for cost escalation.
Lack of transparency in sole-source justification requires careful review.
Long contract duration without competition may reduce contractor urgency for efficiency.
Limited public data on specific performance metrics for this lot.

Positive Signals

Award to a known, experienced defense contractor with a track record in missile systems.
Ensures continued availability of a critical strategic weapon system for the Air Force.
Potential for economies of scale in production due to the large award value.
Fixed fee component provides some cost certainty for the government compared to cost-plus-incentive-fee.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a critical component of the defense industrial base. This contract for JASSM LOT 9 falls within this specialized segment, characterized by high technological barriers to entry and significant government investment. The market is dominated by a few large defense contractors. Comparable spending benchmarks are difficult to establish precisely due to the proprietary nature of defense contracts and the unique specifications of each missile system, but annual defense spending on missile systems typically runs into billions of dollars.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Lockheed Martin Corporation is a large prime contractor. While prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan and its impact on the small business ecosystem are not detailed in the provided data. Without this information, it's difficult to assess the direct benefits to small businesses from this particular award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, specifically within the Department of the Air Force. Accountability measures are typically embedded in the contract terms, including delivery schedules, quality standards, and reporting requirements. Transparency is limited due to the sole-source nature and the classified aspects of weapon system development. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

JASSM Program
Air-Launched Cruise Missiles
Department of Defense Procurement
Lockheed Martin Missiles and Fire Control

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Lack of competitive bidding
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $219.8 million to LOCKHEED MARTIN CORPORATION. JASSM LOT 9

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 Air Force).

What is the total obligated amount?

The obligated amount is $219.8 million.

What is the period of performance?

Start: 2011-04-04. End: 2016-12-31.

What is the historical spending trend for the JASSM program, and how does this award compare?

The Joint Air-to-Surface Standoff Missile (JASSM) program has seen consistent funding over many years as it is a critical component of the U.S. Air Force's long-range strike capability. Specific historical spending data for the JASSM program is often aggregated within broader defense budget categories, making precise year-over-year comparisons for individual lots challenging without access to detailed program financial reports. However, this $220 million award for LOT 9 represents a significant single-year investment. Previous lots and subsequent procurements have also involved substantial funding, reflecting the ongoing need for advanced cruise missile technology and the associated research, development, testing, and production costs. The trend generally indicates sustained investment in maintaining and modernizing this capability, with contract values fluctuating based on production quantities, technological upgrades, and contract type.

What are the specific risks associated with a sole-source, cost-plus-fixed-fee contract for missile production?

Sole-source contracts eliminate competitive pressure, which is the primary risk as it can lead to inflated prices and reduced incentive for the contractor to achieve cost efficiencies. The government lacks the leverage to negotiate the best possible price. The Cost-Plus-Fixed-Fee (CPFF) structure presents another risk: while the fee is fixed, the contractor is reimbursed for all allowable costs. This can create an incentive for the contractor to incur higher costs, as their fixed fee is a percentage of the total estimated cost, or simply to ensure all costs are covered without aggressive cost management. For taxpayers, this combination means a higher likelihood of paying more than necessary for the delivered missiles, with less transparency into the contractor's cost structure and profit margins compared to fixed-price contracts or competitively awarded contracts.

How does the JASSM LOT 9 contract fit into Lockheed Martin's overall defense portfolio and market position?

The JASSM program is a cornerstone of Lockheed Martin's missile and fire control business segment, contributing significantly to their revenue and strategic positioning within the defense industry. As a prime contractor for this critical air-launched cruise missile, Lockheed Martin solidifies its role as a key supplier to the U.S. Air Force and potentially allied nations. This contract reinforces their expertise in advanced guided missile manufacturing, a high-value, technology-intensive area. The sustained awards for JASSM demonstrate the company's ability to manage complex production programs and maintain a strong relationship with its primary government customer. It also positions them favorably for future missile system procurements and upgrades, leveraging the established production infrastructure and technical knowledge base.

What are the performance implications of awarding this contract without competition?

The performance implications of awarding the JASSM LOT 9 contract without competition are mixed. On the positive side, awarding to Lockheed Martin, the incumbent and likely sole developer of the JASSM system, ensures continuity of production and leverages their established expertise and infrastructure. This can lead to predictable delivery schedules and consistent product quality, assuming the contractor's historical performance is strong. However, the lack of competition removes the incentive for the contractor to innovate aggressively on cost reduction or process improvement beyond what is contractually required or what they deem necessary for their own profitability. Without competitive pressure, there's a reduced impetus to exceed performance expectations or to proactively identify and implement cost-saving measures that could benefit the government.

What is the typical profit margin for defense contractors on sole-source CPFF contracts like this?

Determining the exact profit margin for defense contractors on sole-source Cost-Plus-Fixed-Fee (CPFF) contracts can be challenging, as specific profit rates are often subject to negotiation and can vary based on contract type, risk, performance, and the specific government agency's policies. However, the 'fixed fee' in a CPFF contract is intended to represent the contractor's profit. This fee is negotiated upfront and typically represents a percentage of the estimated total contract cost. While historical data suggests that fixed fees on CPFF contracts can range anywhere from 3% to 15% of the estimated cost, this is a broad range. For a contract of this magnitude ($220 million), even a modest percentage fee translates into substantial profit dollars. The government aims to negotiate a fee that is fair compensation for the contractor's effort and risk without being excessive, especially in sole-source situations where competitive benchmarks are absent.

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

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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

Financial Breakdown

Contract Ceiling: $221,187,085

Exercised Options: $221,187,085

Current Obligation: $219,809,627

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline