Lockheed Martin awarded $187M for JASSM missile production, raising questions on competition and value

Contract Overview

Contract Amount: $18,697,617 ($18.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-10-13

End Date: 2027-08-15

Contract Duration: 1,767 days

Daily Burn Rate: $10.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: JOINT AIR TO SURFACE STANDOFF (JASSM)

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $18.7 million to LOCKHEED MARTIN CORPORATION for work described as: JOINT AIR TO SURFACE STANDOFF (JASSM) Key points: 1. Contract awarded to a single source, limiting price discovery and potentially increasing costs. 2. The contract type (Cost Plus Fixed Fee) may incentivize higher spending by the contractor. 3. Long performance period (over 4 years) suggests a significant, ongoing need for the JASSM system. 4. The contractor, Lockheed Martin, is a dominant player in defense manufacturing, indicating a concentrated market. 5. Lack of competition raises concerns about achieving best value for taxpayer dollars. 6. The contract is a delivery order, implying it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract.

Value Assessment

Rating: questionable

The contract's Cost Plus Fixed Fee (CPFF) structure, while common for complex defense systems, can lead to higher costs compared to fixed-price contracts if not managed rigorously. Without competitive bidding, it is difficult to benchmark the pricing against market alternatives or other similar contracts. The total award amount of $186,976,170 over a nearly four-year period suggests a substantial investment. However, the absence of competition prevents a definitive assessment of whether this represents a fair and reasonable price for the delivered goods and services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning no other vendors were solicited or considered. This approach is typically used when a unique capability is required, or when only one vendor can provide the necessary goods or services. The lack of competition means that the Department of Defense did not benefit from a bidding process that could have driven down prices through market forces. This raises concerns about the potential for inflated costs and reduced value for money.

Taxpayer Impact: Sole-source awards mean taxpayers may be paying a premium as there was no opportunity for competitive pressure to lower the price. This limits the government's ability to ensure it is getting the best possible deal.

Public Impact

The primary beneficiaries are the U.S. Air Force and potentially other branches of the military requiring advanced air-to-surface standoff missile capabilities. The contract will deliver Joint Air-to-Surface Standoff Missiles (JASSM), a key component of modern air power. The geographic impact is primarily within Florida, where the contractor is located, but the ultimate operational impact is global for U.S. military deployments. The contract supports jobs within Lockheed Martin's defense manufacturing operations, contributing to the skilled workforce in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost Plus Fixed Fee contract type may incentivize higher contractor spending without strict oversight.
Long contract duration could mask inefficiencies or scope creep over time.
Dominant market position of Lockheed Martin in defense may reduce leverage for the government.
Lack of transparency in the sole-source justification process could hide potential issues.

Positive Signals

Ensures continued supply of a critical defense asset (JASSM) for national security.
Lockheed Martin possesses specialized expertise and established production lines for this specific missile system.
The contract provides long-term stability for a key defense contractor and its workforce.
Delivery order structure allows for phased funding and delivery, potentially aligning with budget cycles.

Sector Analysis

The defense sector, particularly the missile systems segment, is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors. Lockheed Martin is a major player in this space. Spending on guided missiles and space vehicles is a substantial part of the defense budget. This contract for JASSM fits within the broader category of strategic weapons systems, where sole-source or limited competition awards are not uncommon due to the specialized nature of the technology and the established supply chains.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'ss' and 'sb' fields being false. Given the nature of advanced missile manufacturing, it is likely that Lockheed Martin would be the prime contractor, with potential for subcontracting opportunities. However, without specific subcontracting plans detailed in the award, the direct impact on the small business ecosystem is unclear. It is possible that smaller, specialized defense suppliers could be involved in the JASSM supply chain, but this contract's structure does not prioritize small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. The Cost Plus Fixed Fee structure necessitates robust financial oversight to monitor expenditures and ensure costs are reasonable and allocable. Inspector General (IG) reports related to defense spending could potentially review aspects of this contract if significant issues arise. Transparency is limited due to the sole-source nature, but contract modifications and performance reports would be subject to internal DoD review.

Related Government Programs

Air-to-Ground Munitions
Guided Missile Production
Strategic Weapons Systems
Department of Defense Procurement
Lockheed Martin Defense Contracts
Joint Air-to-Surface Standoff Missile (JASSM) Program

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns
Long-term dependency on single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.7 million to LOCKHEED MARTIN CORPORATION. JOINT AIR TO SURFACE STANDOFF (JASSM)

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 $18.7 million.

What is the period of performance?

Start: 2022-10-13. End: 2027-08-15.

What is the track record of Lockheed Martin in delivering JASSM missiles on time and within budget under previous contracts?

Lockheed Martin has a long history of producing the JASSM missile family for the U.S. Air Force and allied nations. While specific performance metrics for past JASSM contracts are not detailed in this award data, the company generally has a strong reputation for delivering complex defense systems. However, like many large defense programs, the JASSM program has likely experienced schedule adjustments and cost fluctuations over its lifecycle. Detailed program management reviews and historical contract performance data within the Department of Defense would provide a more granular assessment of their track record, including any past issues with delivery delays, cost overruns, or quality control.

How does the pricing structure (Cost Plus Fixed Fee) compare to alternative contract types for similar defense systems, and what are the implications for value?

Cost Plus Fixed Fee (CPFF) contracts reimburse the contractor for allowable costs plus a fixed fee representing profit. This structure is often used when the scope of work is not precisely defined or involves significant uncertainty, such as in advanced R&D or complex manufacturing where unforeseen issues are likely. Compared to fixed-price contracts, CPFF offers less cost certainty for the buyer and can incentivize higher spending if cost controls are weak. While it allows for flexibility, it places a greater burden on the government to meticulously track and audit contractor costs to ensure value. For established systems like JASSM, where production processes are more mature, fixed-price incentive fee (FPIF) or firm-fixed-price (FFP) contracts might offer better value by sharing risks and rewarding cost efficiency.

What specific risks are associated with a sole-source award for a critical defense system like the JASSM?

The primary risk of a sole-source award for the JASSM is the lack of competitive pressure, which can lead to inflated prices and reduced incentive for the contractor to innovate or improve efficiency. It also creates a dependency on a single supplier, making the supply chain vulnerable to disruptions at that specific company. Furthermore, without market validation through competition, it's harder for the government to ascertain if the negotiated price represents the best possible value. This can also limit opportunities for emerging technologies or alternative solutions that might be offered by other potential suppliers if the market were opened.

What is the overall effectiveness of the JASSM program in meeting its intended military objectives, and how does this contract contribute?

The JASSM is designed to provide aircrews with a standoff capability to destroy high-value, fixed, and relocatable targets in all weather conditions. It is a key component of the Air Force's precision strike capabilities. Its effectiveness is generally considered high due to its stealth characteristics, range, and precision guidance. This contract directly contributes to maintaining and replenishing the JASSM inventory, ensuring that U.S. and allied forces have sufficient numbers of these critical munitions to meet operational requirements and deter potential adversaries. Continued production ensures the system remains relevant and available for deployment.

How has federal spending on JASSM and similar guided missile systems evolved over the past five years, and what trends are apparent?

Historical spending data for the JASSM program and similar guided missile systems typically shows significant and often increasing investment by the Department of Defense, driven by modernization efforts and evolving geopolitical threats. While specific figures for the JASSM program over the last five years are not provided here, overall spending on strategic weapons and advanced munitions has been robust. Trends often include upgrades to existing platforms, development of new variants (like the JASSM-ER), and efforts to increase production rates to meet demand. Fluctuations can occur based on budget allocations, program milestones, and perceived threats, but the general trend is sustained, high-level investment in these capabilities.

Are there any known issues or concerns regarding the performance or reliability of the JASSM missile system that this contract aims to address?

While this specific contract award notice does not detail performance issues, defense programs like the JASSM are subject to continuous review and potential upgrades. Concerns regarding reliability, effectiveness, or obsolescence are typically addressed through engineering change proposals, software updates, or the development of new variants. If this contract is a sole-source award for continued production, it suggests the system is currently meeting requirements. However, ongoing testing and operational feedback could lead to requirements for modifications or improvements that would be incorporated into future production runs or separate contracts.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $19,706,348

Exercised Options: $19,706,348

Current Obligation: $18,697,617

Subaward Activity

Number of Subawards: 13

Total Subaward Amount: $4,638,675

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: FA868222DB001

IDV Type: IDC

Timeline