Missile Defense Agency awards $47.5M contract to Lockheed Martin for Next Generation Aegis Missile development

Contract Overview

Contract Amount: $47,492,763 ($47.5M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2011-04-07

End Date: 2015-05-31

Contract Duration: 1,515 days

Daily Burn Rate: $31.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THE MISSILE DEFENSE AGENCY (MDA) WILL ACQUIRE THE NEXT GENERATION INTERCEPTOR FOR FIELDING IN 2020 AS AN ELEMENT OF THE BALLISTIC MISSILE DEFENSE SYSTEM (BMDS). THE NEXT GENERATION AEGIS MISSILE (NGAM) WILL BE DESIGNED TO PROVIDE EARLY INTERCEPT CAPABILITY AGAINST SOME SHORT RANGE BALLISTIC MISSILES (SRBM), ALL MEDIUM RANGE BALLISTIC MISSILES (MRBM), ALL INTERMEDIATE RANGE BALLISTIC MISSILES (IRBM) AND NON-ADVANCED INTERCONTINENTAL BALLISTIC MISSILES (ICBM) LAUNCHED FROM THE REGION WHERE AEGIS WEAPON SYSTEMS (AWS) (INCLUDING THE AEGIS BMD 5.1 AND MK 41 VERTICAL LAUNCHING SYSTEM (VLS)) ARE LOCATED. THE FIRST PHASE OF THIS ACQUISITION IS THE CONCEPT DEFINITION AND PROGRAM PLANNING PHASE BEGINNING IN 2011, TO BE FOLLOWED BY COMPETITIVE PRODUCT DEVELOPMENT PHASE IN FY13. THE PURPOSE OF THE CONCEPT DEFINITION AND PROGRAM PLANNING CONTRACTS ARE TO: 1) DEFINE DESIGN OBJECTIVES, 2) PRESENT TRADES TO MEET THAT CAPABILITY, AND 3) OPTIMIZE TRADES TO MINIMIZE COST, SCHEDULE, AND TECHNICAL RISKS.

Place of Performance

Location: HUNTSVILLE, MADISON County, ALABAMA, 35898

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $47.5 million to LOCKHEED MARTIN CORP for work described as: THE MISSILE DEFENSE AGENCY (MDA) WILL ACQUIRE THE NEXT GENERATION INTERCEPTOR FOR FIELDING IN 2020 AS AN ELEMENT OF THE BALLISTIC MISSILE DEFENSE SYSTEM (BMDS). THE NEXT GENERATION AEGIS MISSILE (NGAM) WILL BE DESIGNED TO PROVIDE EARLY INTERCEPT CAPABILITY AGAINST SOME SHORT RANG… Key points: 1. Contract supports the development of a crucial component for the Ballistic Missile Defense System. 2. Focus on early intercept capabilities against a range of ballistic missile threats. 3. Acquisition strategy includes concept definition, program planning, and competitive product development phases. 4. The contract is a Cost Plus Fixed Fee type, indicating shared risk between government and contractor. 5. This award is part of a larger, ongoing effort to modernize missile defense capabilities. 6. The Next Generation Aegis Missile aims to counter evolving missile threats from various ranges.

Value Assessment

Rating: fair

The contract value of $47.5 million for the initial concept and planning phase appears reasonable given the complexity of developing advanced missile defense technology. However, without detailed cost breakdowns and comparisons to similar R&D efforts for weapon systems, a definitive value-for-money assessment is challenging. The Cost Plus Fixed Fee structure means the final cost could exceed the initial estimate, requiring close government oversight to manage expenditures effectively. Benchmarking against other major defense R&D programs would provide a clearer picture of its cost-efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that multiple capable contractors had the opportunity to bid. This approach is generally favored for ensuring the government receives the best possible technical solutions and pricing. The specific number of bidders is not provided, but the open competition framework implies a robust selection process. This level of competition is expected to drive innovation and cost-effectiveness in the development of the Next Generation Aegis Missile.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages a wider range of innovative solutions and can lead to more competitive pricing, ultimately reducing the overall cost of the program.

Public Impact

The primary beneficiaries are national security and defense, through enhanced missile defense capabilities. The contract will deliver the foundational research and development for the Next Generation Aegis Missile. Geographic impact is national, focusing on strategic defense capabilities rather than specific regional deployment. Workforce implications include highly skilled engineers, scientists, and technical personnel in the aerospace and defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost overruns are a potential risk with Cost Plus Fixed Fee contracts, requiring diligent oversight.
Technological challenges in developing next-generation missile defense systems can lead to schedule delays.
The long-term sustainment and upgrade costs of the NGAM system are not detailed in this initial award.

Positive Signals

Awarded under full and open competition, indicating a potentially strong pool of qualified bidders.
Development of a critical component for the Ballistic Missile Defense System addresses a significant national security need.
The phased acquisition approach allows for iterative development and risk mitigation.

Sector Analysis

This contract falls within the Research and Development sector, specifically focusing on advanced defense technologies. The market for missile defense systems is highly specialized, dominated by a few large aerospace and defense contractors. Spending in this area is driven by evolving geopolitical threats and the need for continuous technological advancement. Comparable spending benchmarks would typically involve other major defense acquisition programs for advanced weapon systems, which often run into billions of dollars over their lifecycle.

Small Business Impact

The contract details do not indicate any specific small business set-asides. Given the highly specialized nature of developing advanced missile defense technology, it is likely that the prime contractor, Lockheed Martin, will subcontract portions of the work. The extent to which small businesses will participate through subcontracting opportunities remains to be seen and would be a key factor in assessing the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract will be managed by the Missile Defense Agency, a component of the Department of Defense. Accountability measures will be embedded within the Cost Plus Fixed Fee structure, requiring detailed reporting and justification of costs. Transparency will be maintained through contract reporting mechanisms and program reviews. The Inspector General of the Department of Defense would have jurisdiction over any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Ballistic Missile Defense System (BMDS)
Aegis Weapon System (AWS)
MK 41 Vertical Launching System (VLS)
Ground-based Midcourse Defense (GMD)
Standard Missile (SM-3)

Risk Flags

Cost Uncertainty (CPFF Contract)
Technological Complexity
Long Development Cycles
Evolving Threat Landscape

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.5 million to LOCKHEED MARTIN CORP. THE MISSILE DEFENSE AGENCY (MDA) WILL ACQUIRE THE NEXT GENERATION INTERCEPTOR FOR FIELDING IN 2020 AS AN ELEMENT OF THE BALLISTIC MISSILE DEFENSE SYSTEM (BMDS). THE NEXT GENERATION AEGIS MISSILE (NGAM) WILL BE DESIGNED TO PROVIDE EARLY INTERCEPT CAPABILITY AGAINST SOME SHORT RANGE BALLISTIC MISSILES (SRBM), ALL MEDIUM RANGE BALLISTIC MISSILES (MRBM), ALL INTERMEDIATE RANGE BALLISTIC MISSILES (IRBM) AND NON-ADVANCED INTERCONTINENTAL BALLISTIC MISSILES (ICBM) LAUNCHED FROM THE REGION WHERE AEGIS W

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 $47.5 million.

What is the period of performance?

Start: 2011-04-07. End: 2015-05-31.

What is the historical spending pattern for the development of similar advanced missile defense interceptors?

Developing advanced missile defense interceptors is a historically expensive and lengthy process. Programs like the Ground-based Midcourse Defense (GMD) system have seen billions of dollars invested over decades, with significant cost overruns and schedule delays. Early phases, similar to this NGAM contract's concept and planning stage, typically involve hundreds of millions to billions of dollars for system design, component development, and testing. The Missile Defense Agency's overall budget consistently runs into the tens of billions annually, reflecting the high cost associated with maintaining and advancing U.S. missile defense capabilities. This $47.5 million award represents an initial investment in a program expected to grow substantially as it moves through development and production.

How does the chosen contract type (Cost Plus Fixed Fee) influence the risk and cost for the government?

The Cost Plus Fixed Fee (CPFF) contract type shares risk between the government and the contractor. The government agrees to pay the contractor's allowable costs plus a fixed fee representing profit. This structure is often used for research and development efforts where the scope of work or final costs are uncertain. For the government, the primary risk is that the final costs could exceed initial estimates if actual costs are higher than anticipated, although the fixed fee provides some cost certainty regarding profit. The contractor is incentivized to control costs to maximize their profit margin, as the fee is fixed regardless of the final cost. Effective government oversight is crucial in CPFF contracts to ensure that all costs incurred are reasonable, allocable, and necessary for the project's completion.

What is Lockheed Martin's track record with developing complex defense systems, particularly missile defense?

Lockheed Martin Corporation has a long and extensive track record in developing complex defense systems, including significant contributions to missile defense. They are a prime contractor for numerous programs within the U.S. Department of Defense, including the Terminal High Altitude Area Defense (THAAD) system and various components of the Aegis Combat System. Their experience spans design, integration, testing, and production of sophisticated aerospace and defense technologies. While their history includes successes, like many large defense contractors, they have also faced challenges related to cost, schedule, and performance on complex, cutting-edge programs. Their established presence and expertise in this domain likely made them a strong contender for the Next Generation Aegis Missile development.

What are the key performance indicators (KPIs) likely to be used to measure the success of this R&D contract?

Key performance indicators (KPIs) for this R&D contract would likely focus on technical performance, schedule adherence, and cost control. Technical KPIs could include the successful demonstration of critical technologies, achievement of specified intercept capabilities against simulated threats, system integration milestones, and performance in government-mandated testing. Schedule KPIs would involve meeting key program milestones, such as the completion of concept definition, design reviews, and readiness for the subsequent competitive product development phase. Cost KPIs would center on managing expenditures within the allocated budget for the CPFF contract, demonstrating efficient use of resources, and providing accurate cost projections. Meeting these KPIs is essential for the Missile Defense Agency to ensure the program progresses effectively towards fielding a capable interceptor.

How does the Next Generation Aegis Missile fit into the broader U.S. missile defense strategy?

The Next Generation Aegis Missile (NGAM) is intended to be a crucial element of the U.S. Ballistic Missile Defense System (BMDS), specifically enhancing the capabilities of the Aegis Weapon System. Its development aims to provide an improved intercept capability against a wider range of ballistic missile threats, including short, medium, intermediate-range, and non-advanced intercontinental ballistic missiles. This initiative addresses the need for more versatile and effective interceptors to counter evolving threats from potential adversaries. By fielding the NGAM, the U.S. seeks to bolster its layered defense architecture, ensuring that Aegis-equipped naval platforms and potentially land-based systems have a more robust means of defending against ballistic missile attacks.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: HQ014710R0027

Offers Received: 4

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: $50,931,974

Exercised Options: $50,931,974

Current Obligation: $47,492,763

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline