DoD's $1.33B contract for missile defense systems awarded to Lockheed Martin, with 3 bidders
Contract Overview
Contract Amount: $1,330,150,643 ($1.3B)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2015-10-21
End Date: 2027-03-31
Contract Duration: 4,179 days
Daily Burn Rate: $318.3K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: FIXED PRICE INCENTIVE
Sector: Defense
Official Description: LRDR
Place of Performance
Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057
Plain-Language Summary
Department of Defense obligated $1.33 billion to LOCKHEED MARTIN CORPORATION for work described as: LRDR Key points: 1. Value for money assessed through fixed-price incentive structure, aiming to balance cost control with performance. 2. Competition dynamics show a moderate level of engagement with 3 bidders for this critical defense system. 3. Risk indicators include potential for cost overruns inherent in fixed-price incentive contracts for complex systems. 4. Performance context is tied to the Missile Defense Agency's ongoing efforts to counter ballistic missile threats. 5. Sector positioning places this contract within the highly specialized and technologically advanced aerospace and defense industry.
Value Assessment
Rating: good
The contract's fixed-price incentive (FPI) structure suggests an effort to control costs while incentivizing performance. Benchmarking against similar complex defense systems is challenging due to unique technological requirements. However, the initial award value of $1.33 billion indicates a significant investment. The FPI type aims to share cost risks between the government and contractor, potentially leading to better value than cost-plus contracts if managed effectively. The number of bidders also provides some indication of market interest and potential for competitive pricing.
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. Three bidders participated in this competition, suggesting a reasonable level of market interest for this specialized defense system. While three bidders is not an exceptionally high number for complex defense procurements, it does provide a basis for price discovery and allows the agency to select the offer that best meets technical and cost requirements.
Taxpayer Impact: A competitive process, even with three bidders, helps ensure that taxpayer funds are used efficiently by driving down prices and encouraging innovation from the participating companies.
Public Impact
The primary beneficiaries are the Department of Defense and national security, through the acquisition of advanced missile defense capabilities. Services delivered include the development, integration, and sustainment of critical components for the nation's missile defense shield. Geographic impact is national, enhancing the security posture of the United States against ballistic missile threats. Workforce implications include employment opportunities for highly skilled engineers, technicians, and support staff within Lockheed Martin and its subcontractors, primarily in New Jersey.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Potential for cost growth under the fixed-price incentive structure if development challenges arise.
- Dependence on a single prime contractor for a critical national security system.
- Long contract duration (over 10 years) increases exposure to evolving technological landscapes and geopolitical shifts.
Positive Signals
- Awarded through full and open competition, indicating a robust bidding process.
- Fixed-price incentive contract type aims to align contractor and government interests for cost efficiency.
- Lockheed Martin is a well-established defense contractor with significant experience in missile systems.
Sector Analysis
This contract falls within the aerospace and defense sector, specifically focusing on advanced missile defense systems. This is a highly specialized and capital-intensive segment of the industry, characterized by long development cycles, significant R&D investment, and stringent performance requirements. The market is dominated by a few large, experienced prime contractors. Spending in this area is driven by national security priorities and technological advancements in threat capabilities. Comparable spending benchmarks are difficult to establish due to the unique nature of each missile defense program.
Small Business Impact
The data indicates that small business participation was not a primary set-aside criterion for this contract (ss: false, sb: false). While Lockheed Martin is the prime contractor, there may be subcontracting opportunities for small businesses within its supply chain. The extent of small business involvement will depend on Lockheed Martin's subcontracting plan and the availability of small businesses capable of providing specialized components or services required for this advanced missile defense system.
Oversight & Accountability
Oversight for this contract is primarily managed by the Department of Defense, specifically the Missile Defense Agency, which is responsible for ensuring contract compliance and performance. Accountability measures are embedded within the fixed-price incentive contract terms, linking payment to performance milestones and cost targets. Transparency is facilitated through contract award databases and reporting requirements, though detailed program specifics may be classified. The Inspector General of the Department of Defense would have jurisdiction over any investigations into fraud, waste, or abuse related to this contract.
Related Government Programs
- Ballistic Missile Defense System
- Ground-based Midcourse Defense (GMD)
- Aegis Ballistic Missile Defense System
- Terminal High Altitude Area Defense (THAAD)
- Patriot Missile System
Risk Flags
- Potential for cost overruns
- Long-term sustainment costs
- Technological obsolescence risk
- Integration complexity with existing systems
Tags
defense, missile-defense, lockheed-martin, department-of-defense, missile-defense-agency, definitive-contract, fixed-price-incentive, full-and-open-competition, new-jersey, large-contract, advanced-technology, national-security
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $1.33 billion to LOCKHEED MARTIN CORPORATION. LRDR
Who is the contractor on this award?
The obligated recipient is LOCKHEED MARTIN CORPORATION.
Which agency awarded this contract?
Awarding agency: Department of Defense (Missile Defense Agency).
What is the total obligated amount?
The obligated amount is $1.33 billion.
What is the period of performance?
Start: 2015-10-21. End: 2027-03-31.
What is Lockheed Martin's track record with similar large-scale missile defense contracts?
Lockheed Martin has a substantial and long-standing track record in developing and producing complex missile defense systems for the U.S. military and international allies. They are a key player in programs such as the THAAD (Terminal High Altitude Area Defense) system, the PAC-3 Patriot missile interceptor, and components of the Aegis Ballistic Missile Defense system. Their experience spans research, development, testing, manufacturing, and sustainment of these critical technologies. This extensive history provides a foundation of expertise and program management capability relevant to the current contract, though each new system presents unique challenges and requires rigorous oversight to ensure successful execution and value for taxpayer investment.
How does the $1.33 billion award compare to historical spending on similar missile defense systems?
The $1.33 billion award for this specific contract is significant, reflecting the high cost associated with developing and procuring advanced, cutting-edge missile defense technology. To provide a precise comparison, one would need to identify the specific system being procured and its developmental phase (e.g., R&D, production, sustainment). However, major missile defense programs, such as the Ground-based Midcourse Defense (GMD) system or the THAAD system, have historically involved multi-billion dollar investments over their lifecycles. This $1.33 billion figure likely represents a substantial portion of a larger program's budget or a significant standalone procurement, aligning with the general trend of high expenditure in this critical defense capability area.
What are the primary risks associated with this fixed-price incentive contract, and how are they being managed?
The primary risk with a Fixed-Price Incentive (FPI) contract is the potential for cost overruns if the contractor encounters unforeseen technical difficulties or underestimates the complexity of the work. While the FPI structure aims to share cost savings and overruns with the government, significant overruns can still occur, impacting the total value. Management of these risks relies heavily on robust government oversight, including detailed technical reviews, Earned Value Management (EVM) systems to track progress and costs, and clear communication channels with the contractor. The contract's incentive clauses are designed to motivate Lockheed Martin to control costs and meet performance targets, but diligent government program management is crucial to mitigate the inherent risks.
What is the expected effectiveness of the systems being procured under this contract in countering current and future threats?
The effectiveness of the systems procured under this contract is directly tied to the Missile Defense Agency's strategic objectives and the specific threat landscape they are designed to counter. Missile defense systems are developed to intercept various types of ballistic missiles, including short-, medium-, and long-range variants, as well as potential hypersonic threats. The effectiveness is contingent upon the system's technological maturity, reliability, integration with other defense layers, and the accuracy of threat intelligence. Continuous testing, upgrades, and adaptation to evolving threats are essential for maintaining effectiveness. The Missile Defense Agency's program documentation and independent testing results would provide the most direct assessment of the expected effectiveness.
How has spending on missile defense systems evolved over the past decade, and where does this contract fit in?
Spending on missile defense systems has generally been robust over the past decade, driven by perceived threats from nations developing ballistic missile capabilities. While specific budget allocations fluctuate annually based on program priorities and geopolitical developments, the overall investment in missile defense has remained a significant component of the Department of Defense budget. This $1.33 billion contract represents a substantial, but not unprecedented, investment within this ongoing trend. It likely contributes to the sustainment, modernization, or expansion of existing capabilities or the development of new ones, fitting into the broader, sustained national effort to build and maintain a multi-layered missile defense architecture.
Industry Classification
NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing
Product/Service Code: COMM/DETECT/COHERENT RADIATION
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: HQ014714R0002
Offers Received: 3
Pricing Type: FIXED PRICE INCENTIVE (L)
Evaluated Preference: NONE
Contractor Details
Address: 199 BORTON LANDING RD, MOORESTOWN, NJ, 08057
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $1,456,307,638
Exercised Options: $1,374,928,886
Current Obligation: $1,330,150,643
Actual Outlays: $18,759,544
Subaward Activity
Number of Subawards: 18
Total Subaward Amount: $9,560,134
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2015-10-21
Current End Date: 2027-03-31
Potential End Date: 2027-03-31 00:00:00
Last Modified: 2026-01-15
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