DoD awards $9.08B for THAAD interceptor production, with Lockheed Martin as sole provider

Contract Overview

Contract Amount: $9,085,374,044 ($9.1B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-03-27

End Date: 2028-11-30

Contract Duration: 4,266 days

Daily Burn Rate: $2.1M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: HQ0147-17-C-0032 UNDEFINITIZED CONTRACT ACTION (UCA) FOR THAAD INTERCEPTOR LOT 9 PRODUCTION - QTY OF 23

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $9.09 billion to LOCKHEED MARTIN CORPORATION for work described as: HQ0147-17-C-0032 UNDEFINITIZED CONTRACT ACTION (UCA) FOR THAAD INTERCEPTOR LOT 9 PRODUCTION - QTY OF 23 Key points: 1. This contract represents a significant investment in national missile defense capabilities. 2. The fixed-price incentive structure aims to balance cost control with performance incentives. 3. Sole-source procurement raises questions about potential price escalation and limited market leverage. 4. Long-term contract duration suggests a sustained need for these interceptors. 5. The Missile Defense Agency is the primary recipient of this critical defense asset. 6. Production is concentrated in Texas, impacting the regional defense industrial base.

Value Assessment

Rating: fair

The contract value of over $9 billion for 23 THAAD interceptors is substantial. Benchmarking this specific interceptor's value is challenging due to its specialized nature and limited production. However, the fixed-price incentive (FPI) contract type suggests an expectation of cost efficiencies, though the sole-source nature may limit aggressive price negotiation. Without comparable contract data for similar systems or detailed cost breakdowns, a definitive value-for-money assessment is difficult, but the scale implies a high unit cost.

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 considered. This approach is typically justified when a unique capability exists or for follow-on production where competition is not feasible. The lack of competition means there was no opportunity for other manufacturers to bid, potentially limiting price discovery and innovation that could arise from a competitive bidding process.

Taxpayer Impact: Taxpayers are reliant on the sole provider to offer fair pricing, and oversight is crucial to ensure costs are reasonable given the absence of competitive pressure.

Public Impact

The primary beneficiaries are the U.S. Army and Missile Defense Agency, enhancing national security through advanced missile defense. The contract delivers critical THAAD interceptors, a key component of the U.S. ballistic missile defense system. Production is located in Texas, supporting jobs and infrastructure within the state's defense sector. This award sustains a specialized manufacturing capability essential for national defense.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Long contract duration (over 10 years) increases exposure to potential cost overruns or scope creep.
Lack of transparency in pricing due to sole-source nature makes independent cost verification difficult.
Reliance on a single contractor for a critical defense system poses supply chain and strategic risk.

Positive Signals

Fixed-price incentive contract type provides some cost control and performance incentives.
Sustained production ensures availability of a critical missile defense capability.
Contract awarded to a known, experienced defense contractor with a track record in missile systems.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector (NAICS 336414) is highly specialized and dominated by a few large defense contractors. This contract for THAAD interceptors falls squarely within this niche, representing a significant portion of spending for this specific capability. The market is characterized by high barriers to entry, extensive R&D requirements, and strong government procurement influence. Comparable spending benchmarks are difficult to establish due to the unique nature of missile defense systems, but this award signifies substantial investment in advanced aerospace and defense manufacturing.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by 'sb: false'. Given the specialized nature of THAAD interceptor production, 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 require further investigation into the subcontracting plan. Without explicit set-asides, the direct impact on small businesses is likely limited to those capable of fulfilling highly specialized roles within the supply chain.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of Defense and the Missile Defense Agency. As a large, multi-year definitive contract, it is subject to standard contract administration and auditing procedures. Inspector General investigations may be initiated if specific concerns regarding fraud, waste, or abuse arise. Transparency is generally limited for sole-source defense contracts, but reporting requirements on production milestones and expenditures are expected.

Related Government Programs

Missile Defense Systems
Ballistic Missile Defense
THAAD Program
Guided Missile Manufacturing
Department of Defense Procurement

Risk Flags

Sole-source procurement
High contract value
Long contract duration
Critical defense system

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $9.09 billion to LOCKHEED MARTIN CORPORATION. HQ0147-17-C-0032 UNDEFINITIZED CONTRACT ACTION (UCA) FOR THAAD INTERCEPTOR LOT 9 PRODUCTION - QTY OF 23

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 $9.09 billion.

What is the period of performance?

Start: 2017-03-27. End: 2028-11-30.

What is the historical spending trend for THAAD interceptor production, and how does this award compare?

Historical spending data for THAAD interceptor production prior to this award is not explicitly detailed in the provided data. However, this contract, valued at approximately $9.08 billion, represents a significant, long-term investment. Previous awards for THAAD components and production likely occurred, but this specific 'UNDEFINITIZED CONTRACT ACTION (UCA) FOR THAAD INTERCEPTOR LOT 9 PRODUCTION' suggests a major procurement phase. Without access to historical contract databases or specific program budget documents, a direct comparison of spending trends is challenging. It is reasonable to infer that this award signifies a substantial ramp-up or continuation of production, potentially exceeding prior annual expenditures for this specific interceptor lot.

What are the specific performance metrics tied to the 'FIXED PRICE INCENTIVE' contract type for this award?

The provided data indicates the contract type is 'FIXED PRICE INCENTIVE' (FPI). For an FPI contract, there is a target cost, a target profit, and a price ceiling. If the final cost is below the target cost, both the contractor and the government share in the savings based on a pre-negotiated formula. If the final cost exceeds the target cost but remains below the ceiling, the contractor bears a larger share of the overrun. If the cost exceeds the ceiling, the contractor is responsible for all costs above the ceiling. Specific performance metrics are not detailed in the summary data but would typically include factors like production schedule adherence, quality control standards, and potentially technical performance specifications related to the interceptor's effectiveness. The incentive aspect is primarily financial, tied to cost efficiency.

What is Lockheed Martin's track record with the THAAD program and similar missile defense systems?

Lockheed Martin Corporation is the prime contractor for the Terminal High Altitude Area Defense (THAAD) system, including the interceptors. They have a long-standing and extensive track record with this program, having been involved since its development. The company is a major defense contractor with deep expertise in missile systems, aerospace, and defense technologies. Their portfolio includes other significant missile defense programs and platforms. This extensive experience with THAAD suggests a high level of technical capability and program management proficiency, which likely contributed to their selection as the sole-source provider for this production lot.

How does the $9.08 billion value compare to overall Missile Defense Agency (MDA) budgets or similar large-scale defense procurements?

The $9.08 billion value of this contract is a significant portion of the Missile Defense Agency's (MDA) annual budget. For context, the MDA's budget typically ranges in the tens of billions of dollars annually. This single contract represents a substantial commitment to one specific program element. When compared to other large-scale defense procurements, such as fighter jet programs (e.g., F-35) or naval shipbuilding, it is in the same league of major, high-value defense investments. However, it is specific to a critical but niche capability within the broader defense landscape. Its size underscores the strategic importance and cost associated with advanced missile defense technology.

What are the potential risks associated with a sole-source award for such a critical defense system?

The primary risk of a sole-source award for a critical defense system like THAAD interceptors is the lack of competitive pressure. This can lead to inflated prices, as the government has limited leverage to negotiate better terms. It also reduces the incentive for the sole contractor to innovate aggressively or improve efficiency beyond what is contractually required. Furthermore, reliance on a single supplier creates a vulnerability in the supply chain; any disruption to Lockheed Martin's production capabilities could have significant national security implications. There's also a risk of vendor lock-in, making it difficult and costly to switch providers or introduce alternative solutions in the future.

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

Solicitation ID: HQ014716R0024

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1701 W MARSHALL DR, GRAND PRAIRIE, TX, 75051

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: $10,478,298,415

Exercised Options: $9,085,519,727

Current Obligation: $9,085,374,044

Actual Outlays: $156,490,187

Subaward Activity

Number of Subawards: 2584

Total Subaward Amount: $29,480,139,168

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline