Lockheed Martin awarded $52.2M for PAC-3 fire control software, a significant investment in missile defense

Contract Overview

Contract Amount: $52,187,550 ($52.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2018-09-26

End Date: 2023-09-25

Contract Duration: 1,825 days

Daily Burn Rate: $28.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CET 18-835, ENGINEERING SERVICES, THE PURPOSE OF THIS TASK IS TO DESIGN AND IMPLEMENT IMPROVED FIRE CONTROL, GUIDANCE, AND SIGNAL PROCESSING SOFTWARE ALGORITHMS CONTRIBUTING TO PAC-3 EVOLUTIONARY DEVELOPMENT.

Place of Performance

Location: OWEGO, TIOGA County, NEW YORK, 13827

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $52.2 million to LOCKHEED MARTIN CORPORATION for work described as: CET 18-835, ENGINEERING SERVICES, THE PURPOSE OF THIS TASK IS TO DESIGN AND IMPLEMENT IMPROVED FIRE CONTROL, GUIDANCE, AND SIGNAL PROCESSING SOFTWARE ALGORITHMS CONTRIBUTING TO PAC-3 EVOLUTIONARY DEVELOPMENT. Key points: 1. The contract focuses on enhancing critical fire control, guidance, and signal processing software for the PAC-3 missile system. 2. This award represents a substantial commitment to the ongoing evolution and modernization of missile defense capabilities. 3. The use of a Cost Plus Fixed Fee (CPFF) contract type suggests potential for cost overruns if not closely managed. 4. The duration of the contract (5 years) indicates a long-term need for these specialized engineering services. 5. The sole awardee, Lockheed Martin, suggests a high degree of specialization and potentially limited market alternatives for this specific upgrade. 6. Performance context is crucial, as the success of these software algorithms directly impacts the effectiveness of the PAC-3 missile system.

Value Assessment

Rating: fair

Benchmarking the value of this specific engineering services contract is challenging without detailed cost breakdowns and comparisons to similar software development efforts within the defense sector. The Cost Plus Fixed Fee (CPFF) structure, while common for complex R&D, carries inherent risks of cost escalation. The provided data does not allow for a direct comparison to market rates for similar specialized software algorithm development, making a definitive value-for-money assessment difficult. However, the significant dollar amount suggests a high level of complexity and criticality.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple capable vendors had the opportunity to bid. However, the fact that only one delivery order was issued suggests that Lockheed Martin was either the prime contractor selected through the initial competition or the only entity capable of fulfilling this specific task order. The level of competition for the initial contract is not detailed, but the single award for this task implies a specialized niche.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it promotes a competitive environment that can lead to better pricing and innovation. However, the ultimate benefit depends on the number of actual bidders and the effectiveness of the bidding process.

Public Impact

The primary beneficiaries are the U.S. Department of Defense, specifically units utilizing the PAC-3 missile system, enhancing their defensive capabilities. The services delivered include the design and implementation of advanced software algorithms crucial for missile guidance and targeting. The geographic impact is national, supporting U.S. military readiness and strategic defense posture. Workforce implications include specialized software engineers and developers, likely concentrated in areas with defense industry presence, such as New York.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not meticulously managed and monitored.
The specialized nature of the software algorithms may limit the pool of qualified contractors, potentially reducing future competition.
Dependence on a single contractor for critical software evolution could pose supply chain risks.
The long contract duration requires sustained oversight to ensure continued alignment with evolving defense needs.

Positive Signals

Awarded under full and open competition, suggesting a robust initial bidding process.
Focus on upgrading a critical defense system (PAC-3) indicates investment in national security.
The contract duration allows for sustained development and integration of complex software.
The contractor, Lockheed Martin, is a well-established defense prime with significant experience in missile systems.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on advanced missile systems and associated software engineering. The market for such specialized defense software is dominated by a few large prime contractors. Spending in this area is driven by national security priorities and the need for technological superiority. Comparable spending benchmarks would typically involve other major defense programs requiring complex software development and integration, often in the billions of dollars over their lifecycle.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Lockheed Martin is a large prime contractor. While there is no direct information on subcontracting plans, large defense contracts often involve a complex supply chain where small businesses may participate as subcontractors. However, the primary awardee is not a small business, and there's no explicit indication of a focus on small business utilization for this specific task order.

Oversight & Accountability

Oversight for this contract would primarily fall under the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The Cost Plus Fixed Fee (CPFF) structure necessitates rigorous financial oversight to manage costs effectively. Transparency regarding the specific software algorithms developed and their performance metrics would be subject to defense security protocols, potentially limiting public disclosure. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

PAC-3 Missile System
Missile Defense Agency Programs
Advanced Software Development Contracts
Department of Defense Engineering Services
Lockheed Martin Defense Contracts

Risk Flags

Cost Plus Fixed Fee (CPFF) contract type requires close monitoring to prevent cost overruns.
Sole awardee for this specific task order may indicate limited competition for specialized services.
Long contract duration necessitates sustained oversight and performance management.
Reliance on a single contractor for critical software evolution could pose long-term program risks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $52.2 million to LOCKHEED MARTIN CORPORATION. CET 18-835, ENGINEERING SERVICES, THE PURPOSE OF THIS TASK IS TO DESIGN AND IMPLEMENT IMPROVED FIRE CONTROL, GUIDANCE, AND SIGNAL PROCESSING SOFTWARE ALGORITHMS CONTRIBUTING TO PAC-3 EVOLUTIONARY DEVELOPMENT.

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $52.2 million.

What is the period of performance?

Start: 2018-09-26. End: 2023-09-25.

What is Lockheed Martin's track record with PAC-3 system development and upgrades?

Lockheed Martin Corporation has been the prime contractor for the Patriot Advanced Capability-3 (PAC-3) missile program for many years. They have a long and established history of developing, manufacturing, and upgrading various versions of the PAC-3 missile, including the PAC-3 MSE (Missile Segment Enhancement). Their expertise encompasses the entire missile lifecycle, from design and testing to production and sustainment. This includes significant work on the associated fire control systems, guidance, and target tracking software. The company's extensive experience with the PAC-3 platform makes them a logical and often sole-source provider for evolutionary upgrades to the system's software and hardware components, as evidenced by this contract.

How does the $52.2 million cost compare to similar software development contracts for advanced weapon systems?

The $52.2 million cost for engineering services related to fire control, guidance, and signal processing software for the PAC-3 system is substantial but falls within the typical range for complex, specialized software development within major defense programs. Contracts for similar advanced weapon system software, especially those involving upgrades to existing platforms with long lifecycles like the PAC-3, can range from tens to hundreds of millions of dollars over several years. Factors influencing cost include the novelty of the algorithms, the required level of security, integration complexity with existing systems, and the contractor's overhead. Without specific details on the scope of 'improved' algorithms and the competitive landscape for this particular task, a precise value-for-money comparison is difficult, but the amount is consistent with the criticality and technical sophistication involved.

What are the primary risks associated with this contract, particularly given the CPFF structure?

The primary risks associated with this contract stem from its Cost Plus Fixed Fee (CPFF) structure and the specialized nature of the work. CPFF contracts can incentivize contractors to incur higher costs, as their fee is fixed regardless of the actual expenses, potentially leading to budget overruns if not rigorously managed. Risks include scope creep, where the definition of 'improved' algorithms expands beyond initial intentions, increasing costs. Technical risks involve the complexity of developing and integrating advanced signal processing and guidance software, which may encounter unforeseen challenges. Furthermore, reliance on a single contractor, Lockheed Martin, for critical software evolution introduces program risk if performance falters or if future competition is limited due to proprietary knowledge.

How effective is the PAC-3 missile system, and how will these software upgrades contribute to its effectiveness?

The PAC-3 missile system is a highly effective, combat-proven air and missile defense system designed to intercept tactical ballistic missiles, cruise missiles, and advanced aircraft. It utilizes hit-to-kill technology for direct impact destruction. The software upgrades specified in this contract—focusing on fire control, guidance, and signal processing algorithms—are critical for enhancing the system's effectiveness. Improved algorithms can lead to better target detection, tracking accuracy, discrimination of countermeasures, and overall engagement success rates, particularly against evolving threats. These enhancements are vital for maintaining the PAC-3's capability to protect against sophisticated aerial and missile attacks, ensuring its continued relevance in modern warfare.

What has been the historical spending trend for PAC-3 related software and engineering services?

Historical spending on the PAC-3 missile system, including its software and engineering services, has been substantial and consistent over the years, reflecting its importance in U.S. missile defense strategy. The U.S. Department of Defense, through the Missile Defense Agency and Army programs, has allocated billions of dollars towards the development, procurement, and sustainment of PAC-3 variants. Spending on software upgrades, like the one awarded to Lockheed Martin, is a recurring component of this lifecycle support. Annual obligations for PAC-3 related contracts, encompassing production, upgrades, and support services, typically range in the hundreds of millions to over a billion dollars, depending on program phase and procurement quantities. This $52.2 million contract represents a specific, focused investment within that broader historical spending context.

What is the significance of 'engineering services' in the context of this contract compared to direct procurement of hardware?

The significance of 'engineering services' in this contract lies in its focus on intangible intellectual property and developmental work, rather than the physical acquisition of hardware. While hardware procurement (like missiles themselves) represents a major cost, the underlying software and algorithms are the 'brains' of the system, dictating its performance and adaptability. Engineering services encompass the research, design, development, testing, and refinement of these critical software components. This contract aims to improve the core intelligence of the PAC-3 system by enhancing its fire control, guidance, and signal processing capabilities through advanced algorithms. Such services are crucial for keeping the weapon system effective against evolving threats and are often more complex and require highly specialized expertise than manufacturing existing hardware.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HQ072715R0001

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1801 STATE RT 17 C, OWEGO, NY, 13827

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: $52,187,550

Exercised Options: $52,187,550

Current Obligation: $52,187,550

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $2,281,216

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HQ072716D0001

IDV Type: IDC

Timeline