Missile Defense Agency awards $71.9M logistics support contract to Lockheed Martin for THAAD system

Contract Overview

Contract Amount: $71,879,404 ($71.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-04-30

End Date: 2024-10-17

Contract Duration: 1,631 days

Daily Burn Rate: $44.1K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THIS TASK ORDER IS INTENDED FOR THE THAAD SUSTAINMENT AND LOGISTICS SUPPORT. THE INITIAL AWARD CAPTURES THE BATTERY CLS IN A TASK INSTRUCTION.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $71.9 million to LOCKHEED MARTIN CORPORATION for work described as: THIS TASK ORDER IS INTENDED FOR THE THAAD SUSTAINMENT AND LOGISTICS SUPPORT. THE INITIAL AWARD CAPTURES THE BATTERY CLS IN A TASK INSTRUCTION. Key points: 1. Contract focuses on sustainment and logistics for the THAAD missile defense system. 2. Awarded as a delivery order under an existing contract, indicating a continuation of services. 3. The contract type is Cost Plus Fixed Fee, which allows for cost reimbursement plus a fixed fee. 4. Duration of over 1600 days suggests a long-term need for these critical support services. 5. The specific NAICS code (541614) points to specialized logistics consulting services. 6. No small business set-aside was applied to this contract. 7. The contract is managed by the Missile Defense Agency, a key component of national defense.

Value Assessment

Rating: good

The contract value of $71.9 million for over four years of logistics support for the THAAD system appears reasonable given the complexity and criticality of missile defense systems. Benchmarking against similar sustainment contracts for advanced defense platforms is challenging due to unique system requirements. However, the Cost Plus Fixed Fee structure necessitates careful monitoring of costs to ensure value for money, as the government reimburses allowable costs plus a predetermined fee. The absence of detailed cost breakdowns in the provided data limits a precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as a delivery order under an existing contract and was not competed. This suggests that Lockheed Martin Corporation was likely the incumbent or sole provider capable of fulfilling the specific sustainment and logistics requirements for the THAAD system at the time of award. The lack of competition means that pricing and service terms were not subjected to market forces, potentially leading to higher costs than if multiple bidders had participated.

Taxpayer Impact: The absence of competition for this critical defense sustainment contract means taxpayers may not have benefited from the cost savings typically achieved through a competitive bidding process. This could result in a higher overall expenditure for the THAAD program.

Public Impact

The primary beneficiaries are the U.S. Army and its operational units relying on the THAAD system for ballistic missile defense. Services delivered include sustainment, logistics, and potentially maintenance support for the THAAD batteries. Geographic impact is national, ensuring the readiness of a key strategic defense asset. Workforce implications include specialized technical and logistics personnel employed by Lockheed Martin and potentially its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Cost Plus Fixed Fee contract type if not rigorously managed.
Lack of competition may limit opportunities for innovation and cost reduction from alternative providers.
Dependence on a single contractor for critical sustainment could pose supply chain or availability risks.

Positive Signals

Award to a known entity (Lockheed Martin) with established expertise in the THAAD system.
Long contract duration suggests a stable and predictable support structure for a vital defense asset.
Focus on sustainment and logistics is crucial for maintaining the operational readiness of the THAAD system.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically supporting a major strategic weapons system. The market for sustainment and logistics for advanced missile defense platforms is highly specialized, with a limited number of prime contractors possessing the necessary expertise and security clearances. Spending in this area is driven by national security priorities and ongoing geopolitical threats, requiring significant investment in maintaining and supporting complex defense technologies.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses, nor does it explicitly mention subcontracting plans for small businesses. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Lockheed Martin actively engages them for specific components or services not covered by the prime contract. Further analysis of subcontracting reports would be needed to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Defense and the Missile Defense Agency. As a Cost Plus Fixed Fee contract, rigorous financial oversight and auditing are essential to ensure that costs are allowable, reasonable, and allocable. Transparency is typically managed through contract reporting mechanisms and program reviews. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Ballistic Missile Defense System (BMDS)
Ground-based Midcourse Defense (GMD)
Aegis Ballistic Missile Defense System
Patriot Missile System
Terminal High Altitude Area Defense (THAAD) Program

Risk Flags

Sole-source award
Cost-reimbursable contract type
Long contract duration
Critical defense system sustainment

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $71.9 million to LOCKHEED MARTIN CORPORATION. THIS TASK ORDER IS INTENDED FOR THE THAAD SUSTAINMENT AND LOGISTICS SUPPORT. THE INITIAL AWARD CAPTURES THE BATTERY CLS IN A TASK INSTRUCTION.

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 $71.9 million.

What is the period of performance?

Start: 2020-04-30. End: 2024-10-17.

What is Lockheed Martin's track record with the THAAD system and similar defense contracts?

Lockheed Martin Corporation is the prime contractor for the THAAD system, responsible for its development, production, and sustainment. They have a long-standing and extensive track record with this specific weapon system, dating back to its initial development. Their experience includes manufacturing, integration, testing, and providing logistical support for THAAD batteries deployed globally. Beyond THAAD, Lockheed Martin is a major defense contractor involved in numerous other complex weapon systems, including fighter aircraft, satellites, and other missile defense programs. This deep familiarity with the THAAD system suggests a strong capability to fulfill the sustainment and logistics requirements outlined in this contract. However, as with any large defense contractor, their performance history across all contracts would need to be reviewed for any significant past performance issues or disputes.

How does the $71.9 million value compare to similar sustainment contracts for advanced missile defense systems?

Directly comparing the $71.9 million value to similar sustainment contracts for advanced missile defense systems is challenging due to the unique nature and complexity of each platform, as well as variations in contract scope, duration, and geographic deployment. The THAAD system is a highly specialized, end-to-end missile defense solution. Sustainment contracts for such systems typically involve significant costs related to specialized personnel, spare parts, depot-level maintenance, software updates, and technical support. Given the four-year duration (approximately 1631 days) of this contract, the annual cost averages around $17.5 million. This figure needs to be considered in the context of the overall program cost and the criticality of maintaining operational readiness for a strategic defense asset. Without access to detailed cost breakdowns and comparable contract data for systems like Aegis BMD or GMD sustainment, a precise benchmark is difficult, but the allocated amount appears to be within the expected range for supporting such a sophisticated defense capability.

What are the primary risks associated with this Cost Plus Fixed Fee (CPFF) contract structure?

The primary risk associated with a Cost Plus Fixed Fee (CPFF) contract structure is the potential for cost overruns, which can impact the overall value for taxpayers. In a CPFF arrangement, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. While the fee is fixed, the total cost is not. If the contractor's costs exceed initial estimates, the government bears the burden of these increased expenses. This necessitates robust government oversight, including detailed cost accounting, audits, and performance monitoring, to ensure that all claimed costs are reasonable, allocable, and necessary for contract performance. Without stringent controls, there is a risk that the contractor may have less incentive to control costs compared to fixed-price contracts, potentially leading to a less efficient use of government funds. However, CPFF contracts are often used when the scope of work is not precisely defined or involves a high degree of uncertainty, making them suitable for complex R&D or sustainment efforts where precise cost estimation is difficult.

What is the expected program effectiveness or outcome of this logistics support contract?

The expected outcome of this logistics support contract is the sustained operational readiness and effectiveness of the Terminal High Altitude Area Defense (THAAD) missile defense system. Effective sustainment and logistics are critical for ensuring that the THAAD batteries are available, reliable, and capable of performing their mission to intercept ballistic missiles. This includes maintaining the physical hardware, ensuring the availability of necessary spare parts, providing timely technical support and repairs, and managing the overall supply chain. By ensuring these functions are adequately performed by Lockheed Martin, the Missile Defense Agency aims to guarantee that the U.S. military has a robust defense capability against evolving ballistic missile threats. The success of the contract will be measured by the operational availability rates of the THAAD system and its demonstrated performance in exercises and, if necessary, in actual defense scenarios.

How has federal spending on THAAD sustainment evolved over recent years?

Analyzing the historical spending trends specifically for THAAD sustainment requires access to detailed budget data and contract awards over multiple fiscal years. The provided data point represents a single delivery order awarded in April 2020 with an estimated completion date in October 2024, totaling approximately $71.9 million. This single award does not provide a comprehensive view of overall THAAD sustainment spending. Typically, sustainment costs are part of larger program budgets and can fluctuate based on system upgrades, operational tempo, and the age of deployed assets. To understand the evolution of spending, one would need to examine annual budget requests for the THAAD program, track all awarded contracts related to its sustainment (including prime and subcontracts), and consider any multi-year procurement or sustainment initiatives. Without this broader dataset, it is impossible to determine the historical spending trajectory for THAAD sustainment.

What are the implications of this contract being awarded as a delivery order under an existing contract?

Awarding this contract as a delivery order under an existing contract, rather than a new competitive procurement, has several implications. Firstly, it suggests that the requirements for THAAD sustainment and logistics were already established under a previous contract vehicle, likely held by Lockheed Martin Corporation. This allows for a faster acquisition process, as much of the foundational work, such as contractor vetting and basic terms, may have already been completed. However, it also means that the Missile Defense Agency did not conduct a new competition for these specific services. This can limit the government's ability to leverage market competition to achieve the best possible pricing and terms. For taxpayers, this could mean potentially higher costs compared to a fully competed contract. The existing contract likely dictates the overall framework, and the delivery order specifies the scope, value, and period of performance for this particular set of services.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Management, Scientific, and Technical Consulting Services › Process, Physical Distribution, and Logistics Consulting Services

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ085320R0028

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

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: $79,154,587

Exercised Options: $79,154,587

Current Obligation: $71,879,404

Actual Outlays: $34,953,075

Subaward Activity

Number of Subawards: 125

Total Subaward Amount: $77,274,792

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: HQ085320D0001

IDV Type: IDC

Timeline