DoD awards $41.6M to Lockheed Martin for THAAD missile support, raising value-for-money questions

Contract Overview

Contract Amount: $41,635,843 ($41.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-07-01

End Date: 2023-12-29

Contract Duration: 1,276 days

Daily Burn Rate: $32.6K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THAAD MISSILE SUPPORT SERVICES

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $41.6 million to LOCKHEED MARTIN CORPORATION for work described as: THAAD MISSILE SUPPORT SERVICES Key points: 1. Contract awarded on a cost-plus incentive fee basis, which can lead to cost overruns. 2. Sole-source award limits price discovery and potentially increases costs for taxpayers. 3. Lack of competition raises concerns about whether the government received the best possible value. 4. Contract duration of over three years suggests a long-term need for these services. 5. Services fall under logistics consulting, a category where performance can be difficult to quantify. 6. Awarded to a single, large defense contractor, potentially crowding out smaller, specialized firms.

Value Assessment

Rating: questionable

The contract's cost-plus incentive fee structure, combined with a sole-source award, presents a questionable value proposition. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The lack of transparency in pricing mechanisms under this type of contract makes it challenging to assess if the government is receiving fair and reasonable pricing for the THAAD missile support services. Further analysis would be needed to compare the cost per unit of service or support provided against industry standards.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This approach is typically used when only one responsible source is available or when a compelling justification exists for avoiding full and open competition. The lack of multiple bidders means there was no direct price competition, which can limit the government's ability to negotiate the lowest possible price and may result in higher costs.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the cost savings typically achieved through competitive bidding processes. This can lead to higher overall program expenditures.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Missile Defense Agency, which receives critical support for the THAAD missile system. Services delivered include logistics consulting, crucial for the operational readiness and maintenance of advanced missile defense systems. The geographic impact is primarily within Texas, where the contractor is located, but the ultimate impact is on national defense capabilities. Workforce implications include employment for specialized logistics and technical personnel within Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus incentive fee structure can incentivize cost growth.
Lack of transparency in pricing for sole-source contracts.
Potential for contractor to dictate terms due to lack of alternatives.
Difficulty in benchmarking performance and cost without comparable contracts.

Positive Signals

Award to a major defense contractor with established expertise in missile systems.
Contract addresses a critical national security need (THAAD missile support).
Incentive fee structure aims to align contractor performance with government objectives.
Long-term contract duration suggests a stable and ongoing requirement.

Sector Analysis

The Missile Defense Agency operates within the broader defense sector, which is characterized by high-value, complex systems and long procurement cycles. Spending in this sector is driven by national security priorities and technological advancements. Contracts for specialized support services, like logistics consulting for advanced weapon systems, are common. Benchmarks for such services are often internal to the agency or based on historical data with the same contractor, given the unique nature of the systems involved.

Small Business Impact

This contract was not set aside for small businesses and was awarded to a large prime contractor, Lockheed Martin Corporation. There is no explicit information provided regarding subcontracting plans for small businesses. Without a small business set-aside or clear subcontracting goals, the direct impact on the small business ecosystem for this specific contract is likely minimal, though the prime contractor may engage small businesses as part of its broader supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA). Inspector General (IG) oversight is standard for DoD contracts, allowing for investigations into fraud, waste, and abuse. Transparency is often limited for sole-source, cost-plus contracts, but reporting requirements are usually mandated by the contract terms.

Related Government Programs

THAAD Missile System Procurement
Missile Defense Agency Support Services
Lockheed Martin Defense Contracts
Logistics Consulting Services
Cost-Plus Incentive Fee Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns
Limited transparency

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.6 million to LOCKHEED MARTIN CORPORATION. THAAD MISSILE SUPPORT SERVICES

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 $41.6 million.

What is the period of performance?

Start: 2020-07-01. End: 2023-12-29.

What is the track record of Lockheed Martin Corporation in delivering similar missile support services to the Department of Defense?

Lockheed Martin Corporation is a major defense contractor with extensive experience in developing, manufacturing, and supporting complex weapon systems, including missile defense platforms like THAAD. They have a long history of contracts with the DoD for various missile programs, encompassing research, development, production, and sustainment. While their overall track record is substantial, specific performance metrics for 'THAAD Missile Support Services' under this particular contract would require detailed review of past performance evaluations, delivery orders, and any documented issues or successes. Generally, large contractors like Lockheed Martin are expected to meet stringent performance requirements, but the complexity and criticality of missile defense systems mean that any deviations can have significant implications.

How does the pricing structure (Cost Plus Incentive Fee) compare to other contract types for similar logistics support services?

Cost Plus Incentive Fee (CPIF) contracts are designed to share risks and rewards between the government and the contractor. The contractor is reimbursed for allowable costs plus a fee that is adjusted based on performance against pre-determined targets (e.g., cost, schedule, performance). Compared to Firm-Fixed-Price (FFP) contracts, CPIF offers more flexibility for complex projects where costs are uncertain, but it carries a higher risk of cost overruns if targets are not met or if the targets themselves are not well-defined. For logistics support services, FFP might be preferred if the scope is clearly defined and stable. However, for specialized, evolving support needs like those for advanced missile systems, CPIF can incentivize efficiency and quality, provided the incentive targets are robust and achievable.

What are the primary risks associated with a sole-source award for critical defense support services?

The primary risks associated with a sole-source award for critical defense support services include a lack of competitive pricing, potentially leading to higher costs for the government and taxpayers. Without competition, there is reduced incentive for the contractor to innovate or optimize efficiency beyond what is contractually required. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. There's also a risk that the government may not be aware of or have access to the full range of available solutions or technological advancements that a competitive process might uncover. This can impact long-term system readiness and cost-effectiveness.

What is the historical spending pattern for THAAD missile support services, and how does this $41.6M award fit within that trend?

Historical spending data for THAAD missile support services would be crucial for contextualizing this $41.6 million award. Without specific historical figures, it's challenging to determine if this award represents an increase, decrease, or stable level of spending. Typically, support services for major defense systems like THAAD involve ongoing costs for maintenance, upgrades, training, and logistics. If previous annual spending was significantly lower or higher, it could indicate changes in program requirements, system lifecycle stage, or contracting strategies. Analyzing the duration of the contract (over three years) and the total award amount suggests a substantial, ongoing commitment. A trend analysis comparing this award to previous years' obligations for similar services would reveal whether this represents a typical expenditure or a notable deviation.

How is the performance of Lockheed Martin Corporation being measured and evaluated under this specific contract?

Performance measurement and evaluation under this Cost Plus Incentive Fee (CPIF) contract would be governed by the specific terms and conditions outlined in the contract document, particularly the 'Incentive Fee' provisions. These typically involve establishing measurable performance objectives related to factors such as delivery timeliness, quality of service, system availability, or cost control. The Missile Defense Agency (or its designated contracting officer's representative) would be responsible for monitoring Lockheed Martin's performance against these objectives throughout the contract period. The incentive fee structure implies that the contractor's final fee will be adjusted based on how well they achieve these pre-defined targets. Formal performance reviews and reporting would likely occur at regular intervals.

Industry Classification

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

Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: HQ085320R0028

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $41,635,843

Exercised Options: $41,635,843

Current Obligation: $41,635,843

Actual Outlays: $10,092,727

Subaward Activity

Number of Subawards: 45

Total Subaward Amount: $22,463,834

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