DoD awards $622M THAAD missile support contract to Lockheed Martin, raising value-for-money questions

Contract Overview

Contract Amount: $62,251,155 ($62.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-06-12

End Date: 2026-11-30

Contract Duration: 1,267 days

Daily Burn Rate: $49.1K/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 $62.3 million to LOCKHEED MARTIN CORPORATION for work described as: THAAD MISSILE SUPPORT SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting price competition and potentially increasing costs. 2. The contract type (Cost Plus Incentive Fee) can incentivize cost overruns. 3. Long duration (over 3 years) suggests a critical, long-term need for THAAD missile support. 4. Missile Defense Agency's reliance on a single contractor for specialized support warrants scrutiny. 5. Lack of competition raises concerns about contractor performance incentives and innovation. 6. The contract's value is substantial, requiring robust oversight to ensure taxpayer protection.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and specialized services. While the total award is $622.5 million, the specific pricing structure and profit margins are not publicly detailed. Without competitive bids, it's challenging to assess if this represents a fair market price for THAAD missile support services. The Cost Plus Incentive Fee (CPIF) structure, while intended to align contractor and government interests, can also lead to higher costs if not managed meticulously.

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 among multiple vendors. The Missile Defense Agency likely determined that Lockheed Martin was the only responsible source capable of providing the specialized support required for the THAAD missile system. This lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive pricing, potentially leading to higher expenditures for essential defense services.

Public Impact

The primary beneficiaries are the U.S. Army and the Missile Defense Agency, ensuring the operational readiness of the THAAD missile defense system. Services delivered include crucial support for the THAAD system, likely encompassing maintenance, logistics, engineering, and technical assistance. Geographic impact is national, supporting a critical defense asset, with potential deployment implications globally. Workforce implications include sustaining highly skilled technical and engineering jobs within Lockheed Martin and its potential subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
CPIF contract type carries inherent risk of cost overruns if not closely monitored.
Long contract duration requires sustained government oversight to ensure continued value.
Lack of competition may reduce contractor incentive for innovation and efficiency.
Specialized nature of services could create contractor lock-in.

Positive Signals

Award ensures continued critical support for a vital national defense asset.
Lockheed Martin is an established prime contractor with extensive experience in missile defense.
CPIF contract structure aims to incentivize performance and cost control.
Long-term contract provides stability for essential support services.

Sector Analysis

The Missile Defense Agency (MDA) operates within the broader U.S. defense sector, focusing on developing and deploying systems to protect against ballistic missile threats. The THAAD system is a key component of this strategy. Spending in this sector is characterized by high R&D costs, complex integration challenges, and long procurement cycles. Contracts like this, supporting fielded systems, are essential for maintaining readiness and operational effectiveness, often involving specialized expertise concentrated among a few prime contractors.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. While Lockheed Martin is the prime contractor, there may be opportunities for small businesses to participate as subcontractors. However, the sole-source nature of the prime contract limits direct set-aside opportunities and places the onus on the prime to ensure small business participation goals are met through subcontracting.

Oversight & Accountability

Oversight for this contract will primarily fall under the Missile Defense Agency and the Department of Defense's contracting and program management offices. Given the sole-source nature and CPIF structure, rigorous oversight of cost, performance, and schedule is crucial. The DoD Inspector General may also conduct audits or investigations to ensure accountability and prevent waste, fraud, and abuse. Transparency regarding performance metrics and cost reporting will be key indicators of effective oversight.

Related Government Programs

Ballistic Missile Defense Systems
Integrated Air and Missile Defense
Missile Procurement, Army
Research, Development, Test, and Evaluation, Army
Logistics and Support Services

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Long contract duration
Critical defense system support

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $62.3 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 $62.3 million.

What is the period of performance?

Start: 2023-06-12. End: 2026-11-30.

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

Lockheed Martin is the prime contractor for the Terminal High Altitude Area Defense (THAAD) system, responsible for its design, development, production, and sustainment. They have a long history with the program, dating back to its initial development. Their track record includes successful system integration, testing, and deployment. The company also holds numerous other large defense contracts across various platforms, including other missile defense systems, aircraft, and space systems. While generally considered a capable contractor, like any large defense firm, they have faced scrutiny on specific contracts regarding cost, schedule, and performance. For THAAD, their established role suggests a deep understanding of the system's complexities, but also highlights the lack of alternative providers for specialized sustainment services.

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

Cost Plus Incentive Fee (CPIF) contracts are used when the government needs flexibility in scope and wants to incentivize contractor performance beyond just cost control. Unlike Firm-Fixed-Price (FFP) contracts, which offer price certainty but less flexibility, or Cost Plus Fixed Fee (CPFF), which provides cost reimbursement plus a fixed profit, CPIF allows for a target cost and target profit. If the contractor performs better than the target (e.g., lower cost, better schedule), they earn a higher profit share, up to a ceiling. Conversely, if performance is worse, their profit is reduced. This structure is often employed for complex, long-term projects where precise cost estimation is difficult, such as advanced weapons system support. However, it requires robust government oversight to ensure the target costs are realistic and that the incentive structure effectively drives desired outcomes without encouraging unnecessary spending to achieve profit targets.

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

The primary risks associated with a sole-source award for critical defense systems support, like the THAAD missile system, revolve around cost, innovation, and contractor performance. Without competition, there is less pressure on the contractor to offer the most competitive pricing, potentially leading to higher costs for taxpayers. The lack of alternative providers can also reduce the incentive for the incumbent contractor to innovate or improve efficiency, as they face no direct threat of losing the business. Furthermore, if the sole-source contractor experiences performance issues or financial instability, the government has limited options for recourse or replacement, potentially jeopardizing the operational readiness of the critical defense asset. This situation can also lead to contractor 'lock-in,' where the government becomes heavily dependent on a single entity.

What is the historical spending trend for THAAD missile support services, and how does this award compare?

Historical spending data for THAAD missile support services is often embedded within broader Missile Defense Agency (MDA) budgets and specific contract vehicles. While the exact year-over-year trend for this specific 'THAAD MISSILE SUPPORT SERVICES' contract isn't detailed in the provided data, the overall investment in missile defense systems, including THAAD, has been substantial and generally increasing over the past decade due to evolving threats. This $622.5 million award represents a significant, multi-year commitment. Comparing it requires looking at previous contract awards for THAAD sustainment, upgrades, and related services. Without access to historical contract databases detailing specific line items for THAAD support over time, a precise comparison is difficult. However, the scale of this award suggests a sustained and critical need for ongoing support, likely reflecting the fielded status and operational tempo of the THAAD system.

How does the Missile Defense Agency (MDA) ensure accountability and performance for large, sole-source contracts?

The Missile Defense Agency (MDA) employs several mechanisms to ensure accountability and performance on large, sole-source contracts. These include establishing clear performance metrics and Key Performance Parameters (KPPs) within the contract itself. Regular program reviews, technical interchange meetings, and Earned Value Management (EVM) reporting are used to track progress, costs, and schedule adherence. For sole-source contracts, the government often assigns dedicated contracting officers' representatives (CORs) or technical representatives (TEs) to closely monitor contractor activities and deliverables. Contract clauses may include incentives tied to performance or penalties for deficiencies. Furthermore, the MDA is subject to oversight from the Department of Defense and potentially the Government Accountability Office (GAO) and the Inspector General, who can conduct audits and reviews to ensure proper stewardship of funds and effective program execution.

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: $72,057,033

Exercised Options: $62,251,155

Current Obligation: $62,251,155

Actual Outlays: $5,739,376

Subaward Activity

Number of Subawards: 32

Total Subaward Amount: $10,434,612

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