DoD Awards $4.58B for Next Generation Interceptor Development, Facing Potential Cost Overruns
Contract Overview
Contract Amount: $4,583,507,771 ($4.6B)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2021-03-25
End Date: 2031-03-31
Contract Duration: 3,658 days
Daily Burn Rate: $1.3M/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: DESIGN, DEVELOPMENT, AND DEVELOPMENTAL TESTING OF THE NEXT GENERATION INTERCEPTOR (NGI) ALL-UP-ROUND (AUR)
Place of Performance
Location: HUNTSVILLE, MADISON County, ALABAMA, 35805
State: Alabama Government Spending
Plain-Language Summary
Department of Defense obligated $4.58 billion to LOCKHEED MARTIN CORPORATION for work described as: DESIGN, DEVELOPMENT, AND DEVELOPMENTAL TESTING OF THE NEXT GENERATION INTERCEPTOR (NGI) ALL-UP-ROUND (AUR) Key points: 1. Significant investment in critical missile defense technology. 2. Sole contractor, Lockheed Martin, raises competition concerns. 3. Long duration and cost-plus contract structure pose financial risks. 4. R&D spending in advanced defense systems is a key sector focus.
Value Assessment
Rating: questionable
The $4.58 billion contract for NGI AUR is substantial. Given the 'Cost Plus Incentive Fee' structure and long development timeline, there's a high risk of cost growth beyond initial estimates. Benchmarking is difficult due to the unique nature of next-generation weapon systems.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
While initially awarded under full and open competition, the current phase appears to be with a single entity, Lockheed Martin. This limits future competitive pressure on pricing and innovation.
Taxpayer Impact: Taxpayer funds are committed to a high-priority, but potentially costly, long-term defense program. Cost overruns could significantly increase the final price tag.
Public Impact
Enhances national security by developing a crucial missile defense capability. Supports high-tech jobs in the aerospace and defense sector. Long-term commitment of taxpayer funds for a critical defense asset. Potential for technological advancements with broad defense applications.
Waste & Efficiency Indicators
Waste Risk Score: 75 / 10
Warning Flags
- Cost overrun risk due to CPIF contract type.
- Limited competition in later development phases.
- Long project duration increases uncertainty.
- Lack of small business participation noted.
Positive Signals
- Addresses a critical national security need.
- Utilizes advanced R&D capabilities.
- Significant investment in defense modernization.
Sector Analysis
This contract falls under Research and Development in Physical, Engineering, and Life Sciences, specifically for advanced defense systems. Spending in this area is driven by national security priorities and technological advancement, often involving large, complex, and long-term projects with high R&D costs.
Small Business Impact
The contract data indicates no explicit small business participation. Large, complex defense development programs often subcontract to larger primes, potentially limiting direct opportunities for small businesses unless specifically mandated or pursued.
Oversight & Accountability
The Missile Defense Agency is responsible for this program. Oversight will be critical to manage costs, schedule, and performance throughout the extensive development and testing phases, especially given the CPIF contract structure.
Related Government Programs
- Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)
- Department of Defense Contracting
- Missile Defense Agency Programs
Risk Flags
- Cost Overruns
- Schedule Delays
- Technical Performance Risk
- Sole-Source Dependence
- Limited Small Business Engagement
Tags
research-and-development-in-the-physical, department-of-defense, al, definitive-contract, billion-dollar
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $4.58 billion to LOCKHEED MARTIN CORPORATION. DESIGN, DEVELOPMENT, AND DEVELOPMENTAL TESTING OF THE NEXT GENERATION INTERCEPTOR (NGI) ALL-UP-ROUND (AUR)
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 $4.58 billion.
What is the period of performance?
Start: 2021-03-25. End: 2031-03-31.
What is the projected total lifecycle cost of the NGI program, and how does it compare to previous interceptor programs?
The current contract value is $4.58 billion for design, development, and testing through 2031. However, the total lifecycle cost is not provided and is likely to be significantly higher, encompassing production, deployment, and sustainment. Benchmarking against prior programs is challenging due to the 'next generation' nature and evolving threat landscape, but historical trends suggest potential for substantial cost growth in such complex weapon systems.
What are the specific performance metrics tied to the incentive fee, and what are the potential penalties if these are not met?
The provided data specifies a 'Cost Plus Incentive Fee' (CPIF) contract but does not detail the specific performance metrics or incentive fee structure. These metrics typically relate to technical performance, schedule adherence, and cost control. Without this information, it's difficult to assess the effectiveness of the incentives in driving desired outcomes or the potential financial impact of underperformance.
How will the MDA ensure continued competition or cost control throughout the NGI's lifecycle, given the current sole-source nature of this phase?
Ensuring future competition or cost control will require strategic planning by the MDA. Options include structuring future contract phases to allow for competitive bidding, implementing robust cost-tracking and negotiation processes, and potentially exploring alternative technologies or approaches. Proactive oversight and clear performance expectations are crucial to mitigate risks associated with a sole-source development path.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Nanotechnology and Biotechnology)
Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Solicitation ID: HQ085620R0001
Offers Received: 3
Pricing Type: COST PLUS INCENTIVE FEE (V)
Evaluated Preference: NONE
Contractor Details
Address: 4800 BRADFORD DR NW, HUNTSVILLE, AL, 35805
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $5,356,695,146
Exercised Options: $5,356,695,146
Current Obligation: $4,583,507,771
Actual Outlays: $1,591,846,741
Subaward Activity
Number of Subawards: 2000
Total Subaward Amount: $2,403,956,613
Contract Characteristics
Multi-Year Contract: Yes
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2021-03-25
Current End Date: 2031-03-31
Potential End Date: 2031-03-31 00:00:00
Last Modified: 2026-01-05
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