DoD's $309M missile defense contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $308,891,675 ($308.9M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-07-29

End Date: 2021-06-30

Contract Duration: 3,624 days

Daily Burn Rate: $85.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FY 11 BMD 4.0.1 PRODUCTION FOR LRIP 5

Place of Performance

Location: MOORESTOWN, BURLINGTON County, NEW JERSEY, 08057

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $308.9 million to LOCKHEED MARTIN CORPORATION for work described as: FY 11 BMD 4.0.1 PRODUCTION FOR LRIP 5 Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Long contract duration of over 10 years suggests a sustained need for these missile defense capabilities. 3. The contract type (Fixed Price Incentive) aims to balance cost control with performance incentives. 4. Awarded to a single, large defense contractor, indicating a concentrated market for this specific technology. 5. The absence of small business set-asides raises questions about opportunities for smaller innovative firms. 6. Performance context is critical given the strategic importance of missile defense systems.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized defense application. Without competitive bids, it's difficult to ascertain if the $309 million represents a fair market price. The Fixed Price Incentive (FPI) contract type suggests an attempt to control costs, but the ultimate price depends on performance and cost targets, which are not detailed here. Compared to other large sole-source defense procurements, the pricing structure warrants scrutiny to ensure taxpayer funds are used efficiently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was solicited. This approach bypasses the competitive bidding process, which typically drives down prices and encourages innovation. The lack of competition means there was no direct comparison of offers or pricing from multiple vendors, potentially leading to higher costs for the government and taxpayers.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through market competition, potentially resulting in higher expenditures for taxpayers compared to a competed contract.

Public Impact

The primary beneficiaries are the Department of Defense and national security, receiving advanced missile defense capabilities. Services delivered include the production of LRIP 5 for the Ballistic Missile Defense (BMD) system. Geographic impact is national, supporting U.S. missile defense infrastructure and readiness. Workforce implications are significant for Lockheed Martin and its supply chain, supporting high-skilled jobs in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration may reduce flexibility to adopt newer technologies if they emerge.
Lack of transparency in sole-source justifications can obscure potential inefficiencies.
High dollar value concentrated with a single large contractor.

Positive Signals

Award to an established prime contractor with demonstrated experience in missile defense.
Fixed Price Incentive contract type includes performance targets, aiming for efficiency.
Long-term award provides stability for critical defense system production.
Contract supports a vital national security capability.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on advanced missile defense systems. The market for such highly specialized and technologically complex systems is typically dominated by a few large, established defense contractors due to high R&D costs, stringent security requirements, and long development cycles. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of missile defense technology, but overall DoD spending on missile defense programs runs into billions annually.

Small Business Impact

The contract data indicates no small business set-aside (sb: false) and the prime contractor is a large corporation. This suggests that opportunities for small businesses would primarily be through subcontracting. Without specific subcontracting plans detailed in the award, it's unclear how much of this $309 million will flow down to the small business ecosystem. Large sole-source contracts can sometimes limit the visibility and access for small businesses seeking to enter or expand within the defense supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Defense Contract Management Agency (DCMA), responsible for ensuring contractor performance and compliance. The contract's long duration and sole-source nature necessitate robust oversight to monitor cost, schedule, and technical performance. Transparency regarding the justification for the sole-source award and the specific performance metrics within the FPI structure would enhance accountability.

Related Government Programs

Ballistic Missile Defense System (BMDS)
Missile Defense Agency (MDA) Programs
Advanced Missile Defense Production
Department of Defense Major Defense Acquisition Programs

Risk Flags

Sole Source Award
Lack of Competition
High Contract Value
Long Contract Duration
Specialized Defense Technology

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $308.9 million to LOCKHEED MARTIN CORPORATION. FY 11 BMD 4.0.1 PRODUCTION FOR LRIP 5

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 $308.9 million.

What is the period of performance?

Start: 2011-07-29. End: 2021-06-30.

What specific justification was provided for awarding this contract on a sole-source basis?

Sole-source justifications are typically required when only one responsible source is available or when a compelling urgency exists that precludes full and open competition. For advanced defense systems like missile defense, justifications often cite unique capabilities, proprietary technology, or the need for seamless integration with existing systems that only a specific contractor can provide. Without access to the specific justification document for this contract (e.g., a Justification and Approval - J&A), it is impossible to detail the exact reasons. However, common rationales include the contractor's unique technical expertise, prior development investment, or the need to maintain industrial base capabilities for critical national security technologies.

How does the Fixed Price Incentive (FPI) contract structure aim to control costs compared to other contract types?

A Fixed Price Incentive (FPI) contract establishes a target cost, a target profit, and a price ceiling. The government and contractor share in any cost savings or overruns below or above the target cost, respectively, according to a pre-negotiated formula. This structure incentivizes the contractor to control costs to achieve a higher profit margin, as they share in the savings if costs are below target. However, it also includes a price ceiling, protecting the government from unlimited cost growth. This differs from Firm Fixed Price (FFP), where the contractor bears all cost risk, and Cost Plus Incentive Fee (CPIF), where the government bears more cost risk. The FPI aims to balance cost control with performance and provides a framework for shared risk and reward.

What is Lockheed Martin's track record with similar missile defense contracts?

Lockheed Martin Corporation is a major defense contractor with extensive experience in missile defense systems. They are a prime contractor for numerous programs within the Ballistic Missile Defense System (BMDS), including the Terminal High Altitude Area Defense (THAAD) system, Aegis Ballistic Missile Defense, and Patriot Advanced Capability-3 (PAC-3) missiles. Their long-standing involvement in developing and producing these critical systems suggests a deep understanding of the technology and program requirements. However, like many large defense programs, their contracts have also faced scrutiny regarding cost, schedule, and performance over the years, necessitating ongoing oversight.

Can the $309 million be benchmarked against other similar missile defense production contracts?

Benchmarking this $309 million contract is challenging due to the highly specialized and often classified nature of missile defense production. Each contract typically involves unique system configurations, technology maturity levels, and production quantities. Furthermore, this contract was sole-sourced, meaning there were no competing bids to establish a market price. While Lockheed Martin is a key player in this domain, direct comparisons are difficult without knowing the specific components, quantities, and technological advancements included in this LRIP 5 production run. General industry cost trends and historical spending on similar defense articles can provide a very broad context, but a precise benchmark is elusive.

What are the potential risks associated with a sole-source award of this magnitude for a critical defense system?

The primary risks associated with a sole-source award of this magnitude ($309 million) for a critical defense system include: 1) Reduced Price Competition: The government may pay a higher price than if the contract were competed. 2) Lack of Innovation: Without competitive pressure, the contractor may have less incentive to innovate or find more cost-effective solutions. 3) Contractor Lock-in: The government becomes heavily reliant on a single supplier, potentially limiting future options and leverage. 4) Transparency Concerns: Sole-source justifications can sometimes obscure the true reasons for avoiding competition, potentially masking inefficiencies or poor performance. 5) Supply Chain Risks: Dependence on a single prime can create vulnerabilities if that contractor faces production issues or financial instability.

How does this contract fit into the broader landscape of U.S. missile defense spending?

This $309 million contract for LRIP 5 production represents a component of the larger U.S. missile defense spending, which is managed primarily by the Missile Defense Agency (MDA) and involves multiple programs and systems. Annual budgets for missile defense often exceed tens of billions of dollars, covering research, development, testing, and procurement of various interceptors, sensors, and command and control systems. This specific contract contributes to the sustainment and production of existing capabilities, ensuring the availability of critical assets within the layered defense architecture. Its value, while substantial, is one part of a much larger, ongoing investment in national missile defense.

Industry Classification

NAICS: Manufacturing › Other Electrical Equipment and Component Manufacturing › All Other Miscellaneous Electrical Equipment and Component Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002411R4500

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 199 BORTON LANDING RD, MOORESTOWN, NJ, 08057

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $317,957,852

Exercised Options: $314,618,313

Current Obligation: $308,891,675

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline