DoD's $1.55B contract for Trident missile systems awarded to Lockheed Martin, raising value-for-money questions

Contract Overview

Contract Amount: $12,023,492 ($12.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2002-05-10

End Date: 2004-03-31

Contract Duration: 691 days

Daily Burn Rate: $17.4K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200208!00A174!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0049 !A!N! !N! !20020510!20040331!155109184!155109184!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED WAY MARINE !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!+000012035310!N!N!000000000000!H914!OTHER QUALITY CNTL SVCS/GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !336414!E! !3! ! ! ! ! !99990909!B!F!N!N!Z!B!U!U!1!001!N!4A!A!Y!Z! ! !N!C!N! ! ! !B!B!A!A!000!A!C!Y! ! ! ! ! ! !0001!

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $12.0 million to LOCKHEED MARTIN CORPORATION for work described as: 200208!00A174!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0049 !A!N! !N! !20020510!20040331!155109184!155109184!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED WAY MARINE !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA… Key points: 1. Contract value of $1.55 billion for strategic missile systems. 2. Awarded to a single, dominant contractor, limiting competitive pressure. 3. Potential for cost overruns given the cost-plus contract type. 4. Long-term strategic importance of the Trident missile program. 5. Contract duration of approximately two years. 6. Focus on quality control and services for guided missiles.

Value Assessment

Rating: questionable

The contract's value of $1.55 billion for strategic missile systems is substantial. However, the cost-plus fixed fee structure introduces risk for cost overruns, as the contractor is incentivized to incur costs to achieve a higher fee. Without detailed cost breakdowns or comparisons to similar, competitively bid contracts, it is difficult to definitively assess value for money. The lack of competition further complicates a robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicated by 'NOT AVAILABLE FOR COMPETITION'. This sole-source award to Lockheed Martin Corporation suggests a lack of available alternatives or a strategic decision to award to the incumbent. The absence of a competitive bidding process means that price discovery through market forces was not utilized, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding, as there was no market pressure to drive down costs.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Strategic Systems Programs, ensuring the continued operation and maintenance of the Trident missile system. Services delivered include quality control and support for guided missiles, crucial for national defense. The geographic impact is primarily within the United States, supporting defense infrastructure and potentially related industrial bases. Workforce implications include specialized engineering, manufacturing, and quality assurance roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus contract type can lead to higher-than-expected costs.
Sole-source award limits opportunities for competitive pricing.
Lack of transparency in cost justification for sole-source awards.
Long-term reliance on a single contractor for critical defense systems.

Positive Signals

Award to a contractor with established expertise in missile systems.
Focus on quality control suggests a commitment to system reliability.
Contract supports a critical component of national strategic deterrence.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a highly specialized and critical area of the defense industry. The market is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of producing such complex systems. Spending in this sector is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish due to the unique nature of strategic weapon systems.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans within the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Lockheed Martin actively engages them in its supply chain. Further analysis would be needed to determine subcontracting opportunities for small businesses.

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 Audit Agency (DCAA) for cost and performance monitoring. Inspector General oversight is standard for DoD contracts to investigate fraud, waste, and abuse. Transparency is limited by the sole-source nature and the classification of strategic defense systems.

Related Government Programs

Strategic Systems Programs
Ballistic Missile Defense Systems
Naval Weapons Systems
Guided Missile Manufacturing
Defense Contract Management Agency

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competitive bidding
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.0 million to LOCKHEED MARTIN CORPORATION. 200208!00A174!1700!XSP01 !STRATEGIC SYSTEMS PROGRAMS !N0003002C0049 !A!N! !N! !20020510!20040331!155109184!155109184!834951691!N!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED WAY MARINE !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!+000012035310!N!N!000000000000!H914!OTHER QUALITY CNTL SVCS/GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !336414!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $12.0 million.

What is the period of performance?

Start: 2002-05-10. End: 2004-03-31.

What is Lockheed Martin Corporation's track record with similar strategic missile system contracts?

Lockheed Martin Corporation has a long and extensive history as a prime contractor for various U.S. military programs, including strategic missile systems. They are the prime contractor for the Trident II D5 missile and have been involved in its development, production, and sustainment for decades. Their track record includes managing complex, high-value defense contracts, often involving advanced technologies and stringent quality requirements. While their experience is extensive, the scale and nature of these contracts mean that oversight and performance evaluation are critical to ensure value and reliability. Past performance reviews and contract audits would provide more granular detail on their specific successes and challenges with similar programs.

How does the $1.55 billion contract value compare to historical spending on the Trident missile program?

The $1.55 billion contract value represents a significant investment in the Trident missile program over its approximately two-year duration (May 2002 - March 2004). Historical spending on the Trident program, which has been ongoing for many years, likely totals many billions of dollars, encompassing research, development, procurement, and sustainment. This specific contract appears to be for a defined period of quality control services and potentially component support for the UGM-96 Trident. To provide a precise comparison, one would need to analyze annual spending trends for the Trident program across different fiscal years and contract types, looking at both prime contracts and subcontracts. Without that broader context, this $1.55 billion figure should be viewed as a snapshot of spending for a specific service period.

What are the primary risks associated with a cost-plus fixed fee contract for missile systems?

Cost-Plus Fixed Fee (CPFF) contracts, like the one awarded to Lockheed Martin, carry inherent risks for the government. The primary risk is that the contractor may not have a strong incentive to control costs, as their profit (fee) is a fixed amount regardless of the final project cost. This can lead to cost overruns if the contractor's initial cost estimates are inaccurate or if unforeseen issues arise. The government bears the risk of cost increases, potentially paying more than anticipated. Effective oversight, detailed cost tracking, and robust negotiation of the fee structure are crucial to mitigate these risks. The CPFF structure is often used when the scope of work is not precisely defined or involves significant uncertainty, but it requires diligent government management.

What is the strategic importance of the UGM-96 Trident missile system to U.S. national security?

The UGM-96 Trident missile system, specifically the Trident II D5 variant, is a cornerstone of the United States' strategic nuclear deterrent. It is deployed on U.S. Navy ballistic missile submarines (SSBNs), providing a highly survivable and credible second-strike capability. This capability is crucial for deterring potential adversaries from launching a first strike against the U.S. or its allies. The system's reliability, range, and payload capacity (including multiple independently targetable reentry vehicles - MIRVs) make it a vital component of maintaining strategic stability and ensuring national security in a complex geopolitical environment. Contracts supporting its maintenance, quality control, and sustainment are therefore of paramount importance.

How does the sole-source nature of this award impact the government's ability to ensure competitive pricing?

A sole-source award fundamentally bypasses the competitive pricing process. When a contract is not competed, the government loses the benefit of market forces driving down prices through multiple bids. Instead, the government must rely on negotiation and justification of the proposed price based on historical data, cost analysis, and fair and reasonable pricing standards. In this case, awarding $1.55 billion without competition means the government did not have the opportunity to solicit offers from other potential suppliers, which could have led to a lower price. This approach is typically reserved for situations where only one source can provide the required goods or services, or for reasons of national security or urgency, but it inherently reduces the government's leverage in price negotiations.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: QUALITY CONTROL, TEST, INSPECTION › OTHER QUALITY, TEST, INSPECT SVCS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 1111 LOCKHEED WAY MARINE, SUNNYVALE, CA, 17

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline