DoD awards $773M to Lockheed Martin for Trident II missile production and support, a sole-source contract

Contract Overview

Contract Amount: $772,861,905 ($772.9M)

Contractor: Lockheed Martin Corp

Awarding Agency: Department of Defense

Start Date: 2018-08-08

End Date: 2023-09-30

Contract Duration: 1,879 days

Daily Burn Rate: $411.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FY19 TRIDENT PRODUCTION AND DEPLOYED SYSTEMS SUPPORT

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $772.9 million to LOCKHEED MARTIN CORP for work described as: FY19 TRIDENT PRODUCTION AND DEPLOYED SYSTEMS SUPPORT Key points: 1. Contract awarded to a single, established prime contractor for a critical defense system. 2. Long-term contract duration suggests ongoing need for missile sustainment and upgrades. 3. Fixed-price incentive contract type aims to balance cost control with contractor performance. 4. High value indicates significant investment in strategic deterrence capabilities. 5. Sole-source nature raises questions about potential for price competition and value. 6. Contractor has extensive experience with the Trident program, implying technical capability.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized, high-stakes nature of strategic missile systems. The fixed-price incentive structure suggests an attempt to manage costs, but without competitive bids, it's difficult to definitively assess if the pricing represents optimal value for taxpayers. The long duration and high dollar value indicate a significant, ongoing investment in national security, but the lack of competition limits the ability to compare pricing against market alternatives.

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 is often taken for highly specialized defense systems where a single contractor possesses unique expertise, intellectual property, or manufacturing capabilities. While this ensures continuity and leverages existing knowledge, it bypasses the potential benefits of a competitive bidding process, which could drive down costs and foster innovation.

Taxpayer Impact: The sole-source award means taxpayers do not benefit from the price reductions typically achieved through competitive bidding. This can lead to higher overall costs for the acquisition and sustainment of these critical defense assets.

Public Impact

Benefits the U.S. Navy's strategic deterrence capabilities through the production and support of Trident II missiles. Ensures the operational readiness and effectiveness of the submarine-launched ballistic missile (SLBM) fleet. Supports high-tech manufacturing jobs within Lockheed Martin and its supply chain, primarily in California. Contributes to national security by maintaining a credible nuclear deterrent.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long-term contract duration may not fully account for evolving technological needs or potential obsolescence.
High dollar value requires robust oversight to ensure funds are used efficiently and effectively.
Dependence on a single contractor for a critical defense system poses a strategic risk.

Positive Signals

Lockheed Martin's extensive experience with the Trident program suggests a high likelihood of successful execution.
Fixed-price incentive contract type provides some incentive for cost control and performance.
Contract supports a critical national security capability, ensuring readiness of strategic deterrent forces.
Long-term award provides stability for production and sustainment, ensuring program continuity.

Sector Analysis

The defense industrial base, specifically the segment focused on strategic weapons systems, is characterized by high barriers to entry, significant R&D investment, and long program lifecycles. Lockheed Martin is a dominant player in this sector, particularly in missile manufacturing. This contract for Trident II production and support fits within the broader context of maintaining and modernizing the U.S. nuclear triad. Comparable spending benchmarks are difficult to establish due to the unique nature of these systems, but investments in strategic missile programs typically represent a substantial portion of defense budgets.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions, as indicated by 'sb': false. Given the specialized nature of Trident II missile production and support, it is likely that Lockheed Martin relies on a complex supply chain. While direct set-asides are absent, the prime contractor may engage small businesses as subcontractors for specific components or services, though the extent of this is not detailed in the provided data. The impact on the broader small business ecosystem is likely indirect, through the prime contractor's procurement activities.

Oversight & Accountability

Oversight for this contract is likely managed by the Defense Contract Management Agency (DCMA), which is responsible for ensuring contractor performance and compliance. The fixed-price incentive contract type includes performance metrics that would be monitored. Transparency regarding specific performance details and cost breakdowns may be limited due to the sensitive nature of strategic weapons systems. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Trident II D5 Missile Program
Submarine-Launched Ballistic Missile (SLBM) Fleet
Strategic Weapons Systems
Nuclear Deterrence Programs
Ballistic Missile Defense Systems

Risk Flags

Sole-source award
High contract value
Critical defense system
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $772.9 million to LOCKHEED MARTIN CORP. FY19 TRIDENT PRODUCTION AND DEPLOYED SYSTEMS SUPPORT

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORP.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $772.9 million.

What is the period of performance?

Start: 2018-08-08. End: 2023-09-30.

What is Lockheed Martin's track record with the Trident II missile program?

Lockheed Martin has been the prime contractor for the Trident II D5 missile program for decades, responsible for its design, development, production, and sustainment. The company has a long history of delivering these complex systems to the U.S. Navy and has consistently met program milestones and performance requirements. Their extensive experience and established infrastructure provide a deep understanding of the missile's intricacies, ensuring continuity and reliability. This long-standing relationship suggests a high degree of trust and proven capability in managing this critical strategic asset, although it also underscores the sole-source nature of current and future contracts.

How does the pricing structure of this fixed-price incentive contract compare to other defense contracts?

Fixed-price incentive (FPI) contracts are common in defense procurement, aiming to share cost risks and rewards between the government and the contractor. Unlike firm-fixed-price contracts, FPI allows for adjustments to the final price based on the contractor's performance against target cost and target profit goals. This structure incentivizes the contractor to control costs while ensuring a reasonable profit. Compared to cost-plus contracts, FPI offers greater cost certainty for the government. However, without competitive bids, assessing whether the target costs and incentives represent optimal value remains difficult. The specific profit-sharing formula and ceiling price are critical elements in determining the ultimate value realized by the government.

What are the primary risks associated with a sole-source award for a critical defense system like the Trident II?

The primary risk of a sole-source award for the Trident II missile system is the lack of price competition, which can lead to higher costs for the government compared to a competitively bid contract. This can result in less efficient use of taxpayer funds. Additionally, sole-sourcing can reduce the incentive for the contractor to innovate or aggressively pursue cost-saving measures, as there is no direct market pressure. Dependence on a single supplier also creates a strategic vulnerability; any disruption in the contractor's operations, such as financial instability, labor disputes, or supply chain issues, could significantly impact the availability and readiness of these critical strategic assets. Furthermore, it limits opportunities for new entrants or alternative technologies to be considered.

How effective is the fixed-price incentive contract type in ensuring program effectiveness for the Trident II?

The fixed-price incentive (FPI) contract type is designed to promote program effectiveness by aligning the interests of the government and the contractor. It establishes a target cost, a target profit, and an incentive sharing ratio, where both parties benefit from cost savings below the target or share in cost overruns above the target, up to a ceiling price. This structure encourages the contractor to manage resources efficiently and meet performance objectives to maximize their profit. For a complex system like the Trident II, where technical performance is paramount, the FPI structure can help ensure that the missile meets stringent operational requirements while providing some level of cost control for the government. However, the effectiveness is highly dependent on the realism of the initial cost estimates and the clarity of performance metrics.

What are the historical spending patterns for Trident production and support, and how does this contract fit?

Historical spending on the Trident II D5 missile program has been substantial, reflecting its status as a cornerstone of U.S. strategic deterrence. Annual expenditures have fluctuated based on production rates, modernization efforts, and sustainment needs. The $773 million awarded in this definitive contract represents a significant, multi-year investment, likely encompassing both ongoing production of new missiles and comprehensive support services for the deployed fleet. This level of spending is consistent with the long-term, high-cost nature of maintaining and upgrading strategic weapons systems. Understanding the historical context of previous contracts, including their duration, value, and any competitive elements, is crucial for assessing the current contract's value and efficiency, though such detailed historical data is not provided here.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0003018Q0100

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 1111 LOCKHEED MARTIN WAY, SUNNYVALE, CA, 94089

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

Financial Breakdown

Contract Ceiling: $774,966,700

Exercised Options: $774,732,864

Current Obligation: $772,861,905

Actual Outlays: $18,274,702

Subaward Activity

Number of Subawards: 742

Total Subaward Amount: $2,444,790,679

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline