Lockheed Martin awarded $794M for missile and space systems, with significant cost overruns anticipated

Contract Overview

Contract Amount: $10,567,706 ($10.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2004-04-07

End Date: 2028-02-07

Contract Duration: 8,706 days

Daily Burn Rate: $1.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200408!002728!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0093 !A!N! !N! ! !20040407!20090331!794571448!794571448!834951691!N!LOCKHEED MARTIN CORPORATION !1701 W MARSHALL DRIVE !GRAND PRAIRIE !TX!75051!30464!113!48!GRAND PRAIRIE !DALLAS !TEXAS !+000000130182!Y!N!000000000000!1055!LAUNCHERS, ROCKET AND PYROTECHNIC !A2 !MISSILE AND SPACE SYSTEMS !000 !* !336419!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!U!1!001!N!1B!A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!00 !A!C!Y! ! ! ! ! ! !0001! !

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $10.6 million to LOCKHEED MARTIN CORPORATION for work described as: 200408!002728!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0093 !A!N! !N! ! !20040407!20090331!794571448!794571448!834951691!N!LOCKHEED MARTIN CORPORATION !1701 W MARSHALL DRIVE !GRAND PRAIRIE !TX!75051!30464!113!48!GRAND PRAIRIE !DALL… Key points: 1. Contract value significantly exceeds initial estimates, raising concerns about cost control. 2. Sole-source award limits competitive pressure, potentially impacting price efficiency. 3. Long contract duration suggests potential for evolving requirements and scope creep. 4. The contractor has a substantial history with the Department of Defense. 5. This contract falls within the broader defense sector, specifically missile and space systems. 6. Potential for cost overruns indicated by the contract type and historical performance.

Value Assessment

Rating: concerning

The total contract value of $794,571,448 is substantial. However, the initial award amount was $794,571,448, with a potential ceiling of $834,951,691, indicating a significant potential increase. The contract type (Cost Plus Fixed Fee) often carries a higher risk of cost overruns compared to fixed-price contracts. Without comparable sole-source contracts for similar missile and space systems, it is difficult to definitively benchmark the value, but the potential for cost escalation warrants close monitoring.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means that price discovery through market forces was not utilized, which can sometimes lead to less favorable pricing for the government.

Taxpayer Impact: A sole-source award means taxpayers did not benefit from competitive bidding, which could have potentially driven down costs. This necessitates strong oversight to ensure fair pricing.

Public Impact

The primary beneficiary is the U.S. Army, which will receive critical missile and space vehicle components. Services delivered include the manufacturing and supply of 'LAUNCHERS, ROCKET AND PYROTECHNIC' and related missile and space systems. The geographic impact is primarily within Texas, where Lockheed Martin's facility is located, but the end-use is national defense. Workforce implications include employment at Lockheed Martin's Grand Prairie, TX facility and potentially its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type increases risk of cost overruns.
Sole-source award limits competitive pricing pressure.
Long contract duration (initial award 2004-04-07 to 2028-02-07) increases exposure to changing requirements and market conditions.
Potential for significant cost increases indicated by the difference between award and ceiling amounts.
Contractor's historical performance on similar large-scale defense contracts needs thorough review for cost control effectiveness.

Positive Signals

Lockheed Martin is a major defense contractor with extensive experience in missile and space systems.
The contract supports critical national defense capabilities.
The award is for essential components within the guided missile and space vehicle manufacturing sector.

Sector Analysis

This contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' industry. This sector is characterized by high technological complexity, significant R&D investment, and long production cycles. Major players like Lockheed Martin dominate the market due to the specialized nature of the work and high barriers to entry. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of defense systems, but overall defense spending on missile technology is in the billions annually.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the nature of missile and space systems manufacturing, it is likely that Lockheed Martin will utilize a complex supply chain, which may include subcontracting opportunities for small businesses. However, the primary award is to a large prime contractor, and the direct impact on small business set-asides is not evident from the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and potentially the Department of Defense's Inspector General. Accountability measures would be tied to the Cost Plus Fixed Fee structure, requiring detailed cost reporting and justification from the contractor. Transparency is generally limited for sole-source defense contracts, but contract modifications and performance reports would be subject to internal review and potentially public reporting through systems like FPDS.

Related Government Programs

Guided Missile and Space Vehicle Manufacturing
Defense Procurement
Aviation and Missile Command Contracts
Lockheed Martin Defense Contracts
Cost Plus Fixed Fee Contracts

Risk Flags

Potential for Cost Overruns
Sole-Source Award
Long Contract Duration
Cost Plus Fixed Fee Contract Type

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.6 million to LOCKHEED MARTIN CORPORATION. 200408!002728!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q04C0093 !A!N! !N! ! !20040407!20090331!794571448!794571448!834951691!N!LOCKHEED MARTIN CORPORATION !1701 W MARSHALL DRIVE !GRAND PRAIRIE !TX!75051!30464!113!48!GRAND PRAIRIE !DALLAS !TEXAS !+000000130182!Y!N!000000000000!1055!LAUNCHERS, ROCKET AND PYROTECHNIC !A2 !MISSILE AND SPACE SYSTEMS !000 !* !336419!E! !3! ! ! ! ! !999

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 Army).

What is the total obligated amount?

The obligated amount is $10.6 million.

What is the period of performance?

Start: 2004-04-07. End: 2028-02-07.

What is Lockheed Martin's track record with Cost Plus Fixed Fee (CPFF) contracts, particularly within the missile and space sector?

Lockheed Martin, as a major defense contractor, has extensive experience with various contract types, including CPFF. CPFF contracts are common for complex, high-risk projects where costs are difficult to predict accurately upfront. While CPFF contracts allow for flexibility and cost recovery for the contractor, they also place a significant burden on the government to meticulously oversee costs and ensure efficiency. Lockheed Martin's historical performance on CPFF contracts would need to be analyzed to assess their ability to manage costs effectively and avoid significant overruns. This involves reviewing past projects for budget adherence, the frequency and magnitude of cost adjustments, and the government's assessment of value received.

How does the awarded amount compare to the potential ceiling, and what does this imply for future spending?

The contract was awarded at $794,571,448 with a ceiling of $834,951,691. This indicates a potential increase of approximately $40 million, or about 5%, above the initial award. For a contract of this magnitude and duration, this difference is not immediately alarming but warrants close monitoring. It suggests that the government has allocated contingency funds for potential cost increases inherent in complex manufacturing. However, if the contract consistently approaches or exceeds this ceiling through subsequent modifications, it would signal significant cost control issues and potential budget overruns for the taxpayer.

What are the primary risks associated with a sole-source award for missile and space vehicle components?

The primary risk of a sole-source award is the lack of competitive pressure, which can lead to higher prices than might be achieved in an open market. Without competing bids, the government relies heavily on negotiation and oversight to ensure fair pricing. For specialized components like missile launchers, there may be limited qualified suppliers, justifying a sole-source approach. However, this necessitates robust cost analysis and benchmarking by the government to validate the contractor's pricing. Another risk is potential complacency from the contractor, assuming a captive market, which could impact innovation and efficiency over the long term.

What is the typical duration for contracts of this nature, and how does this contract's length compare?

Contracts for complex defense systems, such as missile and space vehicle components, often have long durations due to the lengthy development, testing, and production cycles involved. Durations can range from several years to over a decade, especially if they include options for production, sustainment, or upgrades. This contract, with an initial period from April 7, 2004, to March 31, 2009, and a potential extension to February 7, 2028 (totaling nearly 24 years), is on the longer end, even for defense programs. Such extended periods allow for program stability but also increase the risk of obsolescence, requirement changes, and cost escalation over time.

What are the implications of the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' classification for this contract?

This classification indicates that the contract is for components or auxiliary equipment related to guided missiles and space vehicles, rather than the complete systems themselves. This suggests a focus on specific parts, subsystems, or manufacturing support. The 'Other' designation implies it might not fit neatly into more specific categories like 'Missile Launchers' or 'Space Vehicle Components,' potentially indicating a diverse range of items or specialized auxiliary equipment. This classification highlights the intricate nature of defense supply chains, where numerous specialized manufacturers contribute to the final product.

Industry Classification

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

Product/Service Code: WEAPONS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 1701 W MARSHALL DRIVE, GRAND PRAIRIE, TX, 75051

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $11,028,220

Exercised Options: $11,028,220

Current Obligation: $10,567,706

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline