DoD's $33.7M missile contract awarded to Lockheed Martin, raising questions about competition and value

Contract Overview

Contract Amount: $33,761,395 ($33.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2006-06-30

End Date: 2011-06-30

Contract Duration: 1,826 days

Daily Burn Rate: $18.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $33.8 million to LOCKHEED MARTIN CORPORATION for work described as: Key points: 1. The contract's value, while significant, requires careful benchmarking against similar missile system procurements. 2. Sole-source awards can limit price discovery and potentially lead to higher costs for taxpayers. 3. The long duration of the contract (5 years) necessitates ongoing performance monitoring. 4. The specific missile system's role within broader defense strategies provides performance context. 5. This contract falls within the highly specialized Guided Missile and Space Vehicle Manufacturing sector. 6. The absence of small business participation warrants scrutiny of subcontracting opportunities.

Value Assessment

Rating: questionable

Benchmarking this $33.7 million contract is challenging without detailed cost breakdowns and comparisons to similar missile systems. The Cost Plus Fixed Fee (CPFF) contract type, while common for complex R&D, can incentivize cost overruns if not managed tightly. Without competitive pressure, the pricing may not reflect optimal market value. Further analysis of the fixed fee and indirect cost rates is needed to assess true value for money.

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 considered. This approach is typically justified when a specific technology or capability is unique to a single provider, or in cases of urgent need where competition is impractical. However, the lack of competition limits the government's ability to explore alternative solutions or negotiate the best possible price.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from the price reductions typically achieved through competitive bidding, potentially leading to higher overall expenditure for this critical defense capability.

Public Impact

The primary beneficiaries are the Department of Defense, specifically the Department of the Army, receiving advanced missile systems. The contract supports the development and manufacturing of guided missiles and space vehicles, crucial for national security. The geographic impact is centered in Texas, where Lockheed Martin's operations are located, potentially supporting local employment. The contract likely sustains a highly skilled workforce in aerospace engineering and manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings.
CPFF contract type can lead to cost overruns if not rigorously managed.
Lack of transparency in cost components for sole-source procurements.
Absence of small business set-aside raises concerns about broader economic impact.

Positive Signals

Award to a prime contractor with extensive experience in missile systems.
Contract supports critical national defense capabilities.
Long-term contract provides stability for program execution.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and capital-intensive segment of the aerospace and defense industry. It is characterized by long development cycles, significant R&D investment, and a limited number of prime contractors capable of producing advanced systems. Government contracts, particularly from the Department of Defense, are the primary revenue source for companies in this space. Spending benchmarks are difficult to establish due to the unique nature of each system, but overall defense spending on missile procurement represents a substantial portion of the defense budget.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of mandatory subcontracting goals. Given the specialized nature of guided missile manufacturing, it is possible that large prime contractors like Lockheed Martin are the only entities capable of performing the primary work. However, opportunities for small businesses may exist further down the supply chain, though their extent is not detailed in the provided data. The lack of a specific small business focus could limit the participation of innovative smaller firms in this critical defense sector.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations. The Cost Plus Fixed Fee structure requires detailed auditing of costs incurred to ensure they align with the contract's objectives and the fixed fee. The Defense Contract Audit Agency (DCAA) and the Department of Defense Inspector General (DoDIG) would likely have oversight responsibilities, particularly concerning cost allowability and contractor performance. Transparency is often limited in sole-source procurements, making robust oversight crucial.

Related Government Programs

Missile Defense Systems
Strategic Weapons Programs
Aerospace Manufacturing Contracts
Department of Defense Procurement

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.8 million to LOCKHEED MARTIN CORPORATION. See the official description on USAspending.

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 $33.8 million.

What is the period of performance?

Start: 2006-06-30. End: 2011-06-30.

What is Lockheed Martin's track record with similar sole-source missile system contracts?

Lockheed Martin Corporation has a long and extensive history of developing and producing complex missile systems for the U.S. military and international allies. They are a primary contractor for numerous programs, including ballistic missiles, air defense missiles, and tactical missiles. Their track record often involves sole-source or limited-competition awards due to the proprietary nature of their technologies and the significant R&D investments required. While this provides a basis for technical capability, it also underscores the importance of rigorous government oversight to ensure fair pricing and value, as competitive benchmarking is often difficult for these unique systems. Past performance reviews and contract closeouts for similar programs would offer deeper insights into their cost management and delivery reliability.

How does the $33.7 million value compare to similar missile system contracts awarded by the DoD?

Directly comparing the $33.7 million value of this contract to 'similar' missile system contracts is challenging without specific details on the system's complexity, quantity, and technological sophistication. Missile systems can range from relatively simple tactical munitions to highly advanced strategic defense platforms, each with vastly different cost structures. However, for a 5-year definitive contract involving guided missile and space vehicle manufacturing, $33.7 million represents a moderate investment. Larger, multi-year programs for major weapon systems often run into billions of dollars. This figure suggests a focus on a specific component, upgrade, or a smaller-scale production run rather than a full-scale acquisition of a new major missile platform. Benchmarking would require identifying contracts for systems with comparable technological maturity and scope.

What are the primary risks associated with a sole-source Cost Plus Fixed Fee (CPFF) contract for missile manufacturing?

The primary risks associated with a sole-source CPFF contract for missile manufacturing are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated prices and reduced incentive for the contractor to innovate or optimize costs. The government foregoes the opportunity to explore alternative solutions or negotiate based on multiple bids. Secondly, the CPFF structure, while allowing for flexibility in R&D and complex projects, carries inherent risks of cost overruns. The contractor is reimbursed for allowable costs plus a predetermined fixed fee. If cost controls are weak or if unforeseen technical challenges arise, costs can escalate significantly, with the government bearing the brunt. Effective oversight, stringent cost accounting standards, and clear performance metrics are crucial to mitigate these risks.

What is the expected program effectiveness or outcome based on this contract?

Based on the contract data, the expected outcome is the continued production or development of guided missiles and space vehicles by Lockheed Martin for the Department of the Army. The contract's duration of five years (from June 2006 to June 2011) suggests a sustained effort, likely involving manufacturing, testing, and potentially integration into larger defense systems. The effectiveness will be measured by the reliability, performance, and operational readiness of the delivered missile systems. Given the 'Guided Missile and Space Vehicle Manufacturing' description, the contract likely aims to ensure the availability of critical ordnance or components necessary for national defense missions. Success hinges on meeting technical specifications, delivery schedules, and maintaining the required quality standards.

How has historical spending on guided missile and space vehicle manufacturing by the DoD trended?

Historical spending by the Department of Defense (DoD) on guided missile and space vehicle manufacturing has generally trended upwards, particularly following periods of geopolitical tension or shifts in military strategy emphasizing advanced weaponry. This sector represents a significant portion of the defense budget due to the high R&D costs, complex manufacturing processes, and strategic importance of these systems. Major defense contractors like Lockheed Martin consistently receive substantial portions of this spending. Trends are influenced by technological advancements (e.g., hypersonic missiles, drone integration), evolving threats, and congressional appropriations. While specific figures fluctuate annually based on program priorities and budget cycles, the overall investment in this area remains robust, reflecting its critical role in maintaining military superiority.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline