DoD awards $794.6M contract to Lockheed Martin for Patriot PAC-3 missile systems, extending through 2019

Contract Overview

Contract Amount: $1,483,829,804 ($1.5B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2006-04-13

End Date: 2019-09-30

Contract Duration: 4,918 days

Daily Burn Rate: $301.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 200608!002852!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q06C0180 !A!N! !N! ! !20060413!20080331!794571448!794571448!834951691!N!LOCKHEED MARTIN CORPORATION !1701 W MARSHALL DRIVE !GRAND PRAIRIE !TX!75051!30464!113!48!GRAND PRAIRIE !DALLAS !TEXAS !+000379760000!N!N!000000000000!1440!LAUNCHERS, GUIDED MISSILE !A2 !MISSILE AND SPACE SYSTEMS !148 !PATRIOT PAC-3 !336414!E! !3! ! ! ! ! !99990909!B! ! !A! !D!N!J!1!001!N!1G!A!Y!C! ! !N!C!N! ! ! !A!A!A!A!000!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 $1.48 billion to LOCKHEED MARTIN CORPORATION for work described as: 200608!002852!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q06C0180 !A!N! !N! ! !20060413!20080331!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 of $794.6 million indicates a significant investment in missile defense capabilities. 2. Sole-source award raises questions about competition and potential for price optimization. 3. Long contract duration of over 12 years suggests a sustained need for these systems. 4. The contract supports the critical mission of missile defense for national security. 5. Focus on a specific, high-value defense system highlights strategic procurement priorities. 6. The award is concentrated with a single, established defense contractor, limiting broader market engagement.

Value Assessment

Rating: fair

The contract value of $794.6 million for Patriot PAC-3 missile systems appears substantial, reflecting the complexity and strategic importance of the hardware. Without direct comparable contract data for the same period and specific configuration, a precise value-for-money assessment is challenging. However, the extensive duration suggests a long-term commitment that, if managed effectively, could lead to economies of scale. The absence of competition in this sole-source award means that pricing is negotiated directly with the contractor, potentially leading to higher costs than if multiple bids were considered.

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 typically used when a specific system is unique, proprietary, or when there is an urgent need that cannot be met through competitive bidding. The lack of competition means that the government did not benefit from the price discovery mechanisms inherent in a multi-bidder scenario, potentially impacting the final negotiated price.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. The government's negotiating position is inherently weaker in a sole-source scenario, necessitating robust internal cost analysis and negotiation strategies to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Army and potentially allied nations requiring advanced air and missile defense capabilities. The contract delivers critical components and support for the Patriot PAC-3 missile system, enhancing national security. Geographic impact is national, supporting defense infrastructure and readiness across various military installations. Workforce implications include sustained employment at Lockheed Martin facilities involved in missile production and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Long contract duration could lead to vendor lock-in and reduced flexibility in future procurements.
Lack of transparency in the sole-source negotiation process makes independent value assessment difficult.

Positive Signals

Awarding to a sole-source provider ensures access to specialized, critical defense technology.
The contract supports a proven and essential missile defense system, vital for national security.
Long-term commitment can foster stability and predictability for the contractor, potentially leading to efficiencies.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on missile and space systems manufacturing. The market for advanced air and missile defense systems is highly specialized, dominated by a few large defense contractors. Spending in this area is driven by national security priorities and evolving threat landscapes. Comparable spending benchmarks would typically involve other major defense procurement programs for advanced weaponry and defense platforms, often running into hundreds of millions or billions of dollars.

Small Business Impact

There is no indication of small business set-asides or subcontracting plans within the provided data for this specific award. As a sole-source contract awarded to a large prime contractor, the direct impact on small businesses is likely limited unless Lockheed Martin independently incorporates them into its supply chain. Further investigation into subcontracting opportunities would be necessary to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense's contracting and program management offices. Accountability measures would include contract performance reviews, milestone tracking, and financial audits. Transparency is limited due to the sole-source nature, but reporting requirements for major defense contracts typically exist. The Inspector General's office may conduct audits or investigations as deemed necessary.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Guided Missile Manufacturing
Air and Missile Defense Contracts
Department of Defense Procurement

Risk Flags

Sole-source award
Lack of competitive bidding
High contract value
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.48 billion to LOCKHEED MARTIN CORPORATION. 200608!002852!2100!W31P4Q!USA AVIATION AND MISSILE COMMAND!W31P4Q06C0180 !A!N! !N! ! !20060413!20080331!794571448!794571448!834951691!N!LOCKHEED MARTIN CORPORATION !1701 W MARSHALL DRIVE !GRAND PRAIRIE !TX!75051!30464!113!48!GRAND PRAIRIE !DALLAS !TEXAS !+000379760000!N!N!000000000000!1440!LAUNCHERS, GUIDED MISSILE !A2 !MISSILE AND SPACE SYSTEMS !148 !PATRIOT PAC-3 !336414!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 $1.48 billion.

What is the period of performance?

Start: 2006-04-13. End: 2019-09-30.

What is the historical spending trend for the Patriot PAC-3 missile system under Lockheed Martin?

Historical spending data for the Patriot PAC-3 missile system under Lockheed Martin reveals a consistent and significant investment by the Department of Defense over many years. Prior to this $794.6 million award, numerous contracts, both competitive and sole-source, would have been issued for research, development, production, and sustainment. Analyzing cumulative spending would provide context on the total lifecycle cost and the government's long-term commitment to this platform. For instance, if previous awards for similar quantities or capabilities were significantly lower or higher, it could indicate changes in production costs, inflation, or scope. Without access to a comprehensive historical database of all related contracts, a precise trend analysis is difficult, but the scale of this single award suggests a substantial overall investment.

How does the per-unit cost of the PAC-3 missile compare to other similar missile defense systems?

Determining the precise per-unit cost for the PAC-3 missile within this $794.6 million contract is challenging without detailed breakdowns of the contract's CLINs (Contract Line Item Numbers) and quantities. However, publicly available estimates and analyses from defense think tanks often place the cost of a single PAC-3 missile in the range of $1 million to $4 million, depending on the specific variant (e.g., MSE) and associated support packages. This cost is generally considered high, reflecting the advanced technology, complex manufacturing processes, and extensive research and development invested in the system. When compared to other advanced missile defense interceptors, such as those used in systems like THAAD or Aegis BMD, the PAC-3 often falls within a similar high-cost bracket, reflecting the cutting-edge nature of these defensive capabilities.

What are the key performance indicators (KPIs) used to evaluate Lockheed Martin's performance on this contract?

Key performance indicators (KPIs) for a contract like this, involving the production and sustainment of advanced missile systems, typically focus on several critical areas. These include delivery schedule adherence, ensuring missiles and components are produced and delivered on time to meet operational requirements. Quality assurance is paramount, measured by defect rates, reliability testing results, and compliance with stringent military specifications. Technical performance metrics might assess the effectiveness and readiness of the delivered systems. Furthermore, cost control, while challenging in a sole-source environment, is often monitored through variance analysis against the contract's baseline. Finally, contractor responsiveness to government requests and effective program management are also crucial KPIs for ensuring mission success and taxpayer value.

What is the risk associated with relying on a single contractor for such a critical defense system?

Relying on a single contractor, like Lockheed Martin, for a critical defense system such as the Patriot PAC-3 introduces several risks. Foremost is the potential for 'vendor lock-in,' where the government becomes heavily dependent on one supplier, limiting its leverage in future negotiations and potentially stifling innovation. Supply chain disruptions, whether due to geopolitical events, natural disasters, or the contractor's internal issues, can have a severe impact on availability. Furthermore, the absence of competition can reduce the incentive for the contractor to aggressively pursue cost efficiencies or technological advancements beyond contractual requirements. While Lockheed Martin is a reputable defense contractor, the inherent risks of sole-source dependency necessitate robust government oversight, contingency planning, and continuous market surveillance.

What is the projected sustainment cost for the Patriot PAC-3 fleet over its operational life?

Projecting the sustainment cost for the Patriot PAC-3 fleet over its operational life is a complex undertaking, involving numerous variables such as maintenance schedules, spare parts provisioning, upgrades, training, and personnel. While this specific contract focuses on procurement, sustainment costs typically represent a significant portion, often exceeding the initial acquisition cost, of a weapon system's total lifecycle expenses. For advanced systems like the PAC-3, sustainment can run into billions of dollars over decades. Factors influencing these costs include the system's reliability, the availability and cost of spare parts, the need for periodic upgrades to counter evolving threats, and the efficiency of maintenance operations. Detailed lifecycle cost models are developed by the DoD to estimate and budget for these long-term sustainment expenses.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $1,683,609,673

Exercised Options: $1,683,609,673

Current Obligation: $1,483,829,804

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline