DoD's $44.6M Hellfire Missile Support Contract Awarded to Lockheed Martin Without Competition

Contract Overview

Contract Amount: $44,648,126 ($44.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-03-20

End Date: 2012-12-31

Contract Duration: 2,113 days

Daily Burn Rate: $21.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CONTRACTOR DEPOT LEVEL AND BELOW DEPOT LEVEL HELLFIRE MODULAR MISSILE SYSTEMS MAINTENENCE SUPPORT SERVICES AND CONTRACTOR OPERATIONS.

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $44.6 million to LOCKHEED MARTIN CORPORATION for work described as: CONTRACTOR DEPOT LEVEL AND BELOW DEPOT LEVEL HELLFIRE MODULAR MISSILE SYSTEMS MAINTENENCE SUPPORT SERVICES AND CONTRACTOR OPERATIONS. Key points: 1. Contract awarded on a sole-source basis, raising questions about price discovery and potential cost savings. 2. Significant duration of over 5 years suggests a long-term need for these specialized maintenance services. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not closely monitored. 4. Focus on depot-level and below depot-level maintenance indicates critical support for missile systems. 5. Lack of competition limits opportunities for other qualified contractors and potentially higher value. 6. The contractor, Lockheed Martin, is a major defense manufacturer, suggesting a strong existing relationship and specialized knowledge.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized services provided. Without competitive bids, it's difficult to ascertain if the $44.6 million represents a fair market price. The Cost Plus Fixed Fee structure, while common for complex services, carries inherent risks of cost escalation if not rigorously managed. Comparing this to similar sole-source maintenance contracts for complex weapon systems would be necessary for a more robust value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded without competition, meaning only one source, Lockheed Martin Corporation, was considered. This approach is typically justified when a specific contractor possesses unique capabilities, proprietary technology, or when urgency precludes a full and open competition. The absence of multiple bidders means there was no market pressure to drive down prices or encourage innovative solutions, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without alternative offers, the government could not leverage market forces to secure the best possible price for these essential missile maintenance services.

Public Impact

The U.S. Army benefits from the continued operational readiness of its Hellfire missile systems. Services include maintenance support at both depot and below depot levels, ensuring system functionality. The contract's geographic impact is primarily within Florida, where the contractor's operations are located. Workforce implications include employment for specialized technicians and support staff at Lockheed Martin facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs.
Cost Plus Fixed Fee contract type can incentivize contractor to increase costs.
Lack of transparency in the procurement process due to sole-source award.
Potential for vendor lock-in with a single provider for critical maintenance.

Positive Signals

Ensures continued operational readiness of critical missile systems.
Leverages specialized expertise of a known defense contractor.
Provides essential maintenance services for national security assets.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of the U.S. defense industrial base. The market is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors capable of producing and supporting advanced weapon systems. Spending in this sector is heavily influenced by government defense budgets and geopolitical factors. Comparable spending benchmarks would likely involve other sole-source or limited-competition contracts for the sustainment of complex aerospace and defense platforms.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss': false flag suggests it was not a small business prime award. While Lockheed Martin is a large corporation, there may be subcontracting opportunities for small businesses within their supply chain for components or specialized services related to missile maintenance. However, the primary award does not directly benefit small businesses as prime contractors.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Given the sole-source nature and the Cost Plus Fixed Fee structure, rigorous oversight of incurred costs, performance metrics, and adherence to contract terms would be crucial. Transparency might be limited due to the non-competitive award, but contract performance reviews and audits by the Defense Contract Audit Agency (DCAA) would be standard accountability measures. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Hellfire Missile Production
Missile System Maintenance
Defense Contractor Support Services
Guided Missile Manufacturing
Department of the Army Logistics

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of competitive bidding

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $44.6 million to LOCKHEED MARTIN CORPORATION. CONTRACTOR DEPOT LEVEL AND BELOW DEPOT LEVEL HELLFIRE MODULAR MISSILE SYSTEMS MAINTENENCE SUPPORT SERVICES AND CONTRACTOR OPERATIONS.

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 $44.6 million.

What is the period of performance?

Start: 2007-03-20. End: 2012-12-31.

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

Lockheed Martin Corporation has a long history of sole-source and limited-competition contracts for the production and sustainment of various missile systems, including the Hellfire. Their extensive experience and established infrastructure often position them as the sole viable provider for specialized maintenance and upgrades. Analyzing past performance on similar contracts would involve reviewing contract award histories, performance evaluations (e.g., CPARS), and any documented issues related to cost, schedule, or quality. Without specific access to these internal performance metrics for this particular contract, it's assumed that their extensive experience in this niche defense sector contributes to their selection for such critical support services.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other pricing arrangements for this type of service?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex services where the scope of work is not precisely defined at the outset, or where innovation is a key component. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of actual costs, and cost-reimbursement contracts without a fixed fee, which can offer less incentive for cost control. While CPFF provides flexibility and encourages contractor engagement in complex tasks, it carries a risk of cost overruns if the government's oversight is insufficient. For maintenance services, a firm-fixed-price contract might be preferred if the scope is well-defined, potentially offering better value for money, but CPFF is common for specialized, evolving support needs like missile systems.

What are the primary risks associated with awarding a contract of this magnitude on a sole-source basis?

The primary risks associated with sole-source awards, especially for a contract valued at $44.6 million, include a lack of price competition, which can lead to inflated costs for the government. Without competing bids, there's less incentive for the contractor to be efficient or offer the lowest possible price. There's also a risk of reduced innovation, as the contractor may not feel pressured to explore more cost-effective or technologically advanced solutions. Furthermore, sole-source awards can create a perception of favoritism and may limit opportunities for other capable businesses to enter or compete in the market. Effective government oversight and negotiation become paramount to mitigate these risks and ensure fair value.

What is the historical spending pattern for Hellfire missile maintenance support services by the Department of the Army?

Historical spending on Hellfire missile maintenance support services by the Department of the Army is likely substantial, given the system's long service life and critical role in various military operations. While specific aggregate data for 'Hellfire Missile Maintenance Support Services' is not readily available in public databases, the Army consistently allocates significant funds towards the sustainment and readiness of its weapon systems. This includes contracts for depot-level maintenance, repair, overhaul, and logistical support. The duration and value of this $44.6 million contract suggest a recurring need for such services. Analyzing broader categories like 'Missile and Related Equipment Maintenance' or 'Ordnance and Gunnery Equipment Maintenance' would reveal a pattern of consistent, multi-million dollar annual expenditures by the Army to ensure the operational readiness of its missile arsenals.

How does the geographic location of the contract performance (Florida) impact overall program costs or efficiency?

The geographic location of contract performance in Florida, where Lockheed Martin has significant operations, can influence costs and efficiency in several ways. Proximity to existing facilities and workforce may reduce mobilization costs and allow for quicker response times. However, if this location is not the most cost-effective or strategically advantageous for the specific maintenance tasks, it could lead to higher overall expenses due to factors like higher labor rates, transportation of components, or logistical complexities compared to other potential locations. The decision to perform work in Florida likely stems from Lockheed Martin's established infrastructure and capabilities there, which the Army deemed sufficient to justify the location despite potential alternative cost efficiencies elsewhere.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q06R0196

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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

Financial Breakdown

Contract Ceiling: $96,820,360

Exercised Options: $44,648,126

Current Obligation: $44,648,126

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline