DoD awards $81.7M for PAC-3 Missile Support, a sole-source contract with Lockheed Martin

Contract Overview

Contract Amount: $81,680,540 ($81.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2007-01-31

End Date: 2024-02-05

Contract Duration: 6,214 days

Daily Burn Rate: $13.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PAC-3 MISSILE SUPPORT CENTER

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $81.7 million to LOCKHEED MARTIN CORPORATION for work described as: PAC-3 MISSILE SUPPORT CENTER Key points: 1. Contract awarded to a single, established provider, limiting price negotiation opportunities. 2. Long-term contract duration suggests a sustained need for missile support services. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring close oversight. 4. The contract is a sole-source award, indicating a lack of competitive bidding. 5. This award represents a significant investment in missile defense capabilities. 6. The contract's value is substantial, reflecting the complexity of the supported systems.

Value Assessment

Rating: fair

This contract's value of over $81 million for PAC-3 missile support, awarded sole-source to Lockheed Martin, warrants scrutiny. Without competitive bidding, it's challenging to benchmark against market rates or similar contracts. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex defense systems, can lead to higher costs if not managed diligently. The long duration of the contract (over 17 years) also means that the total expenditure could significantly exceed the current award amount, making ongoing value assessment crucial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed. This typically occurs when a specific contractor possesses unique capabilities or intellectual property essential for the product or service. In this case, Lockheed Martin is the prime contractor for the PAC-3 missile system, making them the only viable source for its support. The lack of competition means that the government did not benefit from potential price reductions or innovative solutions that might have emerged from a bidding process.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to drive down prices. This necessitates robust negotiation and oversight to ensure fair pricing.

Public Impact

The U.S. Army benefits from continued support and maintenance for its critical PAC-3 missile defense systems. This contract ensures the operational readiness of a key component of national missile defense. The contract supports specialized technical expertise and sustainment services for advanced missile technology. Work is primarily located in Texas, contributing to the local economy and specialized workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Cost-plus-fixed-fee contract type may incentivize higher costs without strict oversight.
Long contract duration (over 17 years) increases the risk of cost overruns and reduced value over time.
Lack of transparency in pricing due to sole-source nature makes independent value assessment difficult.

Positive Signals

Ensures continued availability of critical missile defense systems, enhancing national security.
Leverages the specialized expertise of the original equipment manufacturer for complex systems.
Long-term contract provides stability for sustainment operations and planning.
Awarded to a prime contractor with a proven track record in missile systems.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and critical part of the aerospace and defense industry. Companies in this sector are involved in the design, development, production, and sustainment of advanced weapon systems. Spending in this area is often characterized by long-term contracts, significant R&D investment, and a limited number of prime contractors due to the complexity and proprietary nature of the technologies. This contract for PAC-3 missile support fits squarely within this domain, representing ongoing sustainment for a key defense asset.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the sole-source nature and the specialized requirements for PAC-3 missile support, it is unlikely that small businesses would be primary contractors. However, Lockheed Martin, as the prime contractor, may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data. Further investigation into subcontracting plans would be needed to assess the impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and potentially the Department of Defense's Inspector General. Given the sole-source and cost-plus-fixed-fee nature, rigorous oversight is essential to monitor costs, ensure performance, and prevent fraud or abuse. Transparency is limited due to the lack of competition, making detailed public scrutiny of pricing and performance metrics challenging. Accountability rests on the contracting officer's representatives to manage the contractor's adherence to contract terms and cost controls.

Related Government Programs

Missile Defense Systems
Air and Missile Defense
Strategic Weapons Systems
Aviation and Missile Research, Development and Engineering Center (AMRDEC)
Ground-Based Air Defense

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $81.7 million to LOCKHEED MARTIN CORPORATION. PAC-3 MISSILE SUPPORT CENTER

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 $81.7 million.

What is the period of performance?

Start: 2007-01-31. End: 2024-02-05.

What is Lockheed Martin's track record with the PAC-3 missile program and similar defense contracts?

Lockheed Martin Corporation is the prime contractor for the Patriot Advanced Capability-3 (PAC-3) missile program, including its various interceptor variants. Their track record with this specific system is extensive, spanning development, production, and sustainment over many years. The company has a long history of delivering complex defense systems to the U.S. military and international allies. Their experience with missile technology, guided systems, and large-scale defense manufacturing is well-established. However, like many large defense contractors, they have faced scrutiny regarding contract costs, performance, and delivery schedules on various programs. For the PAC-3 specifically, the long-term nature of this support contract suggests a continued reliance on their expertise, but detailed performance metrics beyond contract awards are often classified or not publicly available.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for missile support, and what are the implications for value?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common for research, development, and complex systems where costs are difficult to estimate precisely beforehand. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure incentivizes the contractor to control costs to maximize their profit margin, as the fee is fixed regardless of the final cost. However, it can also lead to cost growth if the initial cost estimates are inaccurate or if unforeseen issues arise. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less price certainty for the government but greater flexibility for complex, evolving requirements. For missile support, CPFF allows for adaptation to technical challenges, but it necessitates robust government oversight to ensure costs remain reasonable and that the fixed fee represents fair value for the services rendered. Without strong oversight, CPFF contracts can be more expensive than FFP.

What are the primary risks associated with a sole-source award for critical defense systems like the PAC-3 missile?

The primary risk associated with a sole-source award for critical defense systems like the PAC-3 missile is the lack of competitive pressure, which can lead to inflated prices and reduced innovation. Without competing bidders, the government has less leverage to negotiate favorable terms and pricing. This can result in higher costs for taxpayers over the life of the contract. Another significant risk is contractor complacency; a sole-source provider may have less incentive to improve efficiency or proactively address potential issues if they know they are the only option. Furthermore, reliance on a single supplier can create vulnerabilities in the supply chain and increase dependence on that contractor's financial stability and operational continuity. This dependence can be particularly concerning for systems critical to national security.

How has historical spending on PAC-3 missile support evolved, and does this contract represent a significant change?

Historical spending data for PAC-3 missile support, particularly for sustainment and upgrades, shows a consistent and substantial investment by the Department of Defense over many years. The PAC-3 system has been a cornerstone of U.S. missile defense strategy, necessitating ongoing funding for maintenance, upgrades, and operational readiness. Contracts for this system are typically long-term and awarded to Lockheed Martin, the original equipment manufacturer. This current $81.7 million award, while significant, appears to be part of this ongoing, long-term sustainment effort rather than a drastic increase or shift in spending patterns. The duration of the contract (over 17 years) indicates a continuation of established support strategies. Analysis of historical spending would likely reveal similar large, sole-source contracts for PAC-3 sustainment over the years, reflecting the system's enduring importance and the specialized nature of its support.

What are the potential performance implications of awarding this contract to Lockheed Martin, given their role as the prime contractor?

Awarding the PAC-3 missile support contract to Lockheed Martin, the original equipment manufacturer (OEM), offers several potential performance advantages. Their deep understanding of the system's design, intricacies, and historical development is unparalleled, which can lead to more effective troubleshooting, maintenance, and upgrades. This expertise can minimize downtime and ensure the system operates at peak performance. Furthermore, as the OEM, Lockheed Martin likely possesses proprietary technical data and specialized tooling essential for servicing the PAC-3. This can streamline support operations and reduce the risk of errors or damage that might occur with less experienced providers. However, the performance must be continuously monitored through robust contract management to ensure that the benefits of OEM expertise translate into tangible operational readiness and value for the Department of the Army.

Industry Classification

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

Product/Service Code: MODIFICATION OF EQUIPMENT › MODIFICATION OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q06R0194

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

Address: 1701 MARSHALL DR, GRAND PRAIRIE, TX, 75051

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $81,680,540

Exercised Options: $81,680,540

Current Obligation: $81,680,540

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline