DoD awards $1B+ for PAC-3 missile production to Lockheed Martin, raising value-for-money questions

Contract Overview

Contract Amount: $1,004,165,114 ($1.0B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2008-12-23

End Date: 2020-09-30

Contract Duration: 4,299 days

Daily Burn Rate: $233.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY09 PAC-3 MISSILE PRODUCTION BUY

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $1.00 billion to LOCKHEED MARTIN CORPORATION for work described as: FY09 PAC-3 MISSILE PRODUCTION BUY Key points: 1. Significant contract value suggests a substantial need for air defense capabilities. 2. Sole-source award to Lockheed Martin warrants scrutiny of pricing and alternatives. 3. Long contract duration may indicate a stable but potentially less competitive market. 4. Firm Fixed Price contract type shifts cost risk to the contractor. 5. High dollar value may impact budget allocation for other defense priorities. 6. Geographic concentration in Texas for production could have regional economic implications.

Value Assessment

Rating: questionable

The $1.004 billion awarded for PAC-3 missile production is a substantial investment. Without comparable contract data for similar missile systems or specific unit cost breakdowns, it is difficult to benchmark the value for money. The sole-source nature of this award further complicates a direct price comparison. However, the sheer scale of the award suggests a critical capability, but the lack of competition raises concerns about whether the government is achieving the best possible price.

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 typically occurs when a specific technology or capability is unique to a single provider, or in cases of urgent need where competition is not feasible. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure to drive down prices. The government's negotiating position is weakened without alternative suppliers.

Public Impact

The U.S. Army benefits from enhanced air and missile defense capabilities. The contract supports the production of advanced Patriot Advanced Capability-3 (PAC-3) missiles. Production is concentrated in Texas, potentially creating or sustaining jobs in the region. The defense industrial base benefits from sustained demand for critical munitions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potentially increases costs.
Long contract duration (over 11 years) may reduce flexibility and responsiveness to market changes.
Lack of transparency in pricing due to sole-source nature.
Potential for cost overruns if not managed tightly, despite FFP contract type.

Positive Signals

Firm Fixed Price contract type transfers cost risk to the contractor.
Long-term award provides predictable demand for a critical defense system.
Production in Texas supports domestic manufacturing capabilities.

Sector Analysis

The PAC-3 missile system falls within the Guided Missile and Space Vehicle Manufacturing sector, a critical component of the broader aerospace and defense industry. This sector is characterized by high R&D investment, stringent quality control, and often long production cycles. Spending in this area is driven by national security requirements and geopolitical factors. Comparable spending benchmarks would typically involve other major defense procurement programs for advanced munitions and weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. Furthermore, the prime contractor, Lockheed Martin, is a large aerospace and defense company. While large prime contractors are often required to subcontract a portion of their work to small businesses, the specific subcontracting plan details are not provided here. The absence of a direct set-aside means small businesses are less likely to be the primary recipients of this funding, though they may benefit indirectly through the supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense and the Department of the Army, given its agency and service assignments. The contract's long duration and significant value suggest it would be subject to regular performance reviews and financial audits. The Firm Fixed Price (FFP) contract type provides a degree of cost control, but oversight would still be necessary to ensure contract compliance, quality standards, and timely delivery. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Patriot Missile System
Missile Defense Programs
Air and Missile Defense
Guided Missile Manufacturing
Department of the Army Procurement

Risk Flags

Sole-source award
Long contract duration
High dollar value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.00 billion to LOCKHEED MARTIN CORPORATION. FY09 PAC-3 MISSILE PRODUCTION BUY

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 $1.00 billion.

What is the period of performance?

Start: 2008-12-23. End: 2020-09-30.

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

Historical spending data for PAC-3 missile production under Lockheed Martin is extensive, reflecting the system's critical role in U.S. air defense. While this specific award totals over $1 billion, it represents a portion of a larger, ongoing procurement effort. Annual spending can fluctuate based on production schedules, congressional appropriations, and foreign military sales. Analyzing past contract awards and modifications would reveal a multi-year trend of significant investment, likely in the hundreds of millions to billions of dollars annually, depending on the specific fiscal year and program phase. This sustained funding underscores the long-term commitment to maintaining and upgrading this air defense capability.

How does the unit cost of the PAC-3 missile compare to similar air defense interceptors?

Directly comparing the unit cost of the PAC-3 missile to similar air defense interceptors is challenging without access to proprietary pricing data and specific contract details for competing systems. Factors such as technological sophistication, range, payload, and production volume significantly influence unit costs. The PAC-3 is a highly advanced missile designed for terminal phase intercept of ballistic and cruise missiles. Interceptors for different threat types or with varying capabilities (e.g., shorter-range systems, different guidance technologies) will naturally have different price points. Publicly available data often aggregates costs or focuses on total contract values rather than precise per-unit figures, making definitive benchmarking difficult. However, advanced missile systems like the PAC-3 are generally among the higher-cost interceptors due to their complex technology and specialized manufacturing.

What are the key performance metrics and success rates associated with the PAC-3 missile system?

The key performance metrics for the PAC-3 missile system revolve around its effectiveness in intercepting various aerial threats, including tactical ballistic missiles, cruise missiles, and advanced aircraft. Success rates are typically measured by the number of successful intercepts during testing and operational engagements. While specific, real-time engagement statistics are often classified for national security reasons, the PAC-3 has been publicly acknowledged for its role in successful intercepts during conflicts and extensive testing phases. Its design emphasizes high-velocity engagement and precision targeting. The system's reliability and kill probability are critical metrics that the Department of Defense monitors closely through rigorous testing protocols and post-mission analyses, aiming for high single-digit or low double-digit probabilities of kill per missile fired, depending on the target set.

What is the projected future demand for PAC-3 missiles, and how might this contract impact it?

The projected future demand for PAC-3 missiles remains strong, driven by persistent and evolving threats from state and non-state actors, as well as the need to modernize air defense capabilities globally. This $1 billion+ contract, awarded in late 2008 with an end date in 2020, signifies a substantial, albeit historical, commitment to production. It likely represents a significant portion of the demand during its performance period. Future demand will be influenced by geopolitical developments, the development of new threat vectors, and the U.S. military's strategic priorities. Continued upgrades to the PAC-3 system and potential new variants, alongside foreign military sales, suggest sustained demand, although the exact volume will depend on future budget allocations and strategic assessments.

Are there any known risks associated with the production or performance of the PAC-3 missile?

Risks associated with the production and performance of the PAC-3 missile, like any complex defense system, can include manufacturing complexities, supply chain vulnerabilities, potential for technical obsolescence over its long service life, and the inherent challenges of intercepting increasingly sophisticated threats. Specific production risks might involve ensuring the quality and availability of specialized components. Performance risks are tied to the missile's ability to reliably intercept targets under diverse and challenging conditions. While the PAC-3 is a mature and proven system, continuous testing and upgrades are necessary to mitigate risks related to evolving threats and maintain its effectiveness. The sole-source nature of this award also presents a risk related to cost control and potential lack of innovation driven by competition.

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 DR, GRAND PRAIRIE, TX, 75051

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

Financial Breakdown

Contract Ceiling: $1,004,165,114

Exercised Options: $1,004,165,114

Current Obligation: $1,004,165,114

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline