DoD awards $977M for PAC-3 missile production to Lockheed Martin, a sole-source contract

Contract Overview

Contract Amount: $977,007,864 ($977.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2009-12-30

End Date: 2017-05-17

Contract Duration: 2,695 days

Daily Burn Rate: $362.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PAC-3 FY10 PRODUCTIO

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $977.0 million to LOCKHEED MARTIN CORPORATION for work described as: PAC-3 FY10 PRODUCTIO Key points: 1. Contract awarded on a firm-fixed-price basis, indicating predictable costs for the government. 2. Sole-source award suggests limited market competition for this specific missile system. 3. Long contract duration (2009-2017) implies a sustained need for the PAC-3 missile. 4. The contract is for guided missile and space vehicle manufacturing, a critical defense sector. 5. Awarded by the Department of the Army, highlighting its importance for ground-based air defense. 6. The contractor, Lockheed Martin, is a major defense industrial base participant.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The firm-fixed-price structure provides cost certainty, but without comparison to other potential suppliers or alternative systems, it's difficult to definitively assess if the $977 million represents optimal value for money. The contract's duration and the nature of advanced missile systems often lead to higher unit costs compared to more commoditized goods.

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 unique capability is required, or when there is insufficient time to conduct a full and open competition. The lack of competition limits the government's ability to leverage market forces to drive down prices and potentially explore innovative solutions from a wider range of suppliers.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure. Without competing bids, there is less assurance that the price reflects the lowest possible cost for acquiring these critical missile systems.

Public Impact

The primary beneficiaries are the U.S. Army, which receives advanced air and missile defense capabilities. This contract ensures the continued production of the Patriot Advanced Capability-3 (PAC-3) missile, a key component of U.S. air defense. The geographic impact is primarily within Texas, where the contractor is located, potentially supporting local jobs and the defense industrial base. Workforce implications include employment for engineers, technicians, and manufacturing personnel involved in missile production at Lockheed Martin facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
Long-term nature of the contract may reduce flexibility to adapt to evolving threats or technologies.
Reliance on a single contractor for a critical defense system poses supply chain risks.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Ensures continued availability of a vital missile defense system.
Award to a major defense contractor suggests established production capabilities and quality control.

Sector Analysis

The guided missile and space vehicle manufacturing sector is a highly specialized and capital-intensive segment of the aerospace and defense industry. This contract falls within the broader defense spending category, specifically focusing on air and missile defense systems. The market is characterized by high barriers to entry, significant R&D investment, and long procurement cycles. Comparable spending benchmarks would typically involve other major defense procurement programs for advanced weapon systems, often awarded through sole-source or limited competition due to technological complexity and national security considerations.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the contractor is a large corporation, suggesting that subcontracting opportunities for small businesses may exist within the supply chain. However, the primary award is not directly aimed at fostering small business participation. The impact on the small business ecosystem would depend on the extent to which Lockheed Martin engages small businesses as subcontractors for components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures are embedded in the firm-fixed-price contract terms, which hold the contractor responsible for delivering the specified goods within the agreed-upon price. Transparency is generally limited for sole-source defense contracts, although reporting requirements may exist. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Air and Missile Defense Systems
Department of the Army Procurement

Risk Flags

Sole-source award
Lack of competitive pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $977.0 million to LOCKHEED MARTIN CORPORATION. PAC-3 FY10 PRODUCTIO

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 $977.0 million.

What is the period of performance?

Start: 2009-12-30. End: 2017-05-17.

What is the historical spending trend for the PAC-3 missile program?

Historical spending data for the PAC-3 missile program, prior to and following this specific contract award, would reveal the overall investment trajectory. Analyzing annual obligations and outlays for the PAC-3 over several fiscal years would indicate whether this $977 million represents a typical annual expenditure, a surge in production, or a phase-out. Without access to a broader dataset encompassing multiple contracts and fiscal years for the PAC-3, it's difficult to establish a definitive trend. However, the duration of this contract (2009-2017) suggests a sustained, multi-year commitment to production, implying consistent annual spending within that period.

How does the unit cost of the PAC-3 missile under this contract compare to other similar missile systems?

Comparing the unit cost of the PAC-3 missile under this contract to similar systems is complex due to the sole-source nature of the award and the proprietary nature of pricing data. Generally, advanced air defense missiles like the PAC-3 are high-cost items due to sophisticated technology, extensive R&D, and specialized manufacturing. Benchmarking against systems like the THAAD (Terminal High Altitude Area Defense) or SM-3 (Standard Missile-3) would likely show comparable high unit costs, reflecting their advanced capabilities. However, without specific unit price breakdowns from this contract and publicly available data for comparable systems, a precise comparison is not feasible. The $977 million total award over several years suggests a significant investment per missile.

What are the specific risks associated with a sole-source award for critical defense equipment like the PAC-3?

Sole-source awards for critical defense equipment like the PAC-3 missile present several risks. Firstly, the absence of competition can lead to higher prices than might be achieved in a competitive bidding process, potentially increasing costs for taxpayers. Secondly, it can foster complacency in the contractor, reducing incentives for innovation or efficiency improvements. Thirdly, it creates a single point of failure; if the sole contractor experiences production issues, supply chain disruptions, or financial instability, the availability of the critical defense asset could be jeopardized. Finally, it limits the government's ability to explore alternative technologies or suppliers that might offer better performance or value.

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

Lockheed Martin Corporation has a long-standing and extensive track record in the development and production of the PAC-3 missile and related air and missile defense systems. As the prime contractor for the PAC-3, the company has been responsible for its evolution and manufacturing for many years. Their experience encompasses complex systems integration, advanced manufacturing processes, and delivery of large quantities of sophisticated weaponry. Lockheed Martin is a major player in the global defense industry, with a portfolio that includes numerous other advanced aircraft, missiles, and space systems, indicating a robust capability in managing large, technologically demanding defense contracts.

What oversight mechanisms are in place to ensure the quality and timely delivery of the PAC-3 missiles under this contract?

Oversight for this contract would involve multiple layers within the Department of Defense and the Army. This typically includes program managers responsible for overseeing contract performance, quality assurance representatives stationed at the contractor's facility to inspect production and ensure adherence to specifications, and potentially Defense Contract Management Agency (DCMA) personnel. The firm-fixed-price nature of the contract itself provides a baseline for accountability, requiring delivery of conforming articles. Milestones and delivery schedules within the contract would be monitored, and performance metrics likely tracked to ensure timely execution. Any deviations or quality issues would trigger contractual remedies or corrective action requests.

Industry Classification

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

Product/Service Code: AMMUNITION AND EXPLOSIVES

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: $977,007,864

Exercised Options: $977,007,864

Current Obligation: $977,007,864

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline