DoD awards Lockheed Martin $786M for PAC-3 MSE missile production, raising concerns about competition and cost
Contract Overview
Contract Amount: $78,617,101 ($78.6M)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2012-07-02
End Date: 2020-04-11
Contract Duration: 2,840 days
Daily Burn Rate: $27.7K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: PATRIOT ADVANCED CAPABILITY (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) INITIAL PRODUCTION FACTILITIES (IPF) FULL RATE PRODUCTION (FRP)
Place of Performance
Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051
State: Texas Government Spending
Plain-Language Summary
Department of Defense obligated $78.6 million to LOCKHEED MARTIN CORPORATION for work described as: PATRIOT ADVANCED CAPABILITY (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) INITIAL PRODUCTION FACTILITIES (IPF) FULL RATE PRODUCTION (FRP) Key points: 1. Significant investment in critical missile defense technology. 2. Sole-source award to Lockheed Martin limits competitive pricing. 3. Cost-plus contract type may incentivize higher spending. 4. Production facilities are key to future missile availability.
Value Assessment
Rating: questionable
The contract type is Cost Plus Incentive Fee, which can lead to higher costs if not managed tightly. Benchmarking against similar missile production contracts is difficult due to the specialized nature of the PAC-3 MSE.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award to Lockheed Martin. The lack of competition likely impacts price discovery and may result in higher costs for taxpayers.
Taxpayer Impact: The absence of competition for this critical defense asset means taxpayers may be paying a premium for the PAC-3 MSE missile segment.
Public Impact
Enhances national missile defense capabilities. Supports advanced air and missile defense for the U.S. Army. Ensures continued production of a vital strategic weapon system.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition
- Cost-plus contract type
- Long contract duration
Positive Signals
- Critical defense capability
- Production ramp-up for key missile
Sector Analysis
This contract falls under the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector. Defense spending in this area is substantial, driven by geopolitical needs and technological advancements.
Small Business Impact
The data indicates this contract was not awarded to small businesses, as Lockheed Martin is a large corporation. There is no indication of subcontracting opportunities for small businesses within this specific award.
Oversight & Accountability
The Department of Defense oversees this contract. Given the sole-source nature and cost-plus structure, robust oversight is crucial to ensure cost control and performance.
Related Government Programs
- Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing
- Department of Defense Contracting
- Department of the Army Programs
Risk Flags
- Sole-source award limits competition.
- Cost-plus contract type may lead to cost overruns.
- Long contract duration increases exposure to price changes.
- Lack of small business participation noted.
- High dollar value of the contract.
Tags
other-guided-missile-and-space-vehicle-p, department-of-defense, tx, definitive-contract, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $78.6 million to LOCKHEED MARTIN CORPORATION. PATRIOT ADVANCED CAPABILITY (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) INITIAL PRODUCTION FACTILITIES (IPF) FULL RATE PRODUCTION (FRP)
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 $78.6 million.
What is the period of performance?
Start: 2012-07-02. End: 2020-04-11.
What is the projected cost per missile unit under this contract, and how does it compare to industry benchmarks for similar systems?
The provided data does not specify a per-unit cost. However, given the Cost Plus Incentive Fee structure and the sole-source nature of the award, the per-unit cost is likely higher than if the contract had been competitively bid. Further analysis would require access to detailed cost breakdowns and comparisons with other advanced missile programs.
What are the specific risks associated with relying on a sole-source provider for such a critical defense component?
The primary risks include potential price gouging, lack of innovation due to absent competition, and supply chain vulnerabilities if the sole provider faces production issues. This dependence also limits the government's leverage in negotiating terms and prices, potentially leading to increased long-term costs and reduced strategic flexibility.
How effectively is the Department of the Army managing the cost and performance aspects of this long-term, cost-plus contract?
Effectiveness is difficult to assess solely from the provided data. The Cost Plus Incentive Fee structure requires diligent government oversight to ensure Lockheed Martin meets performance targets while controlling costs. The long duration necessitates continuous monitoring and potential renegotiation to mitigate risks associated with cost overruns and evolving technological requirements.
Industry Classification
NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing
Product/Service Code: GUIDED MISSLES
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: ONLY ONE SOURCE
Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE (V)
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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $78,617,101
Exercised Options: $78,617,101
Current Obligation: $78,617,101
Subaward Activity
Number of Subawards: 13
Total Subaward Amount: $2,952,944
Contract Characteristics
Consolidated Contract: Yes
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: YES
Timeline
Start Date: 2012-07-02
Current End Date: 2020-04-11
Potential End Date: 2020-04-11 12:04:00
Last Modified: 2020-04-10
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