Lockheed Martin awarded $95.7M contract for Patriot missile support, raising questions about competition and value

Contract Overview

Contract Amount: $95,702,079 ($95.7M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2012-03-30

End Date: 2015-09-30

Contract Duration: 1,279 days

Daily Burn Rate: $74.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: BASIC LABOR EFFORT IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITIES -3 MISSILE SUPPORT CENTER (P3MSC)

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $95.7 million to LOCKHEED MARTIN CORPORATION for work described as: BASIC LABOR EFFORT IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITIES -3 MISSILE SUPPORT CENTER (P3MSC) Key points: 1. Contract awarded to a single, large defense contractor, limiting competitive pressure. 2. Significant contract value for missile support services, requiring careful oversight. 3. Potential for cost overruns given the 'Cost Plus Incentive Fee' contract type. 4. Long contract duration of over three years suggests a need for sustained support. 5. Focus on a critical defense system, the Patriot missile, highlights national security implications. 6. Lack of competition may indicate specialized nature of services or contractor dominance.

Value Assessment

Rating: fair

The contract's value of $95.7 million for basic labor effort in support of the Patriot Advanced Capabilities-3 Missile Support Center (P3MSC) is substantial. Benchmarking this against similar contracts for specialized missile system support is challenging without more granular data on the specific labor categories and hours. The 'Cost Plus Incentive Fee' (CPIF) structure suggests that while there are incentives for cost control, the base cost is reimbursed, which can sometimes lead to higher overall expenditures compared to fixed-price contracts. The provided data does not offer a direct per-unit cost comparison, making a definitive value assessment difficult.

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 approach is typically used when only one responsible source is available or when there is a compelling justification for not seeking competition. For a contract of this magnitude supporting a critical defense system, the lack of competition raises concerns about whether alternative solutions or providers were adequately explored. The absence of multiple bidders means there was no direct price comparison to ensure the most favorable terms for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the lowest possible price for the services rendered.

Public Impact

The primary beneficiaries are the Department of the Army and potentially other branches utilizing the Patriot missile system, ensuring its operational readiness. Services delivered include essential labor support for the P3MSC, crucial for maintaining and upgrading the missile system's capabilities. The geographic impact is centered in Texas, where the contract is being performed, potentially supporting local jobs and the regional economy. Workforce implications include the employment of skilled labor in specialized areas related to defense manufacturing and support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
CPIF contract type can lead to cost overruns if not managed diligently.
Long contract duration may not reflect evolving technological needs or market efficiencies.
Lack of transparency in the justification for sole-source award.

Positive Signals

Contract supports a critical national defense asset, ensuring readiness.
Award to a major defense contractor like Lockheed Martin suggests established expertise.
Incentive fee structure aims to align contractor performance with government objectives.
Contract performance period is clearly defined.

Sector Analysis

The defense sector, particularly within guided missile and space vehicle manufacturing, is characterized by high barriers to entry, significant R&D investment, and long-standing relationships between government agencies and prime contractors. Lockheed Martin is a dominant player in this space. Contracts for specialized support of complex weapon systems like the Patriot are often awarded to the original equipment manufacturer or a limited number of highly qualified firms due to the proprietary nature of the technology and the extensive training and security clearances required. Spending in this sub-sector is substantial, driven by national security priorities and ongoing modernization efforts.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting requirements in the provided data. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely minimal unless Lockheed Martin voluntarily engages them for subcontracting opportunities. The absence of explicit small business provisions suggests that the primary focus was on securing specialized support from the incumbent or sole-source provider, rather than leveraging the small business industrial base.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. The 'Cost Plus Incentive Fee' structure necessitates close monitoring of costs and performance to ensure that incentives are met and that the government receives value. Transparency regarding the justification for the sole-source award and the specific performance metrics tied to the incentive fee would be key areas for public accountability. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Patriot Missile System Production
Missile Defense Agency Programs
Department of Defense Logistics and Sustainment
Guided Missile Manufacturing Contracts
Aerospace and Defense Prime Contracting

Risk Flags

Sole-source award
Cost-reimbursement contract type
Lack of competitive bidding justification
Potential for cost escalation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $95.7 million to LOCKHEED MARTIN CORPORATION. BASIC LABOR EFFORT IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITIES -3 MISSILE SUPPORT CENTER (P3MSC)

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 $95.7 million.

What is the period of performance?

Start: 2012-03-30. End: 2015-09-30.

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

Analyzing historical spending on Patriot missile support requires access to detailed contract databases and budget allocations over several fiscal years. Generally, the sustainment and upgrade of complex weapon systems like the Patriot involve significant, recurring investments. This can include costs for labor, spare parts, maintenance, engineering services, and program management. Spending patterns are influenced by factors such as the operational tempo of deployed units, the system's lifecycle stage (e.g., initial fielding, sustainment, modernization), geopolitical threats, and congressional appropriations. Without specific historical data for this contract or similar Patriot support efforts, it's difficult to provide precise figures, but it's reasonable to assume consistent, multi-million dollar annual expenditures for such a critical defense asset.

How does the 'Cost Plus Incentive Fee' (CPIF) structure compare to other contract types for similar defense services?

The CPIF contract type is a variation of cost-reimbursement contracts, where the contractor is reimbursed for allowable costs plus a fee that is adjusted based on performance against pre-determined targets (e.g., cost, schedule, or performance metrics). Compared to 'Cost Plus Fixed Fee' (CPFF), CPIF offers greater potential for cost savings if targets are met, as the fee can be reduced if costs exceed targets. However, it still carries higher risk for the government than fixed-price contracts ('Fixed Price Incentive Fee' - FPIF, or 'Firm Fixed Price' - FFP), which place more cost risk on the contractor. For complex, long-term projects where cost and performance are difficult to define precisely upfront, CPIF can be a viable option, but it requires robust government oversight to manage costs effectively and ensure the incentive structure truly drives desired outcomes.

What is Lockheed Martin's track record with the Patriot missile system and similar defense contracts?

Lockheed Martin has a long and established track record as a prime contractor for the Patriot Advanced Capability (PAC) missile systems, including the PAC-3 variant. They are the original equipment manufacturer and have been responsible for the production, integration, and sustainment of these critical air and missile defense systems for decades. Their experience encompasses extensive engineering, manufacturing, testing, and logistical support. Given their deep involvement with the Patriot program, awarding follow-on support contracts, even on a sole-source basis, is not uncommon. Their overall track record in the defense sector is extensive, marked by numerous large-scale contracts across various platforms, though like any major defense contractor, they have faced scrutiny regarding contract costs and performance on specific programs.

What are the potential risks associated with a sole-source award for critical defense system support?

The primary risk of a sole-source award for critical defense system support is the lack of competitive pressure, which can lead to inflated prices and reduced innovation. Without competing bids, the government may not secure the most cost-effective solution. There's also a risk that the sole-source provider may become complacent or less responsive to government needs over time, knowing there are limited alternatives. Furthermore, it can stifle the development of a broader industrial base capable of supporting such systems. In cases where the sole-source justification is weak or based on outdated information, it can represent a significant missed opportunity for the government to achieve better value and potentially foster new capabilities within the defense industrial ecosystem.

How does the contract's performance period (duration) align with the typical lifecycle of a major defense system like the Patriot?

The Patriot missile system, particularly the PAC-3 variants, is a relatively modern and continuously upgraded air defense system. Its operational lifecycle can span several decades, involving ongoing sustainment, modernization, and upgrades. A contract duration of 1279 days (approximately 3.5 years) for basic labor effort is a reasonable period for ensuring consistent support during a specific phase of the system's lifecycle. It allows for planning and stability in support services. However, it's important to note that such contracts are often subject to modifications, extensions, or re-competition as the system evolves and strategic needs change. The duration itself isn't inherently problematic, but it should be viewed within the context of the broader, long-term sustainment strategy for the Patriot system.

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

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp

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: $95,702,079

Exercised Options: $95,702,079

Current Obligation: $95,702,079

Subaward Activity

Number of Subawards: 11

Total Subaward Amount: $22,446,632

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline