DoD's $543M missile contract to Lockheed Martin lacked competition, raising value concerns

Contract Overview

Contract Amount: $543,466,803 ($543.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2012-06-29

End Date: 2018-06-30

Contract Duration: 2,192 days

Daily Burn Rate: $247.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: ROCKET QUANTITIES UNDER GMLRS FRP-7 WHICH INCLUDES LCRRPR AND UNITARY ROCKET PODS, DOWNLOAD DEMATE, GMLRS OPTION SPARES, INTEGRATED LOGISTICS SUPPORT, AND ARMY OBSOLESCENCE

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $543.5 million to LOCKHEED MARTIN CORPORATION for work described as: ROCKET QUANTITIES UNDER GMLRS FRP-7 WHICH INCLUDES LCRRPR AND UNITARY ROCKET PODS, DOWNLOAD DEMATE, GMLRS OPTION SPARES, INTEGRATED LOGISTICS SUPPORT, AND ARMY OBSOLESCENCE Key points: 1. The contract awarded to Lockheed Martin for GMLRS rockets lacked competition, potentially impacting price discovery. 2. A significant portion of the contract value is tied to rocket quantities, spares, and logistics support. 3. The contract duration of 6 years suggests a long-term commitment to this specific missile system. 4. The absence of a small business set-aside indicates a focus on large prime contractors. 5. The firm-fixed-price nature of the contract shifts some risk to the government. 6. The contract's scope includes various rocket types and integrated logistics, suggesting a comprehensive support package.

Value Assessment

Rating: questionable

Benchmarking the value of this $543 million contract is challenging due to its sole-source nature and the specific nature of the munitions and support. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or represents a fair value for the quantities and types of rockets, spares, and logistics provided. The long duration and inclusion of integrated logistics suggest a potentially higher cost than a simple procurement of hardware alone. Further analysis would require comparing unit costs for similar missile systems procured competitively.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a specific technology or capability is only available from a single source, or in cases of urgent need where competition is not feasible. The lack of multiple bidders means the Department of Defense did not benefit from the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs.

Taxpayer Impact: Taxpayers may have paid a premium for these missile systems and associated support due to the absence of competitive pressure to drive down prices.

Public Impact

The primary beneficiaries are the U.S. Army, receiving advanced missile systems and logistical support for its operations. The contract ensures the availability of GMLRS rockets, including LCRRPR and unitary variants, crucial for ground combat operations. Geographic impact is primarily within the U.S. Army's operational theaters, with potential deployment globally. Workforce implications include sustained employment at Lockheed Martin facilities and potentially its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated prices.
Sole-source award limits opportunities for alternative suppliers and innovation.
Firm-fixed-price contract with sole-source award could result in the government overpaying if costs are lower than anticipated.
Long contract duration might not adapt well to evolving technological needs or cost-saving opportunities.
Absence of small business participation limits economic opportunities for smaller enterprises in this sector.

Positive Signals

Ensures a consistent supply of critical missile systems for the U.S. Army.
Integrated logistics support provides comprehensive sustainment, reducing operational burdens.
Firm-fixed-price contract provides cost certainty for the government, assuming accurate initial pricing.
Award to a known prime contractor like Lockheed Martin can leverage existing expertise and production capabilities.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and technologically advanced segment of the defense industry. This contract falls within the domain of precision-guided munitions, a critical component of modern military capabilities. The market is often dominated by a few large defense contractors due to high barriers to entry, including significant R&D investment, complex manufacturing processes, and stringent security requirements. Spending in this sector is driven by national security priorities and geopolitical factors, with contracts often being long-term and substantial in value.

Small Business Impact

This contract did not include a small business set-aside, indicating that the primary award went to a large business prime contractor, Lockheed Martin. There is no explicit information provided regarding subcontracting plans for small businesses. The absence of a set-aside means that opportunities for small businesses to participate in this specific procurement are likely limited to subcontracting roles, if any are mandated or pursued by the prime contractor. This could limit the direct economic benefit to the small business ecosystem within the guided missile manufacturing supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and program management offices. Accountability measures are inherent in the contract terms, particularly the firm-fixed-price structure, which aims to hold the contractor responsible for delivering within the agreed price. Transparency is limited due to the sole-source nature of the award, with details of the negotiation and pricing not publicly disclosed. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

GMLRS Rocket Systems
Precision-Guided Munitions
Army Aviation and Missile Command Contracts
Lockheed Martin Missiles and Fire Control
Defense Logistics Agency Support Contracts

Risk Flags

Sole-source award
Lack of competition
Potential for cost overruns
Long-term dependency on a single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $543.5 million to LOCKHEED MARTIN CORPORATION. ROCKET QUANTITIES UNDER GMLRS FRP-7 WHICH INCLUDES LCRRPR AND UNITARY ROCKET PODS, DOWNLOAD DEMATE, GMLRS OPTION SPARES, INTEGRATED LOGISTICS SUPPORT, AND ARMY OBSOLESCENCE

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 $543.5 million.

What is the period of performance?

Start: 2012-06-29. End: 2018-06-30.

What is the historical spending trend for GMLRS rockets by the Department of the Army?

Historical spending data for GMLRS rockets by the Department of the Army reveals a consistent and significant investment over the years. Prior to this $543 million contract (2012-2018), the Army had procured substantial quantities of GMLRS variants, reflecting their operational importance. For instance, in the years leading up to 2012, annual procurements often ran into hundreds of millions of dollars, covering various configurations and associated support. The trend indicates a sustained demand driven by ongoing military operations and modernization efforts. This $543 million award represents a major procurement effort within a specific timeframe, but it is part of a larger, continuous lifecycle of acquisition for this munition family. Analyzing spending patterns before and after this contract would provide a clearer picture of the overall investment in GMLRS technology and sustainment.

How does the unit cost of GMLRS rockets in this contract compare to similar munitions?

Directly comparing the unit cost of GMLRS rockets from this $543 million contract to similar munitions is difficult without access to specific pricing details, which are not publicly available for sole-source awards. However, industry benchmarks and publicly reported figures for GMLRS rockets (including variants like unitary and alternative warheads) have historically ranged from approximately $70,000 to over $100,000 per unit, depending on the specific configuration, quantity, and year of procurement. Given that this contract included rocket quantities, option spares, and integrated logistics support over six years, a simple per-rocket cost derived from the total contract value might not be directly comparable to hardware-only procurements. Competitive procurements of similar guided rockets from other manufacturers or for different systems might offer a broader benchmark, but the unique capabilities and integrated support of the GMLRS system make precise comparisons challenging.

What are the primary risks associated with a sole-source award for critical munitions?

The primary risks associated with a sole-source award for critical munitions like the GMLRS rockets include potential overpricing due to the lack of competitive pressure, reduced incentive for the contractor to innovate or improve efficiency, and a lack of alternative sourcing options in case of supply chain disruptions or contractor performance issues. Without competition, the government has less leverage to negotiate favorable terms and pricing. Furthermore, a sole-source contract can create a long-term dependency on a single supplier, potentially limiting the government's flexibility in adopting newer technologies or seeking more cost-effective solutions in the future. This dependency also poses a strategic risk if the sole-source provider faces financial difficulties or shifts its business priorities.

What is Lockheed Martin's track record with GMLRS production and delivery?

Lockheed Martin has a well-established and extensive track record as the prime contractor for the Guided Multiple Launch Rocket System (GMLRS). They have been responsible for the production and delivery of millions of GMLRS rockets since its inception. The company has consistently met delivery schedules and performance requirements for various GMLRS variants, including the unitary, alternative warhead, and extended-range versions. Their long-standing relationship with the U.S. Army and other international partners underscores their capability in manufacturing these complex munitions. While specific contract performance metrics are often proprietary, Lockheed Martin's continued role as the sole producer suggests a history of successful program execution and reliability in delivering these critical weapon systems.

How does the inclusion of 'Integrated Logistics Support' affect the contract's overall value and complexity?

The inclusion of 'Integrated Logistics Support' (ILS) significantly increases the contract's overall value and complexity beyond the mere procurement of hardware. ILS typically encompasses a range of services essential for maintaining the operational readiness of the weapon system throughout its lifecycle. This can include spare parts management, maintenance and repair services, technical publications, training for personnel, inventory control, and potentially field support. By bundling ILS with the rocket procurement, the Department of the Army aims for a more streamlined and comprehensive support solution, ensuring that the GMLRS rockets are effectively maintained and ready for deployment. However, this also means that a substantial portion of the $543 million contract value is allocated to services rather than just the physical rockets, making direct cost comparisons to hardware-only contracts less meaningful.

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

Solicitation ID: W31P4Q11R0201

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, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $543,466,803

Exercised Options: $543,466,803

Current Obligation: $543,466,803

Actual Outlays: $293

Subaward Activity

Number of Subawards: 30

Total Subaward Amount: $119,859,498

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline