DoD awards $928M+ for PAC-3 missile components, with sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $928,251,559 ($928.3M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2012-12-27

End Date: 2016-05-31

Contract Duration: 1,251 days

Daily Burn Rate: $742.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: LETTER CONTRACT FOR PAC-3 MISSILES, MOTOR CONTROL UNITS, LAUNCHER MOD KITS, TOOLING FOR USA AND TAIWAN.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $928.3 million to LOCKHEED MARTIN CORPORATION for work described as: LETTER CONTRACT FOR PAC-3 MISSILES, MOTOR CONTROL UNITS, LAUNCHER MOD KITS, TOOLING FOR USA AND TAIWAN. Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant investment in critical missile defense technology. 3. Includes components for both U.S. and allied (Taiwan) forces. 4. Long-term contract duration suggests sustained demand for these systems. 5. Firm fixed-price structure aims to control costs, but competition is key. 6. Potential for cost overruns exists due to lack of competitive bidding.

Value Assessment

Rating: fair

The total award of over $928 million for PAC-3 missile components represents a substantial investment. Without competitive bidding, it is difficult to benchmark the value for money effectively. However, the firm fixed-price nature of the contract provides some cost certainty. Comparisons to similar sole-source procurements of advanced defense systems would be necessary for a more precise value assessment, but the lack of competition inherently raises concerns about optimal pricing.

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 or proprietary technology is involved, or in cases of urgent need. The absence of multiple bidders means there was no direct price competition, which can lead to higher costs for the government compared to a fully competed contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive pressure to drive down prices. The government relies on negotiation and oversight to ensure a fair price in sole-source situations.

Public Impact

Enhances U.S. and Taiwanese air and missile defense capabilities. Supports the production of critical components for the Patriot Advanced Capability-3 (PAC-3) missile system. Contributes to national security by bolstering strategic defense assets. Sustains jobs within Lockheed Martin's defense manufacturing operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs.
Lack of competition makes independent cost benchmarking challenging.
Long-term nature of the contract could mask inefficiencies if not closely monitored.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Procurement supports critical national defense capabilities.
Contract includes components for allied defense, fostering international partnerships.

Sector Analysis

This contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' sector, a specialized segment of the aerospace and defense industry. This industry is characterized by high technological barriers to entry, significant R&D investment, and often involves long production cycles and substantial government funding. The PAC-3 missile system is a key component of modern air defense, and spending in this area reflects ongoing investments in strategic deterrence and missile defense.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have significant subcontracting requirements explicitly mentioned in the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem is likely minimal, though Lockheed Martin may engage small businesses as subcontractors for various components or services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Given it's a sole-source award, robust negotiation and auditing processes are crucial to ensure fair pricing and performance. The Inspector General's office within the DoD would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Foreign Military Sales (Taiwan)
Guided Missile Manufacturing

Risk Flags

Sole-source award
Lack of competitive pricing
Long-term contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $928.3 million to LOCKHEED MARTIN CORPORATION. LETTER CONTRACT FOR PAC-3 MISSILES, MOTOR CONTROL UNITS, LAUNCHER MOD KITS, TOOLING FOR USA AND TAIWAN.

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 $928.3 million.

What is the period of performance?

Start: 2012-12-27. End: 2016-05-31.

What is the historical spending trend for PAC-3 missile components from Lockheed Martin?

Historical spending data for PAC-3 missile components from Lockheed Martin would reveal the cumulative investment in this critical defense system over time. Analyzing past contract awards, including modifications and task orders, can illustrate the demand trajectory and the government's commitment to this technology. For instance, tracking the total obligated amounts and contract ceilings across multiple fiscal years provides insight into the program's lifecycle and potential future funding needs. Without specific historical data points for this contract's predecessors or related efforts, it's challenging to establish a precise trend, but the substantial value of this award suggests a consistent and significant requirement for PAC-3 components.

How does the pricing of this sole-source contract compare to potentially competitive bids for similar missile systems?

Directly comparing the pricing of this sole-source contract to potentially competitive bids for similar missile systems is inherently difficult due to the absence of alternative offers. Sole-source procurements often result in higher prices because the government lacks the leverage that competition provides. To assess value, one would typically benchmark against previous sole-source contracts for the same or comparable systems, or against industry cost models if available. The firm fixed-price nature offers some predictability, but the lack of competitive pressure means the government must rely heavily on negotiation expertise and thorough cost analysis to ensure the price is as fair as possible. Without competitive benchmarks, the risk of paying a premium is elevated.

What are the key performance indicators (KPIs) used to measure the success of this contract?

Key performance indicators (KPIs) for a contract like this would likely focus on delivery timeliness, quality of components, and adherence to specifications. For missile components, reliability and performance under testing conditions are paramount. Specific metrics might include on-time delivery rates for motor control units and launcher modification kits, defect rates discovered during quality inspections or testing, and compliance with technical data packages. The government would monitor Lockheed Martin's performance against these KPIs through contract surveillance and acceptance testing. Meeting these indicators ensures the operational readiness and effectiveness of the PAC-3 missile system for both U.S. and Taiwanese forces.

What is Lockheed Martin's track record in delivering complex missile systems on time and within budget?

Lockheed Martin Corporation has a long and extensive track record in developing and producing complex missile systems, including the PAC-3. Historically, the company has demonstrated significant capabilities in delivering advanced defense technologies. However, like many large defense contractors involved in complex, multi-year programs, they have also faced challenges related to schedule delays and cost overruns on certain projects due to the inherent complexities of cutting-edge military hardware development and production. The firm fixed-price nature of this specific contract aims to mitigate budget risks, but successful execution relies on robust program management and efficient supply chain operations by Lockheed Martin.

What are the potential risks associated with relying on a single supplier for critical missile components?

Relying on a single supplier, such as Lockheed Martin in this sole-source contract, presents several potential risks. Foremost is the risk of price escalation over time, as there is no competitive pressure to keep costs down. Supply chain disruptions, whether due to geopolitical events, natural disasters, or the supplier's own operational issues, can have a significant impact on availability. Furthermore, a sole-source arrangement can reduce the government's leverage in demanding technological upgrades or modifications, potentially leading to technological obsolescence if not managed proactively. Dependence on one supplier also limits options if performance issues arise or if the supplier's strategic direction changes.

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

Solicitation ID: W31P4Q12R0012

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: $928,251,559

Exercised Options: $928,251,559

Current Obligation: $928,251,559

Subaward Activity

Number of Subawards: 73

Total Subaward Amount: $327,246,272

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline