DoD's $75M ATACMS missile upgrade contract awarded to Lockheed Martin without competition

Contract Overview

Contract Amount: $75,073,718 ($75.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2014-12-31

End Date: 2018-12-31

Contract Duration: 1,461 days

Daily Burn Rate: $51.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: R&D

Official Description: THIS REQUIREMENT IS A SERVICE LIFE EXTENSION PROGRAM FOR ATACMS, WHICH IS TO CONVERT GFP ATACMS BLOCK I MISSILES.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $75.1 million to LOCKHEED MARTIN CORPORATION for work described as: THIS REQUIREMENT IS A SERVICE LIFE EXTENSION PROGRAM FOR ATACMS, WHICH IS TO CONVERT GFP ATACMS BLOCK I MISSILES. Key points: 1. The contract focuses on extending the service life of existing ATACMS missiles, indicating a strategy to leverage current assets rather than procure new ones. 2. Awarded to a single source, this contract bypasses competitive bidding, raising questions about potential price efficiencies and market-driven innovation. 3. The duration of the contract (over 4 years) suggests a significant, long-term need for missile sustainment and modernization. 4. The R&D classification points to technical complexity and the potential for innovation within the scope of the upgrade. 5. The absence of small business involvement suggests this is a large-scale, specialized project likely requiring advanced manufacturing capabilities.

Value Assessment

Rating: questionable

Benchmarking the value of this specific service life extension program is challenging without comparable contracts for ATACMS missile upgrades. However, the cost-plus-fixed-fee structure, while common for R&D, can lead to cost overruns if not closely managed. The lack of competition means there's no direct market comparison to assess if the fixed fee is optimal or if alternative solutions could have been more cost-effective. The total award amount of $75 million over four years needs to be evaluated against the number of missiles upgraded and the specific technical improvements achieved to determine true value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of Defense did not solicit bids from multiple contractors. This approach is typically justified when a specific contractor possesses unique capabilities, proprietary technology, or when urgency precludes a full and open competition. In this case, Lockheed Martin is the original manufacturer of the ATACMS missile, suggesting they hold the necessary technical data and expertise for the upgrade. The lack of competition limits the government's ability to explore alternative technical approaches or secure potentially lower prices through a bidding process.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the benefit of competitive pricing is forgone. Without competition, there is less pressure on the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are the U.S. Army, which operates the ATACMS missile system, ensuring the continued operational readiness and effectiveness of its long-range strike capabilities. The services delivered include the technical expertise and labor required to perform service life extension on existing ATACMS Block I missiles. The geographic impact is primarily within the United States, likely at defense manufacturing facilities and potentially impacting military bases where these missiles are stored or deployed. Workforce implications include specialized engineering, technical, and manufacturing roles within Lockheed Martin, focusing on missile systems and defense technologies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost-plus-fixed-fee contracts carry inherent risks of cost escalation if not rigorously managed.
Sole-source award limits opportunities for small businesses to participate in this specialized defense contract.
The specific technical scope and success metrics of the 'service life extension' are not detailed, posing a risk of unclear deliverables.

Positive Signals

Leverages existing assets (GFP ATACMS Block I missiles) to maintain capability, potentially more cost-effective than new procurement.
Awarded to the original equipment manufacturer, likely ensuring technical expertise and compatibility.
Focuses on R&D in a critical defense area, potentially leading to improved missile performance and longevity.
The contract duration suggests a sustained commitment to maintaining a key strategic weapon system.

Sector Analysis

This contract falls within the Research and Development in the Physical, Engineering, and Life Sciences sector, specifically related to defense systems. The market for advanced missile technology and sustainment is highly specialized, dominated by a few large defense contractors. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks would typically involve other major defense sustainment and modernization programs, often involving significant R&D components and substantial contract values.

Small Business Impact

This contract was not competed and did not include specific small business set-aside provisions. Given the specialized nature of missile technology and the sole-source award to a large prime contractor, direct subcontracting opportunities for small businesses may be limited unless they possess highly specialized niche capabilities required by Lockheed Martin. The absence of a competitive bidding process also means there was no explicit requirement to engage small businesses as part of the solicitation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. As a sole-source award, scrutiny may focus on the justification for the non-competitive nature and the reasonableness of the costs negotiated. The Cost Plus Fixed Fee (CPFF) contract type necessitates close monitoring of expenditures to ensure they align with the fixed fee objectives and to prevent cost overruns. Inspector General oversight is likely, particularly concerning financial accountability and program execution.

Related Government Programs

Tactical Missile Programs
Missile Defense Systems
Advanced Weapons Development
Army Aviation and Missile Command Contracts
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award lacks competitive pricing.
CPFF contract type carries cost overrun risk.
Technical scope of 'service life extension' is not fully detailed.
Potential for obsolescence of upgraded systems compared to new technology.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $75.1 million to LOCKHEED MARTIN CORPORATION. THIS REQUIREMENT IS A SERVICE LIFE EXTENSION PROGRAM FOR ATACMS, WHICH IS TO CONVERT GFP ATACMS BLOCK I MISSILES.

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 $75.1 million.

What is the period of performance?

Start: 2014-12-31. End: 2018-12-31.

What is the specific technical scope of the 'service life extension' for the ATACMS Block I missiles?

The provided data indicates the requirement is for a 'Service Life Extension Program for ATACMS, which is to convert GFP ATACMS Block I missiles.' While 'GFP' likely refers to 'Government Furnished Property,' implying the missiles themselves are government-owned assets being provided to the contractor, the specifics of the 'extension' are not detailed. This could encompass a range of activities from component refurbishment and replacement to software updates or structural integrity enhancements to ensure the missiles remain operational and safe for an extended period. Without further documentation, the precise technical interventions remain unclear, making it difficult to fully assess the scope and potential impact on missile performance or reliability.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar R&D missile programs?

Cost-Plus-Fixed-Fee (CPFF) contracts are common for research and development efforts where the scope is not fully defined or is expected to evolve. In a CPFF contract, the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. This structure shifts much of the cost risk to the government, as the final cost can exceed initial estimates if costs escalate. Compared to fixed-price contracts, CPFF offers more flexibility for R&D but potentially less cost certainty. Firm-Fixed-Price (FFP) contracts provide greater cost certainty but are less suitable for R&D with undefined outcomes. Incentive contracts (cost-plus-incentive-fee) aim to balance cost control and flexibility by adjusting the fee based on performance against targets. For a program like missile life extension, where technical challenges might arise, CPFF provides a mechanism to proceed while managing uncertainty, though it necessitates robust government oversight to control costs.

What is Lockheed Martin's track record with ATACMS missile sustainment and upgrades?

Lockheed Martin Corporation is the original manufacturer of the Army Tactical Missile System (ATACMS). As such, they possess the primary technical expertise, intellectual property, and manufacturing capabilities related to the system. Their track record with ATACMS sustainment and upgrades would inherently involve extensive experience, likely including initial development, production, and various sustainment activities throughout the missile's service life. While specific details of past upgrade contracts are not provided here, their role as the prime contractor for the system suggests a deep and continuous involvement, making them the logical choice for specialized sustainment and life extension programs due to their intimate knowledge of the system's design and operational history.

What are the potential risks associated with extending the service life of existing missiles versus procuring new ones?

Extending the service life of existing missiles, such as the ATACMS Block I, can offer cost savings compared to developing and procuring entirely new systems. However, risks include the potential for unforeseen technical challenges during the upgrade process, which could lead to cost overruns or schedule delays. The effectiveness and reliability of upgraded older systems may still be limited compared to state-of-the-art new platforms. There's also a risk that the extended service life might not fully meet future operational requirements or keep pace with evolving threat landscapes. Furthermore, the availability of spare parts and specialized knowledge for older systems can diminish over time, potentially complicating sustainment efforts even after an extension.

How has spending on ATACMS-related programs evolved over the years?

Historical spending data on ATACMS-related programs would reveal trends in procurement, modernization, and sustainment efforts. Given the ATACMS's role as a key long-range strike weapon for the U.S. Army, spending has likely fluctuated based on strategic priorities, threat assessments, and budget allocations. Periods of heightened geopolitical tension or the introduction of new adversaries might correlate with increased investment in missile capabilities, including upgrades and sustainment. Conversely, shifts towards different military technologies or budget constraints could lead to reduced spending. The current contract, focusing on life extension, suggests a strategy to maximize the utility of existing assets, possibly indicating a phase where major new procurement is less emphasized than maintaining current readiness.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Scientific Research and Development Services › Research and Development in the Physical, Engineering, and Life Sciences (except Biotechnology)

Product/Service Code: AMMUNITION AND EXPLOSIVES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q14R0065

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $75,073,718

Exercised Options: $75,073,718

Current Obligation: $75,073,718

Actual Outlays: $1,234

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $4,615,108

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline