Army awards $151M for ATACMS missile life extension, a sole-source R&D contract to Lockheed Martin

Contract Overview

Contract Amount: $150,958,111 ($151.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2017-08-02

End Date: 2020-07-31

Contract Duration: 1,094 days

Daily Burn Rate: $138.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::XX::IGF AWARD OF ARMY TACTICAL MISSILE SYSTEM (ATACMS) GUIDED MISSILE AND LAUNCHING ASSEMBLY (GMLA) SERVICE LIFE EXTENSION PROGRAM (SLEP) 1 PRODUCTION FOR 150 QUANTITY.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $151.0 million to LOCKHEED MARTIN CORPORATION for work described as: IGF::XX::IGF AWARD OF ARMY TACTICAL MISSILE SYSTEM (ATACMS) GUIDED MISSILE AND LAUNCHING ASSEMBLY (GMLA) SERVICE LIFE EXTENSION PROGRAM (SLEP) 1 PRODUCTION FOR 150 QUANTITY. Key points: 1. This contract focuses on extending the service life of existing ATACMS missile systems, implying a need for modernization rather than new procurement. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and lack of competitive pressure. 3. Research and Development in Physical, Engineering, and Life Sciences is a broad category; the specific application to missile systems highlights a critical defense need. 4. The contract duration of approximately three years suggests a focused effort on a specific phase of the SLEP program. 5. The absence of small business set-asides indicates this contract is likely beyond the scope or capability of smaller enterprises. 6. The firm-fixed-price structure aims to transfer risk to the contractor, but effective oversight is crucial for managing costs.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without specific details on the SLEP's technical scope and the number of missiles involved. However, a $151 million award for extending the life of a missile system, especially when awarded sole-source, raises questions about whether taxpayers are receiving the best possible value. Without competitive bidding, it's difficult to ascertain if the pricing reflects market rates or if there's an opportunity for cost savings through alternative approaches or contractor negotiation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Lockheed Martin Corporation, was solicited. This approach is typically justified when a unique capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. However, the lack of competition limits price discovery and may result in higher costs for the government compared to a competitively bid contract.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as the contractor faces no competitive pressure to offer the lowest possible cost. This necessitates robust government oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Army, which receives extended operational capability for its tactical missile systems. The contract delivers services related to research and development for the Service Life Extension Program (SLEP) of ATACMS missiles. The geographic impact is primarily within the defense industrial base, with Lockheed Martin's facilities in Texas being a key location. Workforce implications include specialized engineering, manufacturing, and technical roles within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Lack of transparency in the justification for sole-sourcing.
Potential for cost overruns in R&D contracts if not tightly managed.
Dependence on a single contractor for critical missile system upgrades.

Positive Signals

Addresses a critical need for extending the life of existing strategic assets.
Firm-fixed-price contract structure aims to control costs and manage risk.
Leverages existing contractor expertise with the ATACMS system.
Focus on R&D suggests innovation in extending system capabilities.

Sector Analysis

This contract falls within the Aerospace and Defense sector, specifically focusing on missile systems. The market for tactical missile systems is highly specialized, dominated by a few large defense contractors. The $151 million award represents a significant investment in maintaining and upgrading existing capabilities, rather than developing entirely new platforms. Comparable spending benchmarks would typically involve other major defense procurement or sustainment contracts for complex weapon systems.

Small Business Impact

This contract does not appear to have a small business set-aside. Given the specialized nature of missile systems and the prime contractor being Lockheed Martin, it is unlikely that significant subcontracting opportunities for small businesses exist directly related to the core R&D effort, though they may be involved in the broader supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. The firm-fixed-price nature suggests a focus on deliverables and milestones. Transparency is limited due to the sole-source award. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Army Tactical Missile System (ATACMS)
Missile Production Contracts
Defense Research and Development
Service Life Extension Programs (SLEP)
Lockheed Martin Defense Contracts

Risk Flags

Sole-source award
Potential for cost escalation
Limited competition
R&D contract risks

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $151.0 million to LOCKHEED MARTIN CORPORATION. IGF::XX::IGF AWARD OF ARMY TACTICAL MISSILE SYSTEM (ATACMS) GUIDED MISSILE AND LAUNCHING ASSEMBLY (GMLA) SERVICE LIFE EXTENSION PROGRAM (SLEP) 1 PRODUCTION FOR 150 QUANTITY.

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 $151.0 million.

What is the period of performance?

Start: 2017-08-02. End: 2020-07-31.

What is the specific technical scope of the Service Life Extension Program (SLEP) for the ATACMS missile, and what are the key performance improvements expected?

The specific technical scope of the ATACMS SLEP contract awarded to Lockheed Martin involves upgrading existing missile components and systems to extend their operational lifespan and potentially enhance their reliability and maintainability. While detailed technical specifications are often classified or proprietary, SLEP programs generally aim to address obsolescence, incorporate minor upgrades for improved performance or safety, and ensure the system remains viable for its intended mission duration. Expected improvements typically focus on extending the shelf life of propellants, updating guidance and control systems to counter emerging threats or improve accuracy, and ensuring compatibility with newer launch platforms. The exact performance metrics and improvements are determined by the Army's specific requirements and threat assessments.

What was the justification provided by the Department of the Army for awarding this ATACMS SLEP contract on a sole-source basis to Lockheed Martin?

The justification for a sole-source award typically stems from specific circumstances outlined in federal acquisition regulations, such as the existence of unique capabilities, proprietary data, or urgent and compelling needs where competition is impractical. For a sole-source award to Lockheed Martin on a critical defense system like ATACMS, the justification likely centers on Lockheed Martin being the original manufacturer and sole possessor of the necessary technical data, tooling, and expertise required for the SLEP. Modifying or extending the life of such a complex and specialized weapon system often requires intimate knowledge of its design, manufacturing processes, and performance characteristics, which may not be readily available to other potential contractors. The Army would have had to formally document and approve this justification, likely citing the need to maintain critical warfighting capabilities without delay.

How does the $151 million contract value compare to historical spending on ATACMS sustainment or upgrade programs?

Comparing the $151 million award for the ATACMS SLEP to historical spending requires access to detailed historical contract data for the ATACMS program. However, based on the nature of SLEP contracts, this figure represents a significant investment in extending the life of an existing, albeit advanced, missile system. Historically, sustainment and upgrade programs for major weapon systems can range from tens to hundreds of millions of dollars, depending on the scope, quantity of items, and duration. Given that ATACMS is a key component of the Army's long-range precision strike capability, investments in its longevity are expected. Without specific historical data points for prior ATACMS sustainment efforts or similar SLEP initiatives on comparable systems, a precise comparison is difficult, but $151 million suggests a substantial effort.

What are the potential risks associated with a sole-source R&D contract for a critical defense system like ATACMS?

The primary risks associated with a sole-source R&D contract for a critical defense system like ATACMS include potential cost overruns due to the lack of competitive pressure, which can lead to less stringent price negotiations. There's also a risk of reduced innovation if the sole contractor is not incentivized to explore novel or more cost-effective solutions. Furthermore, over-reliance on a single supplier can create vulnerabilities in the supply chain and reduce the government's leverage in future negotiations or program adjustments. Ensuring adequate government oversight and robust technical evaluation becomes paramount to mitigate these risks and ensure the program meets its objectives within reasonable cost and schedule parameters.

What is Lockheed Martin's track record with the ATACMS program and similar missile system development/sustainment contracts?

Lockheed Martin Corporation has a long-standing and extensive track record with the Army Tactical Missile System (ATACMS) program, as they are the original developer and prime contractor for the system. Their experience spans the entire lifecycle of the missile, from initial development and production through sustainment and potential upgrades. The company is a major player in the defense industry, with significant expertise in designing, manufacturing, and supporting complex missile systems for various U.S. military branches and international allies. Their history with ATACMS suggests a deep understanding of the system's intricacies, making them a logical choice for sustainment and life-extension programs. This established relationship and demonstrated capability are key factors often considered in sole-source procurements for specialized defense assets.

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: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q16R0065

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

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: $215,552,990

Exercised Options: $215,552,990

Current Obligation: $150,958,111

Subaward Activity

Number of Subawards: 136

Total Subaward Amount: $264,912,595

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline