DoD awards $257.6M to Lockheed Martin for PAC-3 missile support, with no competition

Contract Overview

Contract Amount: $25,756,508 ($25.8M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2019-06-09

End Date: 2023-11-15

Contract Duration: 1,620 days

Daily Burn Rate: $15.9K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THIS CONTRACT IS IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES (US) AND FOREIGN MILITARY SALES (FMS) CUSTOMERS.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $25.8 million to LOCKHEED MARTIN CORPORATION for work described as: THIS CONTRACT IS IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES (US) AND FOREIGN MILITARY SALES (FMS) CUSTOMERS. Key points: 1. Contract supports critical missile defense systems for US and allied nations. 2. Sole-source award raises questions about price competitiveness and value. 3. Long contract duration (1620 days) suggests sustained support needs. 4. Focus on specialized missile parts manufacturing indicates a niche market. 5. Contractor has a significant role in advanced missile systems. 6. Geographic concentration in Texas for contract performance.

Value Assessment

Rating: questionable

The contract's value of $257.6 million over approximately 4.5 years for specialized missile support warrants scrutiny. Without competitive bidding, it is difficult to benchmark the pricing against market rates or similar contracts. The Cost Plus Fixed Fee (CPFF) structure, while common for complex defense systems, can lead to cost overruns if not managed tightly. Further analysis of the fixed fee and the total estimated cost is needed to assess value for money.

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 considered. This approach is typically justified when a single source possesses unique capabilities or when urgency precludes a competitive process. However, the lack of competition limits the government's ability to explore alternative solutions or secure the best possible pricing through market forces.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the most cost-effective solution. Without bids from other qualified contractors, there is a risk of paying a premium for the goods and services provided.

Public Impact

US and Foreign Military Sales (FMS) customers benefit from continued support of the PAC-3 missile system. Ensures the operational readiness and sustainment of a key missile defense capability. Supports specialized manufacturing and technical expertise within the defense industrial base. Work is primarily located in Texas, impacting the regional economy and workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potential cost savings.
CPFF contract type can incentivize higher costs if not rigorously overseen.
Long-term nature of the contract may reduce flexibility for future technological advancements.
Dependence on a single contractor for critical missile support.

Positive Signals

Addresses a critical national security need for missile defense.
Contractor is a recognized leader in missile technology.
Supports US allies through FMS, enhancing diplomatic and security relationships.
Long-term contract provides stability for essential defense capabilities.

Sector Analysis

This contract falls within the Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing sector, a highly specialized and technologically advanced segment of the aerospace and defense industry. The PAC-3 missile is a key component of modern air and missile defense systems. Spending in this sector is often characterized by high R&D costs, long development cycles, and a limited number of prime contractors due to the technical expertise and security clearances required. Comparable spending benchmarks are difficult to establish due to the unique nature of such systems and the proprietary information involved.

Small Business Impact

The contract data indicates that small business participation (sb) is false, and there is no indication of a small business set-aside (ss). This suggests that the primary contract was not specifically targeted towards small businesses. Subcontracting opportunities for small businesses may exist within Lockheed Martin's supply chain, but these are not explicitly detailed in the provided data. The impact on the broader small business ecosystem is likely indirect, depending on whether small businesses are part of the prime contractor's lower-tier supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and the Department of Defense. As a Cost Plus Fixed Fee contract, rigorous financial oversight is crucial to monitor expenditures against the estimated costs and ensure the fixed fee is justified. Transparency may be limited due to the sole-source nature and the classified or sensitive aspects of missile technology. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Foreign Military Sales (FMS)
Guided Missile Manufacturing
Aerospace and Defense Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Lack of small business participation noted
Critical defense system support

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $25.8 million to LOCKHEED MARTIN CORPORATION. THIS CONTRACT IS IN SUPPORT OF THE PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES (US) AND FOREIGN MILITARY SALES (FMS) CUSTOMERS.

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 $25.8 million.

What is the period of performance?

Start: 2019-06-09. End: 2023-11-15.

What is Lockheed Martin's track record with PAC-3 missile support contracts?

Lockheed Martin Corporation is the prime contractor for the PAC-3 missile program, including its various upgrades and support elements. Their track record with PAC-3 support is extensive, as they are the original manufacturer and have been involved in its sustainment and modernization for many years. This includes delivering missiles, providing technical support, and managing upgrades. The company's long-standing relationship with the Department of Defense for this critical defense system suggests a deep understanding of the program's requirements and a proven capability to deliver. However, the specific performance metrics, delivery timelines, and cost performance on past PAC-3 support contracts would require deeper data dives into contract performance reports and historical spending.

How does the $257.6 million value compare to similar missile support contracts?

Directly comparing the $257.6 million value to similar missile support contracts is challenging due to the specialized nature of the PAC-3 missile and the proprietary data often associated with defense contracts. Missile support contracts can vary significantly based on the specific missile system, the scope of work (e.g., depot-level maintenance, spare parts, software updates, training), the number of units supported, and the contract duration. Given that the PAC-3 is a high-end air defense interceptor, and this contract spans over four years, the total value is substantial but may be within the expected range for sustaining such a critical and complex weapon system. Without access to detailed breakdowns of the work required and comparable sole-source or competitively bid contracts for similar advanced missile systems, a precise value-for-money assessment is difficult.

What are the primary risks associated with this sole-source contract?

The primary risk associated with this sole-source contract is the potential for inflated costs due to the lack of competition. Without competing bids, Lockheed Martin may not have had the same incentive to offer the lowest possible price. Another risk is the potential for reduced innovation or efficiency, as there is less market pressure to adopt new technologies or streamline processes. Furthermore, the government's reliance on a single provider for such a critical system creates a dependency risk; any disruption in Lockheed Martin's ability to deliver could have significant national security implications. The Cost Plus Fixed Fee (CPFF) structure also carries inherent risks of cost overruns if the contractor's costs exceed initial estimates, although the fixed fee component aims to cap the contractor's profit.

How effective is the PAC-3 missile system, and does this contract contribute to its effectiveness?

The PAC-3 missile system is widely regarded as a highly effective terminal-phase missile defense interceptor, designed to counter advanced threats such as tactical ballistic missiles, cruise missiles, and aircraft. Its 'hit-to-kill' technology provides a high probability of destruction. This contract, by providing essential support, spare parts, and auxiliary equipment, directly contributes to the operational readiness and effectiveness of the PAC-3 missile system for both U.S. forces and allied nations operating under Foreign Military Sales (FMS). Ensuring the system is maintained, supplied, and ready for deployment is crucial for its overall effectiveness in defending against missile threats. The contract's duration suggests a commitment to sustained operational capability.

What are the historical spending patterns for PAC-3 missile support?

Historical spending on PAC-3 missile support has been substantial, reflecting the system's critical role in U.S. and allied missile defense architectures. While the specific figure of $257.6 million for this particular delivery order (2019-2023) provides a recent data point, overall spending on the PAC-3 program, including procurement, development, and sustainment, spans many years and billions of dollars. The Department of Defense consistently allocates significant resources to missile defense programs due to evolving threats. Spending patterns often show fluctuations based on modernization efforts, upgrades, and the number of systems deployed by the U.S. and FMS customers. Analyzing past contract awards for PAC-3 sustainment and upgrades would reveal trends in cost, duration, and contractor involvement over time.

What is the significance of the contract being for both US and FMS customers?

The significance of this contract supporting both U.S. and Foreign Military Sales (FMS) customers is twofold. Firstly, it underscores the PAC-3 missile's importance as a key component of collective security and allied defense capabilities. By providing support for allied nations, the U.S. enhances their ability to defend themselves, contributing to regional stability and U.S. foreign policy objectives. Secondly, FMS sales can help offset the U.S. development and production costs of advanced military systems, potentially leading to economies of scale that benefit the U.S. military as well. The shared support infrastructure and logistics also streamline operations and training for both U.S. and allied forces.

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

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: $25,954,964

Exercised Options: $25,756,508

Current Obligation: $25,756,508

Subaward Activity

Number of Subawards: 31

Total Subaward Amount: $80,434,160

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q17D0026

IDV Type: IDC

Timeline