DoD awards $77M for PATRIOT PAC-3 software, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $77,063,012 ($77.1M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-02-01

End Date: 2024-05-26

Contract Duration: 1,576 days

Daily Burn Rate: $48.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT), ADVANCED CAPABILITY-3 (PAC-3) SOFTWARE TASK YEAR 2

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $77.1 million to LOCKHEED MARTIN CORPORATION for work described as: PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT), ADVANCED CAPABILITY-3 (PAC-3) SOFTWARE TASK YEAR 2 Key points: 1. Contract awarded on a cost-plus-incentive-fee basis, allowing for shared cost savings and performance incentives. 2. Sole-source award indicates a lack of competition, potentially impacting price negotiation. 3. Contract duration of nearly 4 years suggests a significant, ongoing need for these services. 4. The contract supports the Department of the Army, a major component of the DoD. 5. The specific product, PATRIOT PAC-3 software, is critical for missile defense capabilities. 6. The award value of $77 million represents a substantial investment in advanced defense technology.

Value Assessment

Rating: fair

The contract's cost-plus-incentive-fee structure allows for flexibility and potential savings, but also carries inherent risks of cost overruns if not managed effectively. Benchmarking against similar software development contracts for advanced defense systems is challenging due to the specialized nature of the PATRIOT PAC-3 system. The award value of $77 million for nearly four years of work suggests a significant investment, but without detailed cost breakdowns or comparisons to alternative solutions, a definitive value-for-money assessment is difficult. The lack of competition further complicates a precise valuation.

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 product or service is unique and only available from a single source, or in cases of urgent need where competition is not feasible. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government compared to a competitive procurement.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not benefit from potential price reductions that could arise from multiple offers.

Public Impact

The primary beneficiaries are the U.S. Army warfighters who will receive updated and maintained missile defense software. The services delivered include software development and sustainment for the critical PATRIOT PAC-3 missile defense system. The contract has a primary performance location in Texas, indicating a domestic focus for this work. This contract supports highly specialized technical jobs within Lockheed Martin, contributing to the defense industrial workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs.
Cost-plus-incentive-fee contracts can incentivize cost growth if not rigorously overseen.
Reliance on a single contractor for critical defense software poses supply chain and innovation risks.

Positive Signals

Contract supports a critical national security capability (missile defense).
Incentive fee structure aims to align contractor and government interests for performance and cost efficiency.
Long-term nature of the contract suggests a stable, ongoing need and commitment to the system's effectiveness.

Sector Analysis

The defense sector, particularly within guided missile and space vehicle manufacturing, is characterized by high R&D costs, long development cycles, and significant government reliance on a few prime contractors. Lockheed Martin is a major player in this space. Spending on advanced missile defense systems is a priority for national security, with significant annual investments across various platforms. This contract fits within the broader DoD strategy to maintain and enhance air and missile defense capabilities against evolving threats.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses detailed 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 unless Lockheed Martin voluntarily engages small businesses for specific components or services not detailed here.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and program management offices. The cost-plus-incentive-fee structure necessitates close monitoring of costs and performance to ensure the government receives value. Inspector General investigations could be initiated if any fraud, waste, or abuse is suspected. Transparency is limited by the sole-source nature, but contract modifications and performance reports would be subject to internal DoD review.

Related Government Programs

PATRIOT Missile System
Missile Defense Agency Programs
Department of the Army Logistics and Sustainment Contracts
Advanced Weapons Systems Development
Guided Missile Manufacturing

Risk Flags

Sole Source Procurement
Cost-Plus Contract Type
Critical Defense System Software

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $77.1 million to LOCKHEED MARTIN CORPORATION. PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT), ADVANCED CAPABILITY-3 (PAC-3) SOFTWARE TASK YEAR 2

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 $77.1 million.

What is the period of performance?

Start: 2020-02-01. End: 2024-05-26.

What is Lockheed Martin's track record with the PATRIOT system and similar defense contracts?

Lockheed Martin Corporation has a long and established history as a prime contractor for the PATRIOT missile defense system, including the PAC-3 variant. They are a major defense contractor with extensive experience in developing, manufacturing, and sustaining complex weapon systems. Their track record includes numerous contracts with the Department of Defense and allied nations for various platforms. While generally considered a capable provider, like many large defense contractors, they have faced scrutiny over contract costs and performance on specific programs. Their deep integration with the PATRIOT system makes them a logical, albeit sole-source, provider for its ongoing software sustainment and upgrades.

How does the $77 million award compare to historical spending on PATRIOT PAC-3 software sustainment?

Without access to historical spending data specifically for PATRIOT PAC-3 software sustainment, a direct comparison is difficult. However, the $77 million award over approximately 3.8 years (February 2020 to May 2024) averages around $20 million per year. This figure should be considered within the context of the system's complexity, the advanced nature of the software, and the ongoing need for updates to counter evolving threats. Annual spending on major defense systems like PATRIOT can fluctuate significantly based on modernization phases, upgrade requirements, and operational tempo. This award appears to represent a substantial, but not necessarily outlier, investment for sustaining a critical, high-technology defense capability.

What are the primary risks associated with a sole-source, cost-plus-incentive-fee contract for critical software?

The primary risks associated with this contract structure are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices and reduced incentive for the contractor to innovate or offer cost efficiencies. The government relies heavily on the contractor's proposed pricing and negotiation skills. Secondly, cost-plus-incentive-fee (CPIF) contracts, while designed to share risks and reward performance, can incentivize cost growth if the target costs are set too high or if oversight is insufficient. The contractor is motivated to meet performance targets, but the cost-sharing mechanism means that cost overruns are borne partially by the government, potentially increasing the final price beyond initial estimates.

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

The PATRIOT PAC-3 system is widely regarded as a highly effective, state-of-the-art air and missile defense system, capable of intercepting tactical ballistic missiles, cruise missiles, and advanced aircraft. Its effectiveness relies heavily on sophisticated software for target detection, tracking, engagement, and system management. This software sustainment contract is crucial because it ensures the system remains operational, updated with the latest threat data, and incorporates technological advancements. Without continuous software development and maintenance, the system's capabilities would degrade over time, diminishing its effectiveness against modern and emerging threats, thereby compromising national security.

What is the strategic importance of the PATRIOT PAC-3 system to the Department of the Army and national defense?

The PATRIOT PAC-3 system is strategically vital for the Department of the Army and overall U.S. national defense, providing a critical layer of protection against a wide range of aerial and missile threats. It is a key component of the U.S. missile defense architecture, safeguarding critical assets, deployed forces, and allies. The PAC-3 variant specifically enhances the system's capability against more sophisticated and numerous threats. Maintaining and upgrading the software associated with this system is paramount to ensuring its continued readiness and effectiveness in deterring adversaries and responding to missile attacks, thus underpinning broader strategic security objectives.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Guided Missile and Space Vehicle Manufacturing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $128,577,476

Exercised Options: $77,063,012

Current Obligation: $77,063,012

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: W31P4Q17G0001

IDV Type: BOA

Timeline