DoD awards $395M+ to Lockheed Martin for PAC-3 missile support, with no competition

Contract Overview

Contract Amount: $39,531,878 ($39.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-06-25

End Date: 2026-03-31

Contract Duration: 2,105 days

Daily Burn Rate: $18.8K/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 $39.5 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. Significant contract value for critical missile defense systems. 2. Sole-source award raises questions about price discovery and potential overpayment. 3. Long contract duration suggests sustained need for support services. 4. Contract supports both US and allied military sales, indicating strategic importance. 5. Focus on specialized parts manufacturing highlights a niche but vital sector.

Value Assessment

Rating: questionable

The total award of over $395 million for PAC-3 missile support is substantial. Without competitive bidding, it is difficult to benchmark the value for money. The Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not managed tightly, especially given the long duration. Comparisons to similar sole-source contracts for advanced missile systems would be necessary to assess pricing fairness, but such data is often proprietary.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach is often used for highly specialized systems where only one contractor possesses the necessary expertise or intellectual property. The lack of competition means there was no opportunity for multiple bidders to offer potentially lower prices or innovative solutions, which can limit price discovery.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. Without a bidding process, there is less assurance that the government is securing the best possible price for these critical missile support services.

Public Impact

US Army benefits from continued support for the PAC-3 missile defense system. Foreign military sales customers receive crucial missile components and support. The contract sustains operations and readiness for air and missile defense. Workforce in Texas is supported by this long-term, high-value contract. Ensures the availability of advanced missile defense capabilities for national security.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings.
Cost Plus Fixed Fee structure may incentivize higher costs if not rigorously overseen.
Long contract duration increases exposure to potential cost escalations over time.

Positive Signals

Supports a critical national defense capability (PAC-3 missile system).
Long-term award provides stability for contractor operations and workforce.
Includes support for foreign military sales, strengthening allied defense capabilities.

Sector Analysis

This contract falls within the Defense Industrial Base, specifically the manufacturing of guided missiles and space vehicle parts. The market for advanced missile defense systems is highly specialized, dominated by a few large defense contractors. Spending in this sector is driven by geopolitical threats and the need for advanced military technology. Comparable spending benchmarks would likely be within the multi-billion dollar range for similar large-scale missile system support contracts.

Small Business Impact

The contract data indicates that small business participation (SB set-aside and subcontracting) is not a primary focus, with 'sb' listed as false. This suggests the primary contractor, Lockheed Martin, will likely handle the majority of the work. There is potential for small businesses to be involved as subcontractors, but this is not explicitly mandated or highlighted in the provided data. The impact on the small business ecosystem is likely minimal unless specific subcontracting plans are implemented.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army and potentially the Department of Defense's Inspector General. The Cost Plus Fixed Fee (CPFF) nature of the contract necessitates robust financial oversight to ensure costs are reasonable and allocable. Transparency may be limited due to the sole-source nature and the classified aspects of missile defense technology. Accountability rests with the contracting officer and program managers to ensure performance and cost control.

Related Government Programs

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

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $39.5 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 $39.5 million.

What is the period of performance?

Start: 2020-06-25. End: 2026-03-31.

What is the historical spending trend for PAC-3 missile support with Lockheed Martin?

Analyzing historical spending on PAC-3 missile support requires access to detailed contract databases beyond the provided summary. However, given the critical nature of the PAC-3 system and its ongoing role in air defense, it is reasonable to infer a consistent and potentially increasing spending trend over time. The current award, spanning from June 2020 to March 2026 with a value exceeding $395 million, indicates a significant and sustained investment. Previous contracts for PAC-3 support, upgrades, and production would likely show a similar pattern of substantial, long-term commitments, reflecting the lifecycle costs associated with advanced weapon systems and the strategic importance placed on missile defense capabilities by the U.S. and its allies.

How does the pricing structure (Cost Plus Fixed Fee) typically impact costs for similar defense contracts?

The Cost Plus Fixed Fee (CPFF) pricing structure is common in defense contracting, particularly for research, development, and complex services where costs are difficult to estimate precisely upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. While this structure allows for flexibility and adaptation to evolving requirements, it carries inherent risks for the government. If not managed with stringent oversight, the contractor may have less incentive to control costs, as the fee is fixed regardless of the final cost incurred. This can potentially lead to higher overall expenditures compared to fixed-price contracts. Effective oversight, detailed cost audits, and clear performance metrics are crucial to mitigate these risks and ensure value for taxpayer money.

What are the specific risks associated with a sole-source award for critical defense components like the PAC-3 missile parts?

Sole-source awards for critical defense components like PAC-3 missile parts present several significant risks. Foremost is the lack of competitive pressure, which can lead to inflated pricing as the government does not benefit from multiple bidders vying for the contract. This absence of competition can also stifle innovation, as the sole provider may have less incentive to invest in developing more efficient or advanced manufacturing processes. Furthermore, reliance on a single supplier creates a vulnerability in the supply chain; any disruption at the contractor's facility or issues with their performance could have immediate and severe consequences for national defense readiness. Finally, without market validation through competition, it is challenging to ascertain if the government is receiving the best possible value and technological solution.

What is the strategic importance of the PAC-3 missile system and its support contracts for US foreign policy and defense alliances?

The PAC-3 (Patriot Advanced Capability-3) missile system is a cornerstone of U.S. and allied air and missile defense capabilities, designed to intercept tactical ballistic missiles, cruise missiles, and advanced aircraft. Its strategic importance lies in its ability to provide a critical layer of protection against evolving threats, thereby enhancing deterrence and maintaining regional stability. Contracts supporting the PAC-3, such as this one with Lockheed Martin, are vital for ensuring the operational readiness and continued effectiveness of these systems. By providing support for both U.S. forces and Foreign Military Sales (FMS) customers, these contracts bolster interoperability within alliances, strengthen the defense capabilities of key partners, and project U.S. security commitments globally. This support is integral to U.S. foreign policy objectives, reinforcing alliances and promoting security cooperation in critical regions.

What are the potential implications for contractor performance and accountability given the long duration and sole-source nature of this contract?

The long duration (approximately 6.5 years from award to completion) combined with the sole-source nature of this contract necessitates robust performance monitoring and accountability mechanisms. While the fixed fee provides a baseline incentive, the absence of competition means the government cannot easily switch providers if performance falters or costs escalate unreasonably. Accountability hinges heavily on the contracting officer's vigilance, the effectiveness of contract clauses related to performance standards, and the potential for audits and reviews by oversight bodies like the Government Accountability Office (GAO) or the Inspector General. Clear metrics for delivery, quality, and responsiveness are essential. The contractor, Lockheed Martin, has a strong track record, but the structure of this award places a greater onus on the government to actively manage the relationship and ensure taxpayer funds are used efficiently and effectively throughout the contract's lifecycle.

Industry Classification

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

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

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: $39,531,878

Exercised Options: $39,531,878

Current Obligation: $39,531,878

Subaward Activity

Number of Subawards: 21

Total Subaward Amount: $29,218,748

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