DoD awards $212M for PAC-3 missile support, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $21,201,872 ($21.2M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2022-09-13

End Date: 2025-03-31

Contract Duration: 930 days

Daily Burn Rate: $22.8K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE 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 $21.2 million to LOCKHEED MARTIN CORPORATION for work described as: THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE US AND FOREIGN MILITARY SALES (FMS) CUSTOMERS. Key points: 1. Contract awarded to a single, established provider, raising questions about competitive pricing. 2. Focus on sustainment and support for critical missile defense systems. 3. Potential for cost overruns given the Cost Plus Incentive Fee (CPIF) structure. 4. Long-term support contract indicates ongoing reliance on this specific technology. 5. Geographic concentration of work in Texas. 6. No small business set-aside, limiting opportunities for smaller firms.

Value Assessment

Rating: fair

The contract's value of $212 million for PAC-3 missile support is substantial. However, without a competitive bidding process, it is difficult to benchmark the pricing against market rates or similar contracts. The CPIF contract type allows for cost sharing but also introduces risk of exceeding initial estimates. Further analysis of historical cost trends for PAC-3 support would be necessary to fully assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to Lockheed Martin Corporation. This indicates that the government determined only one source could provide the required services for the PAC-3 Missile Support Center. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Sole-source awards limit taxpayer value by removing the downward pressure on prices that competition provides. This contract's value could be higher than if multiple bidders had vied for the work.

Public Impact

US and Foreign Military Sales (FMS) customers benefit from continued support of critical missile defense systems. Ensures the operational readiness and sustainment of the PAC-3 missile defense program. Work is primarily located in Texas, supporting the local economy and workforce. Maintains the capability of the US and allied nations to defend against ballistic missile threats.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
CPIF contract type can lead to cost overruns if not managed closely.
Long-term nature of sustainment contracts can mask inefficiencies over time.
Reliance on a single contractor for critical defense systems poses a strategic risk.

Positive Signals

Contract ensures continued support for a vital national security asset.
Lockheed Martin is the original equipment manufacturer, likely possessing unique expertise.
CPIF structure incentivizes contractor to meet cost targets.
Long-term contract provides stability for program sustainment.

Sector Analysis

The defense sector, particularly missile defense, represents a significant portion of federal spending. This contract falls within the 'Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing' NAICS code. The market for missile defense systems is highly specialized, with a limited number of prime contractors capable of providing such advanced support. Spending benchmarks for similar sustainment contracts are difficult to ascertain due to the proprietary nature of the technology and services.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. As a sole-source award to a large prime contractor, opportunities for small businesses to directly participate in this specific contract are likely limited, unless they are part of Lockheed Martin's established supply chain.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Army's contracting and program management offices. Given the CPIF structure, rigorous financial oversight and performance monitoring are crucial to ensure cost control and contractor accountability. Inspector General investigations could be initiated if performance or cost issues arise. Transparency may be limited due to the sole-source nature and defense classification.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Foreign Military Sales (FMS)
Air and Missile Defense

Risk Flags

Sole-source award
Cost Plus Incentive Fee contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.2 million to LOCKHEED MARTIN CORPORATION. THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE 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 $21.2 million.

What is the period of performance?

Start: 2022-09-13. End: 2025-03-31.

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

Lockheed Martin Corporation, as the prime contractor for the PAC-3 missile system, possesses extensive experience and a long-standing track record in its sustainment and support. The company has been involved with the Patriot program for decades, including the development and production of various PAC-3 configurations. Historical data on previous support contracts, including cost performance, delivery schedules, and any associated issues or successes, would provide valuable context for assessing the current contract's potential performance. However, specific details on past PAC-3 support contract performance are often proprietary and not publicly disclosed in detail, making a comprehensive historical assessment challenging without access to internal government or contractor data.

How does the $212 million contract value compare to historical spending on PAC-3 support?

Comparing the $212 million contract value to historical spending on PAC-3 support requires access to detailed historical contract data, which is not fully available in the provided snippet. However, the duration of this contract (September 2022 to March 2025, approximately 30 months) suggests an average annual value of roughly $84.8 million. This figure can be used as a preliminary benchmark. To provide a more robust comparison, one would need to analyze annual spending on PAC-3 sustainment and support over the past 5-10 years, looking for trends in contract values, the number of contracts awarded, and the types of services procured. Significant deviations from historical averages, especially without clear justification (e.g., increased scope, new capabilities), could indicate potential issues with pricing or program requirements.

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

The primary risks associated with this sole-source, Cost Plus Incentive Fee (CPIF) contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, which can lead to inflated pricing and reduced incentive for the contractor to offer the most cost-effective solutions. The government may be paying a premium because there are no alternative providers to compare against. Secondly, the CPIF structure, while designed to incentivize performance and cost control, carries inherent risks. If the target costs are set too high or if oversight is insufficient, the contractor could still incur significant costs, and the government would share in those costs, potentially exceeding budgeted amounts. There's also a risk that the incentive structure might not adequately motivate the contractor to achieve optimal outcomes, especially if the 'incentive' portion is relatively small compared to the total cost.

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

The PAC-3 (Patriot Advanced Capability-3) missile system is widely regarded as a highly effective terminal-phase missile defense system, designed to intercept and destroy short- to medium-range ballistic missiles, cruise missiles, and advanced aircraft. Its effectiveness is crucial for protecting military assets and critical infrastructure. This contract, focused on the PAC-3 Missile Support Center (P3MSC), directly supports the system's effectiveness by ensuring its readiness, maintainability, and availability. By providing necessary support, spare parts, and technical services, the contract helps guarantee that the PAC-3 missiles and associated equipment function as intended when needed. Continued investment in sustainment and support, as represented by this contract, is vital for maintaining the operational capability and reliability of this critical defense asset.

What are the historical spending patterns for PAC-3 related support and sustainment?

Historical spending patterns for PAC-3 related support and sustainment typically involve multi-year contracts focused on logistics, maintenance, repair, overhaul, and the provision of spare parts. These contracts are often awarded to the prime manufacturer, Lockheed Martin, due to the specialized nature of the system. Annual spending can fluctuate based on operational tempo, modernization efforts, and the number of fielded systems (both US and FMS). While specific aggregate figures are not readily available without deep database access, it's common for sustainment contracts for major defense platforms like the Patriot system to represent hundreds of millions of dollars annually across all related efforts. This $212 million contract over roughly two and a half years aligns with the expectation of significant, ongoing investment required to maintain such advanced weapon systems.

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 INCENTIVE FEE (V)

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: $21,201,872

Exercised Options: $21,201,872

Current Obligation: $21,201,872

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $1,688,526

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