DoD awards $35M+ for THAAD/PAC-3 missile component development to Lockheed Martin
Contract Overview
Contract Amount: $35,061,627 ($35.1M)
Contractor: Lockheed Martin Corporation
Awarding Agency: Department of Defense
Start Date: 2023-06-15
End Date: 2025-12-31
Contract Duration: 930 days
Daily Burn Rate: $37.7K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: TERMINAL HIGH ALTITUDE AIR DEFENSE (THAAD) 5.0 PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) COMPONENT DEVELOPMENT.
Place of Performance
Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051
State: Texas Government Spending
Plain-Language Summary
Department of Defense obligated $35.1 million to LOCKHEED MARTIN CORPORATION for work described as: TERMINAL HIGH ALTITUDE AIR DEFENSE (THAAD) 5.0 PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) COMPONENT DEVELOPMENT. Key points: 1. Contract focuses on critical missile defense components, indicating a need for specialized technical services. 2. Sole-source award suggests limited market availability or unique contractor capabilities for this specific development. 3. Long performance period (over 2 years) implies a complex and lengthy development cycle. 4. Cost-plus incentive fee structure incentivizes contractor performance while managing cost risks. 5. Awardee has a significant track record in defense contracting, particularly in missile systems. 6. Geographic location in Texas may point to specific testing or manufacturing facilities.
Value Assessment
Rating: fair
The contract value of over $35 million for component development is substantial. Without specific benchmarks for this type of specialized missile component development, a direct value-for-money assessment is challenging. However, the cost-plus incentive fee (CPIF) structure aims to balance contractor incentives with cost control. Given the sole-source nature, comparing pricing to competitive bids is not possible, but it is essential to ensure the pricing reflects fair and reasonable costs for the unique services provided.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was awarded on a sole-source basis, meaning only one bidder was solicited. This typically occurs when a specific capability, technology, or proprietary knowledge is held by a single entity, or in cases of urgent need where competition is not feasible. The lack of competition limits price discovery and may result in higher costs compared to a fully competed contract.
Taxpayer Impact: For taxpayers, a sole-source award means there is a reduced opportunity for competitive pressure to drive down costs, potentially leading to a higher overall expenditure for this development effort.
Public Impact
The U.S. Army benefits from the development of advanced missile defense components. Services delivered include specialized technical and scientific support for missile systems. The primary geographic impact is in Texas, where the contract is managed and potentially executed. This contract supports a highly specialized segment of the defense industrial workforce involved in advanced engineering and manufacturing.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
- Cost-plus incentive fee contracts can sometimes lead to cost overruns if not closely managed.
- The long duration of the contract requires sustained oversight to ensure progress and value.
- Dependence on a single contractor for critical components could pose a supply chain risk.
Positive Signals
- Awardee is a major defense contractor with extensive experience in missile systems.
- The contract aims to enhance critical missile defense capabilities, contributing to national security.
- Incentive fee structure can motivate contractor efficiency and performance.
- Focus on component development suggests a strategic investment in future defense technologies.
Sector Analysis
This contract falls within the aerospace and defense sector, specifically focusing on missile defense systems. The market for such specialized components is highly concentrated, with a few major defense contractors dominating. Spending in this area is driven by national security priorities and technological advancements in threat capabilities. Comparable spending benchmarks would typically involve other sole-source or limited-competition contracts for advanced missile system development and production.
Small Business Impact
This contract was not set aside for small businesses and was awarded to a large prime contractor. There is no indication of specific subcontracting requirements for small businesses within the provided data. The impact on the small business ecosystem is likely minimal unless the prime contractor actively engages small businesses for specialized support services not covered by this direct award.
Oversight & Accountability
Oversight for this contract will be managed by the Department of the Army, likely through contracting officers and program managers. Accountability measures are embedded in the Cost Plus Incentive Fee (CPIF) structure, which ties contractor profit to performance metrics. Transparency is generally limited for sole-source defense contracts, but reporting requirements under the contract should provide some visibility into progress and spending. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.
Related Government Programs
- TERMINAL HIGH ALTITUDE AIR DEFENSE (THAAD)
- PATRIOT ADVANCED CAPABILITY-3 (PAC-3)
- Missile Defense Systems
- Advanced Technology Development
- Department of the Army Contracts
Risk Flags
- Sole-source award
- Long contract duration
- Cost-plus contract type
Tags
defense, department-of-defense, department-of-the-army, missile-defense, component-development, sole-source, cost-plus-incentive-fee, lockheed-martin-corporation, texas, professional-scientific-technical-services, major-contract
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $35.1 million to LOCKHEED MARTIN CORPORATION. TERMINAL HIGH ALTITUDE AIR DEFENSE (THAAD) 5.0 PATRIOT ADVANCED CAPABILITY-3 (PAC-3) MISSILE SEGMENT ENHANCEMENT (MSE) COMPONENT DEVELOPMENT.
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 $35.1 million.
What is the period of performance?
Start: 2023-06-15. End: 2025-12-31.
What is Lockheed Martin's track record with similar missile defense component development contracts?
Lockheed Martin Corporation is a primary contractor for numerous U.S. missile defense programs, including THAAD and PAC-3. They have a long history of developing, producing, and sustaining complex missile systems for the Department of Defense and international allies. Their experience encompasses various phases of the acquisition lifecycle, from research and development to full-rate production and sustainment. This extensive background suggests a deep understanding of the technical requirements and program management necessary for advanced component development, as evidenced by their consistent role in these critical national security programs. Their track record indicates a capacity to handle large-scale, technologically sophisticated projects within the defense sector.
How does the pricing structure (Cost Plus Incentive Fee) compare to other missile defense development contracts?
The Cost Plus Incentive Fee (CPIF) structure is common for development contracts where the final costs are uncertain, and there's a need to incentivize contractor performance. In a CPIF contract, the final profit is adjusted based on whether the final cost is below or above a target cost, with pre-defined sharing arrangements. This differs from fixed-price contracts, which offer more cost certainty but less flexibility for development, or cost-plus-fixed-fee (CPFF) contracts, where profit is fixed regardless of final cost. For missile defense development, CPIF is often preferred because it allows for innovation and adaptation while encouraging the contractor to manage costs effectively. Benchmarking requires comparing the target cost, incentive sharing ratios, and ceiling prices against similar development efforts, which are often proprietary or classified.
What are the primary risks associated with this sole-source contract for component development?
The primary risks associated with this sole-source contract include a lack of competitive pressure, which can lead to higher costs and potentially less innovation compared to a competed contract. There's also a risk of contractor lock-in, where the government becomes heavily reliant on Lockheed Martin for these specific components, making future transitions difficult or expensive. Furthermore, the long performance period (over two years) increases the risk of schedule delays or technical challenges that could impact the overall missile defense program. Effective risk mitigation requires robust government oversight, clear performance metrics, and proactive management of the contractor relationship to ensure program objectives are met within reasonable cost and schedule parameters.
How effective is the CPIF structure in ensuring value for money in advanced R&D for missile defense?
The Cost Plus Incentive Fee (CPIF) structure can be effective in ensuring value for money for advanced R&D in missile defense, provided it is well-structured and rigorously managed. It incentivizes the contractor to control costs by sharing in any savings below a target cost and penalizing them for exceeding it. This aligns the contractor's profit motive with the government's goal of achieving program objectives efficiently. However, the effectiveness hinges on realistic target costs, appropriate incentive sharing ratios, and a well-defined ceiling price. Without strong government oversight to monitor progress, validate costs, and ensure the contractor is genuinely striving to meet targets, the CPIF structure can still lead to cost overruns. Its success is therefore dependent on both the contract design and the diligence of the contracting agency.
What are the historical spending patterns for THAAD and PAC-3 component development?
Historical spending on the THAAD and PAC-3 programs, including component development, has been substantial, reflecting the critical nature of these missile defense systems. These programs have seen consistent, multi-year funding allocations from the Department of Defense, often in the hundreds of millions or billions of dollars annually when considering procurement, R&D, and sustainment across all components. Component development contracts, like this $35M award, represent a specific slice of that larger investment. Analyzing historical spending patterns reveals a trend of ongoing investment in upgrading and enhancing these systems to counter evolving threats. Specific figures for component development alone are often embedded within broader program budgets and may not be easily isolated without detailed program financial reports.
Industry Classification
NAICS: Professional, Scientific, and Technical Services › Other Professional, Scientific, and Technical Services › All Other Professional, Scientific, and Technical Services
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
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: $43,263,172
Exercised Options: $43,263,172
Current Obligation: $35,061,627
Actual Outlays: $7,123,437
Subaward Activity
Number of Subawards: 23
Total Subaward Amount: $1,332,608
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: YES
Parent Contract
Parent Award PIID: W31P4Q22G0003
IDV Type: BOA
Timeline
Start Date: 2023-06-15
Current End Date: 2025-12-31
Potential End Date: 2025-12-31 00:00:00
Last Modified: 2025-12-11
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