DoD awards $55.4M for PAC-3 missile support, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $55,409,935 ($55.4M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2023-03-22

End Date: 2028-03-29

Contract Duration: 1,834 days

Daily Burn Rate: $30.2K/day

Competition Type: NOT COMPETED

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITIES-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES AND FOREIGN &#1048718 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 $55.4 million to LOCKHEED MARTIN CORPORATION for work described as: THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITIES-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES AND FOREIGN &#1048718 MILITARY SALES (FMS) CUSTOMERS. Key points: 1. Contract awarded on a sole-source basis, limiting competitive pricing benefits. 2. Significant portion of contract value allocated to support for foreign military sales. 3. Contract duration extends over five years, indicating long-term sustainment needs. 4. Focus on missile support suggests critical defense readiness requirements. 5. Potential for cost overruns due to Cost Plus Fixed Fee pricing structure.

Value Assessment

Rating: fair

This contract's value of $55.4 million for PAC-3 missile support is difficult to benchmark without comparable sole-source contracts. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for complex defense systems, carries inherent risks of cost escalation. Without competitive bidding, it's challenging to definitively assess if the pricing represents optimal value for the taxpayer. Further analysis would require access to historical pricing data for similar support services from Lockheed Martin or other defense contractors.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award to Lockheed Martin Corporation. This approach is often taken when a single contractor possesses unique capabilities or intellectual property essential for the product or service. While this ensures access to specialized expertise, it bypasses the price discovery mechanisms inherent in a competitive bidding process, potentially leading to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers may not benefit from the cost savings typically achieved through a bidding process. This sole-source award necessitates careful oversight to ensure fair pricing and prevent potential overspending.

Public Impact

U.S. Army personnel and readiness benefit from sustained support for critical PAC-3 missile systems. Foreign military sales customers receive essential logistical and technical support, enhancing allied defense capabilities. The contract supports specialized technical roles within Lockheed Martin, contributing to high-skilled employment. Ensures the operational readiness of a key component of U.S. and allied air defense.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs.
Cost Plus Fixed Fee structure introduces risk of cost overruns.
Long contract duration requires sustained oversight to manage performance and costs.

Positive Signals

Addresses critical defense need for PAC-3 missile system support.
Ensures continued operational readiness for U.S. and allied forces.
Leverages specialized expertise of the original equipment manufacturer.

Sector Analysis

The defense sector, particularly guided missile manufacturing and support, is characterized by high barriers to entry, significant R&D investment, and a limited number of prime contractors. Contracts for advanced missile systems like the PAC-3 are typically awarded to established aerospace and defense companies. This contract fits within the broader category of "Other Guided Missile and Space Vehicle Parts and Auxiliary Equipment Manufacturing," representing a crucial segment of the defense industrial base focused on sustainment and readiness.

Small Business Impact

This contract does not appear to include specific small business set-asides. As a sole-source award to a large prime contractor, the primary subcontracting opportunities would likely be managed by Lockheed Martin. The extent to which small businesses will benefit will depend on Lockheed Martin's subcontracting plan and their ability to compete for those opportunities.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Army's contracting and program management offices. Given the sole-source nature and CPFF structure, robust oversight is crucial to monitor costs, ensure performance, and verify the necessity of expenditures. Transparency will be key, and any Inspector General (IG) involvement would likely be triggered by specific concerns regarding fraud, waste, or abuse.

Related Government Programs

PAC-3 Missile System
Air and Missile Defense Systems
Foreign Military Sales Program
Guided Missile Parts Manufacturing

Risk Flags

Sole-source award
Cost Plus Fixed Fee pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $55.4 million to LOCKHEED MARTIN CORPORATION. THIS CONTRACT IS FOR PATRIOT ADVANCED CAPABILITIES-3 (PAC-3) MISSILE SUPPORT CENTER (P3MSC) FOR THE UNITED STATES AND FOREIGN &#1048718 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 $55.4 million.

What is the period of performance?

Start: 2023-03-22. End: 2028-03-29.

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

Analyzing historical spending for PAC-3 missile support from Lockheed Martin requires access to detailed contract databases. However, generally, sustainment contracts for complex defense systems like the PAC-3 tend to increase over time due to factors such as aging inventory, evolving threat landscapes requiring system upgrades, and the inherent cost escalations in long-term support agreements. Without specific historical data for this particular contract vehicle or similar PAC-3 support efforts, it's difficult to provide precise figures. However, it is common for such long-term sustainment contracts to represent significant, multi-year investments, often in the tens to hundreds of millions of dollars, reflecting the high cost of maintaining advanced missile technology and ensuring operational readiness.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for defense sustainment?

The Cost Plus Fixed Fee (CPFF) contract type is frequently used for complex defense systems where the scope of work may evolve or is not precisely defined at the outset, such as long-term sustainment. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing their profit. This contrasts with Fixed Price contracts, where the price is set upfront, offering greater cost certainty to the government but potentially higher risk for the contractor if costs exceed estimates. Cost Plus Incentive Fee (CPIF) contracts, on the other hand, share cost savings or overruns between the government and contractor based on performance targets. For sustainment, CPFF offers flexibility but requires stringent oversight to control costs, as the contractor has less incentive to minimize expenses compared to a fixed-price arrangement. The government bears more of the cost risk.

What are the primary risks associated with sole-source defense contracts of this magnitude?

Sole-source defense contracts, especially those valued in the tens of millions like this PAC-3 missile support, carry several primary risks. The most significant is the lack of price competition, which can lead to inflated costs for the government as the contractor faces no pressure to offer the most competitive pricing. This can result in taxpayers paying more than necessary for the goods or services. Another risk is potential complacency from the contractor, who may be less motivated to innovate or improve efficiency without competitive threats. Furthermore, sole-source awards can create vendor lock-in, making it difficult and costly to switch providers in the future. Ensuring robust oversight, fair negotiation, and clear performance metrics becomes paramount to mitigate these risks.

What is the strategic importance of the PAC-3 missile system to U.S. and allied defense?

The PAC-3 (Patriot Advanced Capability-3) missile system is a cornerstone of U.S. and allied air and missile defense capabilities. It is designed to intercept and destroy tactical ballistic missiles, cruise missiles, and advanced aircraft. Its significance lies in its ability to provide critical protection against a wide range of aerial threats, including those posed by near-peer adversaries. The PAC-3's advanced hit-to-kill technology offers a high probability of intercept. Maintaining the operational readiness and effectiveness of these systems through robust support contracts, like the one awarded to Lockheed Martin, is therefore of paramount strategic importance for national security and the collective defense of allies.

What are the implications of supporting Foreign Military Sales (FMS) customers through this contract?

Supporting Foreign Military Sales (FMS) customers through this contract has several implications. Firstly, it contributes to U.S. foreign policy objectives by enhancing the defense capabilities of allies, thereby promoting regional stability and interoperability. Secondly, it generates revenue for the U.S. defense industrial base, supporting jobs and technological development. However, it also means that a portion of the contract value is directed towards non-U.S. entities, which requires careful management to ensure that U.S. national security interests are not compromised. The contract's structure must balance the needs of FMS customers with the primary requirement to maintain U.S. military readiness.

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: $55,409,935

Exercised Options: $55,409,935

Current Obligation: $55,409,935

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $11,634,797

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