DoD awards $7.75B for PAC-3 missile production, with Lockheed Martin as sole contractor

Contract Overview

Contract Amount: $7,750,895,873 ($7.8B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2024-06-28

End Date: 2029-12-31

Contract Duration: 2,012 days

Daily Burn Rate: $3.9M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: EXECUTE PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT) ADVANCED CAPABILITY-3 (PAC-3) MISSILE PRODUCTION BY PROVIDING INCIDENTAL SERVICES, HARDWARE, FACILITIES, EQUIPMENT, AND TECHNICAL, PLANNING, MANAGEMENT, AND MANUFACTURING EFFORTS.

Place of Performance

Location: GRAND PRAIRIE, DALLAS County, TEXAS, 75051

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $7.75 billion to LOCKHEED MARTIN CORPORATION for work described as: EXECUTE PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT) ADVANCED CAPABILITY-3 (PAC-3) MISSILE PRODUCTION BY PROVIDING INCIDENTAL SERVICES, HARDWARE, FACILITIES, EQUIPMENT, AND TECHNICAL, PLANNING, MANAGEMENT, AND MANUFACTURING EFFORTS. Key points: 1. This contract represents a significant investment in national missile defense capabilities. 2. The sole-source nature raises questions about price competition and potential cost efficiencies. 3. Long-term contract duration suggests a sustained need for these advanced missile systems. 4. Performance will be closely monitored given the critical nature of the defense system. 5. The award falls within the Guided Missile and Space Vehicle Manufacturing sector. 6. Focus on hardware, facilities, and technical efforts indicates a comprehensive support package.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized, high-value nature of PAC-3 missile production. The contract's value of $7.75 billion over its period of performance suggests a substantial but potentially necessary investment for critical defense capabilities. Without competitive bids, it's difficult to assess if the pricing reflects optimal value for money compared to alternative solutions or if there are opportunities for cost reduction through negotiation or alternative sourcing.

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 for highly specialized defense systems where only one entity possesses the necessary technology, manufacturing capabilities, and intellectual property. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government than if multiple bidders had vied for the contract.

Taxpayer Impact: The absence of competition means taxpayers may not benefit from the cost savings typically achieved through a competitive bidding process. This could translate to a higher overall expenditure for the PAC-3 missile program.

Public Impact

The U.S. Army benefits from enhanced missile defense capabilities, crucial for national security. Services include the production of advanced PAC-3 missiles, hardware, facilities, and technical support. The contract's primary geographic impact is within Texas, where Lockheed Martin's operations are located. This contract supports a highly specialized workforce in advanced manufacturing and defense technology.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long-term contract duration may reduce flexibility to adapt to evolving technologies or threats.
Dependence on a single contractor for critical missile production poses supply chain risks.

Positive Signals

Ensures continued production of a vital missile defense system for national security.
Provides comprehensive support including hardware, facilities, and technical expertise.
Long-term commitment allows for stable planning and resource allocation for the contractor.

Sector Analysis

The Guided Missile and Space Vehicle Manufacturing sector is a highly specialized and capital-intensive segment of the aerospace and defense industry. Companies in this sector focus on the design, development, and production of complex weapon systems. Spending in this area is driven by national security requirements and technological advancements. Comparable spending benchmarks are difficult to establish due to the unique nature of each missile system, but multi-billion dollar contracts are common for advanced platforms like the PAC-3.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions, nor is there an indication of significant subcontracting opportunities for small businesses based on the provided data. As a sole-source award to a large prime contractor, the direct impact on the small business ecosystem may be limited unless Lockheed Martin actively engages small businesses for specialized components or services not covered by the prime contract.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army, with potential involvement from the Department of Defense's Inspector General. Accountability measures will be embedded within the contract's terms and conditions, including performance metrics and delivery schedules. Transparency may be limited due to the sole-source nature and the classified aspects of advanced missile technology.

Related Government Programs

Patriot Missile System
Missile Defense Agency Programs
Air and Missile Defense Systems
Advanced Weapons Manufacturing

Risk Flags

Sole-source award
High contract value
Long contract duration
Critical defense system

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $7.75 billion to LOCKHEED MARTIN CORPORATION. EXECUTE PHASED ARRAY TRACKING RADAR TO INTERCEPT ON TARGET (PATRIOT) ADVANCED CAPABILITY-3 (PAC-3) MISSILE PRODUCTION BY PROVIDING INCIDENTAL SERVICES, HARDWARE, FACILITIES, EQUIPMENT, AND TECHNICAL, PLANNING, MANAGEMENT, AND MANUFACTURING EFFORTS.

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 $7.75 billion.

What is the period of performance?

Start: 2024-06-28. End: 2029-12-31.

What is Lockheed Martin Corporation's track record with the PAC-3 missile program?

Lockheed Martin Corporation has been the prime contractor for the PAC-3 missile program, a critical component of the U.S. Army's air and missile defense capabilities. The company has a long history of developing and producing advanced missile systems, including various iterations of the PAC-3. Their experience encompasses the complex manufacturing processes, integration with the Patriot system, and ongoing upgrades to enhance intercept capabilities. The sustained nature of these contracts underscores their established expertise and the government's reliance on their capabilities for this specific defense technology. Past performance reviews and delivery histories would provide further insight into their reliability and quality in fulfilling these demanding requirements.

How does the $7.75 billion contract value compare to historical spending on PAC-3 missile production?

The $7.75 billion awarded for PAC-3 missile production represents a significant, multi-year investment. Historical spending on the PAC-3 program has been substantial, reflecting its critical role in national defense. While specific year-over-year figures fluctuate based on production rates, modernization efforts, and foreign military sales, this contract's value is consistent with the high cost associated with advanced missile systems. Previous contracts for PAC-3 production have also been in the billions of dollars, indicating a sustained and substantial commitment to maintaining and expanding this capability. Analyzing trends over the past decade would reveal the overall trajectory of investment in this specific missile defense technology.

What are the primary risks associated with a sole-source contract for critical defense hardware?

The primary risks associated with a sole-source contract for critical defense hardware like the PAC-3 missile include a lack of price competition, which can lead to inflated costs for the government and taxpayers. There is also a potential for reduced innovation and efficiency, as the contractor may face less pressure to optimize processes or develop cost-saving measures. Furthermore, sole-source awards can create dependency on a single supplier, posing supply chain risks if the contractor experiences production issues, financial instability, or geopolitical disruptions. This dependence can also limit the government's flexibility in adapting to new technologies or alternative solutions.

How effective is the PAC-3 missile system in its intended role, and how does this contract support that effectiveness?

The PAC-3 missile system is widely regarded as a highly effective terminal-phase missile defense interceptor, designed to counter tactical ballistic missiles, cruise missiles, and advanced aircraft. Its effectiveness stems from its hit-to-kill technology, which relies on direct kinetic impact to destroy targets. This contract, valued at $7.75 billion, directly supports the continued production and sustainment of these critical interceptors. By providing funding for hardware, facilities, and technical efforts, the contract ensures that the U.S. Army and its allies maintain an adequate inventory of PAC-3 missiles, thereby upholding the system's effectiveness in safeguarding against aerial threats. Ongoing production is essential for replacing expended missiles and fielding upgraded variants.

What are the implications of the contract's duration (ending 2029) for future defense planning?

The contract's duration, extending through December 31, 2029, provides a significant period of stability for both the U.S. Army's missile defense planning and Lockheed Martin's production capabilities. This long-term commitment allows the Army to forecast its needs and budget accordingly for a substantial portion of the next decade, ensuring a consistent supply of PAC-3 missiles. For the contractor, it enables long-range investment in manufacturing capacity, workforce development, and supply chain management. However, such a long duration also means that defense planners must carefully consider potential technological obsolescence or shifts in threat landscapes that might occur before the contract's end, potentially requiring future adjustments or new procurement strategies.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q23R0007

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $10,131,281,739

Exercised Options: $7,828,276,773

Current Obligation: $7,750,895,873

Subaward Activity

Number of Subawards: 217

Total Subaward Amount: $587,040,904

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline