DoD awards $41.5M for PAC-3 missile support, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $41,450,423 ($41.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2024-03-28

End Date: 2027-04-01

Contract Duration: 1,099 days

Daily Burn Rate: $37.7K/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 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 $41.5 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 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. Long-term contract duration suggests ongoing need for specialized technical services. 4. Potential for cost overruns given the Cost Plus Fixed Fee structure. 5. Geographic concentration of contract performance in Texas. 6. No small business set-aside indicates a focus on large prime contractors.

Value Assessment

Rating: fair

The contract's value of $41.5 million for PAC-3 missile support is difficult to benchmark without comparable sole-source sustainment contracts. The Cost Plus Fixed Fee (CPFF) pricing structure, while common for complex systems requiring specialized expertise, carries inherent risks of cost escalation. The fixed fee component provides some incentive for the contractor to manage costs, but the overall value for money is contingent on efficient execution and transparent cost reporting by Lockheed Martin.

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 specific contractor possesses unique capabilities, intellectual property, or is the sole manufacturer of a critical system, as is likely the case with the PAC-3 missile. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bidders had vied for the contract.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without alternative offers, the government relies heavily on negotiation and oversight to ensure a fair price.

Public Impact

The U.S. Army benefits from continued sustainment of its PAC-3 missile defense capabilities. Foreign Military Sales customers also receive critical support for their PAC-3 systems. Ensures the operational readiness of a key component of national missile defense. Supports specialized technical jobs within Lockheed Martin's operations in Texas.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee contract type can lead to cost overruns if not closely managed.
Reliance on a single contractor for critical missile support creates vendor lock-in.
Lack of transparency in cost build-up for sole-source contracts.

Positive Signals

Ensures continued support for a vital national security asset (PAC-3 missile).
Leverages Lockheed Martin's established expertise and infrastructure for PAC-3 sustainment.
Long-term contract provides stability for critical missile defense readiness.
Supports foreign allies through Foreign Military Sales, enhancing interoperability and security cooperation.

Sector Analysis

The defense sector, particularly missile manufacturing and sustainment, is characterized by high barriers to entry and significant reliance on specialized technology and expertise. Contracts for advanced missile systems like the PAC-3 are typically awarded to a limited number of prime contractors with proven capabilities. Spending in this area is driven by national security priorities and geopolitical factors. Comparable spending benchmarks are difficult to establish due to the unique nature of advanced weapon systems and their support requirements.

Small Business Impact

This contract was not competed and does not include a small business set-aside. Lockheed Martin Corporation, the prime contractor, is a large business. While there is no direct subcontracting requirement specified in the provided data, large prime contractors are often encouraged or required to subcontract portions of their work to small businesses. The absence of a specific set-aside means that opportunities for small businesses to directly compete for this prime contract were not available.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army's contracting and program management offices. Given the Cost Plus Fixed Fee structure, rigorous financial oversight and auditing will be crucial to ensure costs are reasonable and allocable. Transparency will depend on the reporting requirements stipulated in the contract and the effectiveness of government audits. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

PAC-3 Missile Production
Missile Defense Agency Programs
Foreign Military Sales - Air Defense
Department of the Army Sustainment Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee pricing
Potential for cost overruns
Lack of competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $41.5 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 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 $41.5 million.

What is the period of performance?

Start: 2024-03-28. End: 2027-04-01.

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

Lockheed Martin Corporation is the prime contractor and manufacturer of the PAC-3 missile. Their track record with PAC-3 support is extensive, as they are the original equipment manufacturer and possess the sole source of technical data and expertise required for its sustainment. Historically, they have been awarded numerous contracts for PAC-3 production, upgrades, and support services for both the U.S. military and international customers. While specific performance metrics for past support contracts are not detailed here, their continued role as the sole provider suggests a generally accepted level of performance and capability by the Department of Defense and FMS customers.

How does the Cost Plus Fixed Fee (CPFF) pricing structure compare to other contract types for this type of service?

The Cost Plus Fixed Fee (CPFF) structure is common for complex, high-risk, or research-intensive projects where the scope of work or final costs are difficult to define precisely at the outset. In this case, it allows the government to leverage Lockheed Martin's specialized knowledge for PAC-3 missile support while providing the contractor with a guaranteed profit margin (the fixed fee) regardless of the final cost, as long as costs are reasonable and allocable. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less price certainty for the government but greater flexibility. It contrasts with Cost-Plus-Incentive-Fee (CPIF) or Cost-Plus-Award-Fee (CPAF) contracts, which include mechanisms to incentivize cost control or performance beyond the basic fee.

What are the primary risks associated with a sole-source award for missile sustainment?

The primary risk of a sole-source award for missile sustainment is the potential for inflated costs due to a lack of competitive pressure. Without competing bids, the government has less leverage to negotiate favorable pricing. This can lead to higher expenditures for taxpayers. Additionally, sole-source contracts can create vendor lock-in, making it difficult and costly to switch providers in the future, even if performance or pricing issues arise. There's also a risk that innovation may be stifled, as the incumbent contractor may have less incentive to find more efficient or cost-effective support methods without competitive threats.

What is the historical spending trend for PAC-3 missile support, and how does this contract fit in?

Historical spending on PAC-3 missile support has been substantial, reflecting the critical role of this air defense system for the U.S. and its allies. The Department of Defense and Foreign Military Sales customers have consistently invested in the sustainment and modernization of PAC-3 capabilities. This $41.5 million contract represents a component of that ongoing investment, specifically for sustainment services over the contract period. Without access to detailed historical spending data for PAC-3 support specifically, it's challenging to place this single award in a precise trend. However, it aligns with the established pattern of significant, long-term government expenditure on advanced missile defense systems.

What are the implications of the contract performance being concentrated in Texas?

The concentration of contract performance in Texas (ST: TX, SN: TEXAS) implies that the specialized facilities, personnel, and infrastructure required for PAC-3 missile support are located there. This geographic concentration can streamline operations for Lockheed Martin, potentially leading to efficiencies in logistics and workforce management. For the local economy in Texas, it signifies continued job creation and economic activity related to high-tech defense manufacturing and support. However, it also means that the benefits of this federal spending are geographically concentrated, and potential risks associated with supply chain disruptions or natural disasters affecting that region could impact program continuity.

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: $41,450,423

Exercised Options: $41,450,423

Current Obligation: $41,450,423

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $36,234

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: W31P4Q22D0022

IDV Type: IDC

Timeline