DoD awards $54.5M contract for PAC-3 missile support to Lockheed Martin, a sole-source procurement

Contract Overview

Contract Amount: $54,524,533 ($54.5M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2025-07-24

End Date: 2027-07-30

Contract Duration: 736 days

Daily Burn Rate: $74.1K/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 $54.5 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. Potential for cost overruns given the Cost Plus Fixed Fee (CPFF) contract type. 4. Long-term support requirement indicates a strategic investment in national defense. 5. Geographic concentration of contract performance in Texas. 6. No small business set-aside, suggesting large prime contractor involvement.

Value Assessment

Rating: fair

The contract's value of $54.5 million for PAC-3 missile support appears substantial, but without comparable contract data or detailed cost breakdowns, a precise value-for-money assessment is challenging. The CPFF structure means costs could fluctuate, and oversight will be crucial to ensure efficiency. Benchmarking against similar sustainment contracts for complex defense systems would be necessary for a more definitive evaluation of pricing and value.

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 specialized systems where only one entity possesses the necessary technical expertise and intellectual property. While this can ensure continuity and access to critical knowledge, it limits price discovery and may result in higher costs compared to a competitive process.

Taxpayer Impact: Taxpayers may face higher costs due to the lack of competition, as the government does not benefit from the price pressures that typically arise from multiple bidders vying for a contract.

Public Impact

The U.S. Army benefits from continued operational readiness of the PAC-3 missile defense system. Foreign Military Sales customers also receive essential support for their PAC-3 systems, enhancing allied defense capabilities. The contract supports specialized technical services related to advanced missile defense technology. Workforce implications are likely concentrated in areas with Lockheed Martin's PAC-3 support infrastructure, primarily in Texas.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee structure introduces potential for cost escalation.
Lack of small business participation may limit broader economic impact.
Long-term sustainment needs could represent significant future financial commitments.

Positive Signals

Ensures continued support for a critical national defense asset (PAC-3).
Leverages specialized expertise of the original equipment manufacturer (Lockheed Martin).
Supports readiness for both U.S. forces and allied nations through FMS.
Provides a stable, long-term support framework for complex technology.

Sector Analysis

The defense sector, particularly missile defense, is characterized by high R&D costs, long product lifecycles, and significant government investment. Contracts for sustainment and support of advanced weapon systems like the PAC-3 are crucial for maintaining operational readiness. The market is often dominated by a few large prime contractors due to the complexity and security requirements. Spending benchmarks for similar sustainment contracts can vary widely based on system maturity and scope of support.

Small Business Impact

This contract does not appear to include a small business set-aside. As a sole-source award to a large prime contractor, the primary focus is on direct support. While Lockheed Martin may utilize small businesses in its supply chain, there is no explicit requirement or set-aside directed by this contract. This limits the direct opportunities for small businesses to participate as prime contractors on this specific procurement.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Army's contracting and program management offices. Accountability measures will be embedded within the Cost Plus Fixed Fee structure, requiring detailed cost reporting and justification. Transparency may be limited due to the sole-source nature, but contract performance metrics and financial reviews should be available through standard DoD reporting channels. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

PAC-3 Missile Production
Missile Defense Agency (MDA) Programs
U.S. Army Air and Missile Defense
Foreign Military Sales (FMS) - Air Defense
Guided Missile Parts Manufacturing

Risk Flags

Sole-source procurement
Cost Plus Fixed Fee contract type
Potential for cost overruns
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $54.5 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 $54.5 million.

What is the period of performance?

Start: 2025-07-24. End: 2027-07-30.

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 responsible for the system's lifecycle sustainment. This includes providing technical expertise, spare parts, maintenance, and upgrades. Historically, their performance on such critical defense systems is closely monitored by the Department of Defense. While specific performance metrics for past PAC-3 support contracts are often sensitive, the continued reliance on Lockheed Martin for these services suggests a generally acceptable performance history, though specific issues or areas for improvement are common in long-term defense sustainment.

How does the pricing of this sole-source contract compare to potentially competed alternatives?

As a sole-source contract, direct price comparison to a competitive scenario is not feasible. Sole-source awards typically result in higher prices because they lack the downward pressure exerted by multiple bidders. The government negotiates directly with Lockheed Martin, relying on historical pricing, should-cost analyses, and profit margin reviews to ensure reasonableness. However, without competitive bids, there's an inherent risk that the price may not reflect the lowest achievable market rate. The Cost Plus Fixed Fee (CPFF) structure further complicates pricing, as the final cost is dependent on actual allowable costs incurred by the contractor, plus a predetermined fixed fee.

What are the primary risks associated with this Cost Plus Fixed Fee contract?

The primary risk with a Cost Plus Fixed Fee (CPFF) contract is the potential for cost overruns. While the contractor's fee is fixed, the total contract cost is not. This structure incentivizes the contractor to incur costs, as the government pays for all allowable expenses. If not managed diligently, this can lead to the contract exceeding its estimated ceiling. Effective oversight, rigorous cost tracking, and clear definition of allowable costs are critical to mitigating this risk. The government bears the financial risk of cost increases, while the contractor is assured a fixed profit margin regardless of cost efficiency.

What is the expected effectiveness of the PAC-3 missile support provided under this contract?

The expected effectiveness of the PAC-3 missile support is high, given that it is provided by the original equipment manufacturer, Lockheed Martin. The contract aims to ensure the continued operational readiness, reliability, and maintainability of the PAC-3 missile defense system for both U.S. forces and allied nations. This includes timely availability of spare parts, expert technical assistance, and necessary maintenance to keep the systems functioning optimally. The effectiveness is measured by the system's ability to meet its performance requirements in defending against advanced threats, which relies heavily on robust sustainment support.

What are the historical spending patterns for PAC-3 missile support?

Historical spending on PAC-3 missile support has been substantial, reflecting the system's critical role in national missile defense and its deployment by numerous allies. Annual spending fluctuates based on specific sustainment needs, upgrade cycles, and the volume of Foreign Military Sales. Contracts for PAC-3 support are typically long-term, often spanning multiple years, and involve significant dollar values due to the complexity of the technology and the required level of technical expertise. The Department of Defense consistently allocates significant resources to missile defense sustainment, with PAC-3 support being a major component of that expenditure.

What is the significance of the contract duration and delivery order type?

The contract has a duration of 736 days (approximately two years) and is awarded as a Delivery Order. This indicates that while the overarching contract is established, specific tasks and deliveries will be ordered incrementally over its term. This flexible approach allows the government to manage requirements and funding more dynamically. The duration suggests a medium-term commitment for sustainment activities, balancing the need for continuity with the ability to adapt to evolving threats and budgetary constraints. It's not a multi-year procurement but rather an established framework for ongoing support.

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: $54,524,533

Exercised Options: $54,524,533

Current Obligation: $54,524,533

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