DoD awards $810.5M for strategic missile systems, with Lockheed Martin as prime contractor

Contract Overview

Contract Amount: $810,572,410 ($810.6M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 1999-04-22

End Date: 2007-12-31

Contract Duration: 3,175 days

Daily Burn Rate: $255.3K/day

Competition Type: FOLLOW ON TO COMPETED ACTION

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: 199908!1700!A154!XSP01!STRATEGIC SYSTEMS PROGRAMS !N0003099C0100 !A!*!* !19990422!19990930!155109184!834951691!834951691!N!23917!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!0001!+000016000000!N!N!000000000000!1410!GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !3761!3!*!*!*!B!A!*!C !N!V!1!001!N!1A!A!N!Z!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!B!N!*!*!*!*!*!

Place of Performance

Location: SUNNYVALE, SANTA CLARA County, CALIFORNIA, 94089

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $810.6 million to LOCKHEED MARTIN CORPORATION for work described as: 199908!1700!A154!XSP01!STRATEGIC SYSTEMS PROGRAMS !N0003099C0100 !A!*!* !19990422!19990930!155109184!834951691!834951691!N!23917!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA … Key points: 1. Contract value exceeds $810 million, indicating significant investment in strategic defense capabilities. 2. The award to Lockheed Martin suggests a reliance on established defense contractors for complex systems. 3. A long contract duration of over 8 years implies a need for sustained support and development. 4. The 'Cost Plus Incentive Fee' pricing structure aims to balance contractor profit with performance objectives. 5. This contract falls under Engineering Services, highlighting the technical expertise required for missile systems. 6. The geographic location of the contractor in California may have implications for regional economic impact.

Value Assessment

Rating: good

The total award of $810.5 million for engineering services related to strategic missile systems appears substantial. Benchmarking this against similar complex defense systems contracts is challenging without more specific data on the scope of work. However, the 'Cost Plus Incentive Fee' (CPIF) structure suggests an attempt to manage costs by incentivizing the contractor to meet performance targets, which can be a reasonable approach for R&D-intensive projects. The contract's long duration also suggests a significant, ongoing need for these services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under a full and open competition, indicating that multiple bidders were likely considered. While the specific number of bidders is not provided, a full and open competition generally fosters a more competitive environment, potentially leading to better pricing and innovation. The 'FOLLOW ON TO COMPETED ACTION' designation suggests this award may be part of a larger, previously competed effort, which could influence the bidding landscape.

Taxpayer Impact: A full and open competition is generally favorable for taxpayers as it increases the likelihood of obtaining the best value through competitive pricing and diverse solutions.

Public Impact

The primary beneficiaries are the Department of Defense and national security, through the acquisition of advanced strategic missile systems. Services delivered include engineering, development, and potentially sustainment for critical defense assets. The geographic impact is primarily centered around Lockheed Martin's facilities in California, potentially supporting local employment and the regional aerospace industry. Workforce implications include the employment of highly skilled engineers, technicians, and support staff within Lockheed Martin and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to cost overruns if not managed effectively.
Reliance on a single prime contractor for critical systems may pose supply chain risks.
The complexity of missile systems requires robust oversight to ensure quality and performance.

Positive Signals

Full and open competition suggests a competitive bidding process, potentially yielding better value.
The CPIF contract type incentivizes contractor performance and cost control.
Awarding to a major defense contractor like Lockheed Martin leverages existing expertise and infrastructure.

Sector Analysis

This contract falls within the Defense sector, specifically focusing on missile and space systems. The aerospace and defense industry is characterized by high R&D investment, long product development cycles, and significant government procurement. Comparable spending benchmarks would involve other major defense contracts for strategic weapon systems, which often run into hundreds of millions or billions of dollars over their lifecycle. This contract represents a significant investment in maintaining and advancing U.S. strategic deterrence capabilities.

Small Business Impact

The data indicates that this contract was not specifically set aside for small businesses, and the prime contractor is a large corporation. There is no explicit information on subcontracting plans for small businesses. Large defense contracts often involve extensive subcontracting, and while not guaranteed, there is potential for small businesses to participate in the supply chain. However, the primary focus appears to be on the capabilities of the large prime contractor.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of Defense's contract management agencies, such as the Defense Contract Management Agency (DCMA). Accountability measures are embedded within the 'Cost Plus Incentive Fee' structure, which links contractor profit to performance metrics. Transparency is generally maintained through contract awards databases, though specific details of performance and cost execution may be less public. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Strategic Weapons Systems
Ballistic Missile Defense
Aerospace Engineering Services
Defense Procurement
Lockheed Martin Contracts
Department of Defense Contracts

Risk Flags

Long contract duration
High contract value
Complex technology

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $810.6 million to LOCKHEED MARTIN CORPORATION. 199908!1700!A154!XSP01!STRATEGIC SYSTEMS PROGRAMS !N0003099C0100 !A!*!* !19990422!19990930!155109184!834951691!834951691!N!23917!LOCKHEED MARTIN CORPORATION !1111 LOCKHEED MARTIN WAY !SUNNYVALE !CA!94089!77000!085!06!SUNNYVALE !SANTA CLARA !CALIFORNIA!0001!+000016000000!N!N!000000000000!1410!GUIDED MISSILES !A2 !MISSILE AND SPACE SYSTEMS !2CNJ!UGM-96 TRIDENT !3761!3!*!*!*!B!A!*!C !N!V!1!0

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Defense Contract Management Agency).

What is the total obligated amount?

The obligated amount is $810.6 million.

What is the period of performance?

Start: 1999-04-22. End: 2007-12-31.

What is the historical spending trend for similar strategic missile system contracts awarded by the Department of Defense?

Analyzing historical spending trends for similar strategic missile system contracts requires access to comprehensive historical contract data. Generally, the Department of Defense invests billions of dollars annually in strategic weapons systems, encompassing research, development, procurement, and sustainment. Spending can fluctuate based on geopolitical conditions, technological advancements, and strategic priorities. Contracts for systems like the Trident missile, which this award is related to, are typically long-term, high-value commitments. Over the past few decades, there has been a consistent, albeit sometimes fluctuating, investment in maintaining and modernizing these critical capabilities, often involving major defense contractors like Lockheed Martin. Specific year-over-year comparisons would depend on the exact scope and phase of different programs.

How does the 'Cost Plus Incentive Fee' (CPIF) structure typically impact contractor performance and final cost compared to other contract types?

The Cost Plus Incentive Fee (CPIF) contract type is designed to share risks and rewards between the government and the contractor. In a CPIF contract, the final price is determined by the actual costs incurred plus a fee that is adjusted based on the contractor's performance against pre-determined targets (e.g., cost, schedule, performance). If the contractor performs better than target (e.g., comes in under budget), both the government and the contractor benefit, with the contractor potentially earning a higher fee within agreed limits. Conversely, if performance is worse, the contractor's fee is reduced. This structure incentivizes the contractor to control costs and meet objectives, potentially leading to better value than a simple cost-plus contract. However, it requires careful negotiation of targets and sharing formulas to ensure alignment and avoid excessive profit or insufficient incentive.

What are the key performance indicators (KPIs) typically used in contracts for strategic missile systems?

Key Performance Indicators (KPIs) for strategic missile system contracts are multifaceted and critical for ensuring mission success and national security. These often include technical performance metrics such as accuracy, reliability, range, and payload delivery capabilities. Schedule adherence is also crucial, given the long development cycles and the need to meet strategic deployment timelines. Cost control is another significant KPI, especially within incentive fee structures, aiming to keep the program within budget. Furthermore, system survivability, maintainability, and safety are paramount. For CPIF contracts, specific KPIs are negotiated and documented, directly influencing the incentive fee earned by the contractor. These KPIs are rigorously monitored by government oversight teams.

What is Lockheed Martin's track record with large-scale strategic defense system contracts?

Lockheed Martin has an extensive and long-standing track record of successfully delivering large-scale strategic defense systems for the U.S. government and its allies. The company is a prime contractor for numerous high-profile programs, including ballistic missile systems (like the Trident and Minuteman III), fighter aircraft (F-35, F-22), and space-based defense platforms. Their experience spans research, development, manufacturing, integration, and sustainment of complex, technologically advanced systems. While specific contract performance details can vary and are subject to oversight, Lockheed Martin is generally recognized for its capabilities in handling the immense technical, logistical, and program management challenges associated with these critical national security programs. Their history includes both notable successes and, like many large defense contractors, occasional challenges related to cost, schedule, or technical performance that are managed through contract mechanisms.

How does the geographic concentration of defense contractors in certain states, like California, impact national security supply chains?

The geographic concentration of major defense contractors, such as Lockheed Martin in California, creates both strengths and potential vulnerabilities in national security supply chains. On the positive side, this concentration fosters specialized ecosystems of talent, research institutions, and supporting industries, leading to innovation and efficiency. It allows for streamlined collaboration and oversight when multiple critical program elements are co-located. However, it also introduces risks. A natural disaster, significant economic downturn, or other regional disruption in a concentrated area could severely impact the production or sustainment of critical defense assets. This necessitates robust contingency planning, diversification strategies where feasible, and strong inter-agency coordination to mitigate such risks and ensure the resilience of the defense industrial base.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: FOLLOW ON TO COMPETED ACTION

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Contractor Details

Address: 1111 LOCKHEED MARTIN WAY, SUNNYVALE, CA, 94089

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline