DoD awards $1.74B for Hellfire II missile production, a sole-source contract to Lockheed Martin

Contract Overview

Contract Amount: $1,742,438,693 ($1.7B)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2011-07-28

End Date: 2019-08-30

Contract Duration: 2,955 days

Daily Burn Rate: $589.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: HELLFIRE II BUY 15 FY 11 MISSILE PRODUCTION REQUIREMENTS FOR ARMY, AIR FORCE AND NAVY

Place of Performance

Location: ORLANDO, ORANGE County, FLORIDA, 32819

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $1.74 billion to LOCKHEED MARTIN CORPORATION for work described as: HELLFIRE II BUY 15 FY 11 MISSILE PRODUCTION REQUIREMENTS FOR ARMY, AIR FORCE AND NAVY Key points: 1. This contract represents a significant investment in air-to-ground missile systems for multiple military branches. 2. The sole-source nature of this award warrants scrutiny regarding potential price inflation and limited innovation. 3. A long performance period of nearly 8 years suggests a sustained need for these munitions. 4. The absence of small business participation raises questions about broader economic impact. 5. The contract's value places it among major defense procurement actions, requiring robust oversight.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. However, the total award of $1.74 billion over nearly eight years for missile production indicates a substantial commitment. While the firm-fixed-price structure offers some cost certainty, the lack of competition means there's no direct market comparison to assess if taxpayers received the best possible price. Further analysis would require comparing unit costs to historical data or similar missile systems if available.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Lockheed Martin Corporation, was solicited. This approach is typically used when a unique capability is required, or for follow-on production where competition is not feasible or cost-effective. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed procurement.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding, as there was no pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are the U.S. Army, Air Force, and Navy, who will receive advanced air-to-ground missile systems. These missiles are crucial for close air support, interdiction, and anti-armor missions, enhancing combat effectiveness. The contract supports advanced manufacturing capabilities within the defense industrial base. Employment in specialized defense manufacturing roles is likely sustained or created by this award.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Long contract duration could mask inefficiencies or price creep over time.
Lack of small business involvement limits broader economic participation.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Award supports critical munitions for multiple U.S. military branches.
Long-term production ensures sustained availability of essential weaponry.

Sector Analysis

The defense sector, particularly guided missile manufacturing, is characterized by high barriers to entry, significant R&D investment, and a concentrated supplier base. Lockheed Martin is a dominant player in this market. This contract for Hellfire II missiles fits within the broader category of tactical missile systems, a critical component of modern air power. Comparable spending benchmarks would involve other large-scale missile production contracts, which often run into hundreds of millions or billions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have significant subcontracting requirements for small businesses based on the provided data. This indicates that the primary contract is with a large prime contractor, and opportunities for small businesses may be limited to direct supply chain roles, if any. The absence of explicit small business participation goals could mean less direct benefit to the small business defense industrial base from this specific award.

Oversight & Accountability

As a definitive contract awarded by the Department of Defense, this procurement is subject to various oversight mechanisms, including internal DoD audits and potentially oversight from the Government Accountability Office (GAO). The firm-fixed-price nature simplifies some aspects of financial oversight compared to cost-plus contracts. Transparency would be enhanced by public reporting of contract performance and any modifications. Inspector General reviews may be triggered by specific allegations of fraud or mismanagement.

Related Government Programs

Other Air-to-Ground Missile Procurements
Defense Industrial Base Fund
Joint Multi-Role Missile Program
Advanced Precision Kill Weapon System

Risk Flags

Sole-source award lacks competitive pricing pressure.
Long contract duration requires sustained oversight.
Potential for cost overruns in long-term sole-source agreements.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.74 billion to LOCKHEED MARTIN CORPORATION. HELLFIRE II BUY 15 FY 11 MISSILE PRODUCTION REQUIREMENTS FOR ARMY, AIR FORCE AND NAVY

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 $1.74 billion.

What is the period of performance?

Start: 2011-07-28. End: 2019-08-30.

What is the historical spending trend for Hellfire II missile production by the Department of Defense?

Historical spending data for Hellfire II missile production prior to this $1.74 billion award would provide crucial context. Analyzing previous contracts, including their value, duration, and whether they were competed or sole-sourced, can reveal trends in pricing and demand. For instance, if previous awards were significantly smaller or competed more frequently, it might suggest a shift in strategy or market conditions. Understanding the cumulative investment over time is essential for assessing the long-term financial commitment and the overall value proposition of continued production.

How does the unit cost of the Hellfire II missile under this contract compare to similar missiles or previous production runs?

A detailed comparison of the unit cost for the Hellfire II missile under this $1.74 billion contract against previous production runs or comparable air-to-ground missiles is vital for value assessment. Without specific unit cost data, it's difficult to determine if the price is competitive. If unit costs have increased significantly compared to prior contracts, it could indicate inflationary pressures, changes in manufacturing complexity, or the effects of sole-source negotiation. Conversely, stable or decreasing unit costs, especially over a long production run, would suggest efficient production and favorable pricing.

What are the specific performance metrics and delivery schedules associated with this contract?

The contract specifies a performance period from July 28, 2011, to August 30, 2019, spanning nearly eight years, indicating a long-term production requirement. While the total award is $1.74 billion, the specific delivery schedules for the missiles are not detailed in the provided summary. Understanding these schedules is important for assessing the contractor's production capacity and the military's readiness planning. Key performance metrics would likely include missile reliability, accuracy, and adherence to quality standards, which are critical for mission success and warrant close monitoring by the DoD.

What is Lockheed Martin's track record with sole-source defense contracts of this magnitude?

Lockheed Martin Corporation has a long history of securing large, sole-source contracts with the Department of Defense across various weapon systems. Their extensive experience in defense manufacturing and established relationships often position them favorably for such awards. Analyzing their performance on similar sole-source contracts, including adherence to cost, schedule, and quality requirements, provides insight into their reliability. While sole-source awards inherently lack direct price competition, a strong track record suggests a lower risk of performance issues, though it doesn't guarantee optimal value for taxpayer dollars.

Are there any planned future competitions or opportunities for alternative suppliers for this missile system?

Given this is a sole-source award for Hellfire II missile production, the potential for future competition or alternative suppliers depends on several factors. The maturity of the technology, the existence of alternative designs, and the strategic decisions of the Department of Defense play a significant role. If the Hellfire II is considered a legacy system with no viable alternatives planned, future awards may continue to be sole-source. However, if the DoD is exploring next-generation missile systems or seeking to foster competition in the long term, opportunities for other suppliers or new competitions might arise, potentially impacting future spending.

Industry Classification

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

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: W31P4Q11R0002

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 5600 W SAND LAKE RD # MP-265, ORLANDO, FL, 32819

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: $1,742,438,693

Exercised Options: $1,742,438,693

Current Obligation: $1,742,438,693

Subaward Activity

Number of Subawards: 9

Total Subaward Amount: $650,963

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline