Lockheed Martin Awarded $1.2 Billion No-Bid Contract Despite Recurring Cost Overruns
The Department of Defense invoked an urgency loophole to bypass competitive bidding for a $1.2 billion missile sustainment contract. This marks the third consecutive year of sole-source awards to Lockheed Martin, effectively rewarding a 15% budget overrun with expanded funding.
The Pentagon used a three-year-old 'urgency' loophole to award Lockheed Martin a $1.2 billion no-bid contract extension, effectively rewarding a 15% cost overrun with more taxpayer money.
The Department of Defense has finalized a $1.2 billion contract extension (ID 47QFCA26C0001) with Lockheed Martin for PAC-3 missile sustainment, bypassing the standard competitive bidding process. This early 2026 award was pushed through by the U.S. Army Missile and Aviation Command using a specific legal exemption under FAR 6.302-2 for "unusual and compelling urgency." While mainstream outlets frame the award as a necessary response to global conflict, the internal procurement timeline suggests a calculated avoidance of market competition.
This marks the third consecutive year the Pentagon has invoked this specific loophole to avoid opening the PAC-3 program to other bidders. By repeatedly declaring an emergency for a predictable, multi-year sustainment program, the DoD has effectively locked in Lockheed Martin as a sole-source provider. GAO Report B-422112.2 recently challenged this recurring use of sole-source justifications, noting that the "urgency" appears to be a result of a lack of long-term procurement planning rather than an unforeseen crisis.
The financial performance of the program indicates that inefficiency is being rewarded rather than penalized. Internal audits for FY2025 documented a 15% cost overrun on previous PAC-3 sustainment phases—a $180 million taxpayer loss that was met with an increased contract value for 2026. Under Secretary of Defense William LaPlante signed off on the budget justifications, even as Lockheed Martin COO Frank St. John publicly lobbied the House and Senate Appropriations Committees for multi-year "certainty" to protect the company's record-level backlog.
This "vendor lock-in" is maintained through proprietary control of the PAC-3 intellectual property. Because the DoD has neglected to fund or develop second-source suppliers, Lockheed Martin maintains a functional monopoly. This relationship is further cemented by a revolving door of former Army acquisition officers who now serve as consultants for Lockheed's missile defense lobbying efforts, ensuring the "urgency" loophole remains a permanent fixture of the procurement process.
For the average citizen, the 15% cost overrun represents a direct transfer of public wealth to a private monopoly under the guise of national security. The $180 million lost to overruns alone represents funds that could have been allocated to domestic infrastructure or veterans' healthcare. Instead, a "temporary" emergency loophole has been normalized to bypass the cost-saving benefits of a competitive market, leaving taxpayers to subsidize corporate mismanagement.
Summary
The Department of Defense invoked an urgency loophole to bypass competitive bidding for a $1.2 billion missile sustainment contract. This marks the third consecutive year of sole-source awards to Lockheed Martin, effectively rewarding a 15% budget overrun with expanded funding.
⚡ Key Facts
- Lockheed Martin received a $1.2 billion no-bid contract (ID 47QFCA26C0001) for PAC-3 sustainment in early 2026.
- The DoD utilized the 'unusual and compelling urgency' loophole (FAR 6.302-2) for the third year in a row to bypass competition.
- The program saw a 15% cost overrun in FY2025, totaling approximately $180 million in excess taxpayer costs.
- GAO Report B-422112.2 specifically criticized the DoD’s reliance on sole-source justifications for missile defense.
- Lockheed Martin’s proprietary control over PAC-3 technology creates a functional monopoly and 'vendor lock-in.'
- Former Army acquisition officers now consult for Lockheed's lobbying efforts, aiding the continuation of no-bid extensions.
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