Transportation awards $25.3M cost-reimbursable contract for deep sea freight, awarded via other than full and open competition

Contract Overview

Contract Amount: $25,314,016 ($25.3M)

Contractor: Keystone Shipping CO

Awarding Agency: Department of Transportation

Start Date: 2022-09-21

End Date: 2026-01-31

Contract Duration: 1,228 days

Daily Burn Rate: $20.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Transportation

Official Description: BOB HOPE FY 22 GAA M&R COST REIMBURSABLE KEY-BHP22-GAC A

Place of Performance

Location: PORTLAND, MULTNOMAH County, OREGON, 97203

State: Oregon Government Spending

Plain-Language Summary

Department of Transportation obligated $25.3 million to KEYSTONE SHIPPING CO for work described as: BOB HOPE FY 22 GAA M&R COST REIMBURSABLE KEY-BHP22-GAC A Key points: 1. Contract awarded on a cost-reimbursable basis, which can lead to higher costs if not managed closely. 2. The contract was not competed, raising questions about potential price discovery and value for money. 3. The duration of the contract extends over three years, indicating a significant, long-term need. 4. The North American Industry Classification System (NAICS) code 483111 suggests services related to deep sea freight transportation. 5. The contract is a delivery order, implying it's part of a larger contract vehicle. 6. The contractor, Keystone Shipping Co., is the sole awardee. 7. The contract has a 'cost no fee' pricing structure.

Value Assessment

Rating: questionable

The contract's value is difficult to assess without comparable data for similar deep sea freight transportation services awarded under similar terms. The 'cost no fee' structure means the government reimburses the contractor for all allowable costs, plus an additional fee. Without knowing the fee structure or the contractor's cost base, it's challenging to benchmark the value. The lack of competition further complicates a value-for-money assessment, as there was no market pressure to drive down costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using the 'other than full and open competition' method, meaning it was not competed. This typically occurs when only one source is capable of meeting the requirement. The lack of competition means there was no opportunity for multiple vendors to bid, which could limit price discovery and potentially lead to higher costs for the government.

Taxpayer Impact: Taxpayers may not be receiving the best possible price due to the absence of competitive bidding. The government did not benefit from the cost-saving pressures that typically arise from a competitive procurement process.

Public Impact

The primary beneficiaries are likely entities requiring deep sea freight transportation services, potentially for national defense, strategic sealift, or other government logistics needs. The services delivered are related to deep sea freight transportation, which could include the operation and maintenance of vessels. The geographic impact is likely global, given the nature of deep sea freight, though specific routes or destinations are not detailed. Workforce implications could include employment for maritime professionals, such as captains, crew, and support staff involved in operating and maintaining the vessels.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced value for taxpayer dollars.
Cost-reimbursable contracts can incentivize higher spending if not rigorously monitored for cost efficiency.
The 'cost no fee' structure removes a direct profit motive tied to efficient cost management, potentially impacting cost control.
The sole-source nature limits transparency into the pricing structure and the justification for the selected contractor.

Positive Signals

The contract addresses a specific need for deep sea freight transportation, indicating a critical government requirement.
The long contract duration suggests a stable, ongoing need that the contractor is expected to fulfill reliably.
The award to Keystone Shipping Co. implies they possess the necessary capabilities and resources for this specialized service.

Sector Analysis

The deep sea freight transportation sector is a critical component of global logistics and national security. This contract falls under the broader transportation and logistics industry, which is characterized by high capital investment, complex regulatory environments, and significant operational risks. Comparable spending benchmarks are difficult to establish without more specific details on the services rendered, but the overall market for maritime shipping is substantial, with significant government expenditure often related to strategic sealift capabilities and national defense logistics.

Small Business Impact

There is no indication that this contract includes small business set-asides or subcontracting requirements. The nature of deep sea freight transportation often involves large, specialized vessels and operations that may not be conducive to subcontracting to small businesses. Further analysis would be needed to determine if any small business participation opportunities exist within the supply chain or support services for this contract.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the contracting officer's representative (COR) and the agency's procurement and financial oversight offices. Given the cost-reimbursable nature, rigorous monitoring of incurred costs, performance, and compliance with contract terms would be essential. Transparency is limited by the sole-source award, but contract modifications, performance reports, and payment requests would be subject to internal agency review and potentially audits by the Inspector General.

Related Government Programs

Strategic Sealift Program
Military Sealift Command Contracts
Maritime Security Program
Jones Act Vessels

Risk Flags

Sole-source award lacks competitive pricing.
Cost-reimbursable contract requires diligent oversight to control costs.
Potential for cost overruns due to long duration and 'cost no fee' structure.
Lack of transparency in pricing justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Transportation awarded $25.3 million to KEYSTONE SHIPPING CO. BOB HOPE FY 22 GAA M&R COST REIMBURSABLE KEY-BHP22-GAC A

Who is the contractor on this award?

The obligated recipient is KEYSTONE SHIPPING CO.

Which agency awarded this contract?

Awarding agency: Department of Transportation (Maritime Administration).

What is the total obligated amount?

The obligated amount is $25.3 million.

What is the period of performance?

Start: 2022-09-21. End: 2026-01-31.

What is the specific nature of the deep sea freight transportation services being procured under this contract?

The provided data indicates the contract is for 'Deep Sea Freight Transportation' under NAICS code 483111. While the specific cargo or routes are not detailed, this typically involves the operation, manning, maintenance, and potentially bareboat chartering of vessels for transporting goods across oceans. Given the context of federal spending, these services could be related to national defense logistics, strategic material transport, or supporting other government agencies with global supply chain needs. The 'cost no fee' structure suggests the government reimburses the contractor for all approved operational and maintenance costs, plus a pre-determined fee for their services, though the fee itself is not specified as a percentage or fixed amount in this data.

What is the justification for awarding this contract on a sole-source basis?

The data explicitly states the contract was 'NOT COMPETED' and is categorized under 'other than full and open competition' (CT: NOT COMPETED). Federal regulations permit sole-source awards under specific circumstances, such as when only one responsible source is available or capable of providing the required services. For deep sea freight transportation, this could be due to the unique ownership or operational requirements of specific vessels, specialized certifications or licenses held by only one company, or urgent national security needs where only a particular contractor's assets can be utilized. Without further documentation from the awarding agency (Department of Transportation, Maritime Administration), the precise justification remains unspecified, but it implies a lack of readily available alternatives in the market for the government's specific requirement.

How does the 'cost no fee' pricing structure impact the government's financial risk and oversight requirements?

A 'cost no fee' (CNF) contract means the government reimburses the contractor for all allowable costs incurred in performing the contract, but the contractor does not receive a separate fee or profit margin on top of those costs. This structure is often used when the scope of work is uncertain or when the government is primarily concerned with ensuring the service is performed rather than incentivizing profit. For the government, the financial risk lies in the potential for uncontrolled costs; if the contractor's expenses are high, the total contract cost will be high. This necessitates robust oversight to ensure all costs are reasonable, allocable, and allowable according to the contract terms. The absence of a fee means the contractor's primary incentive is to perform the work, but not necessarily to minimize costs beyond what is required for performance, unlike fixed-price contracts.

What is the historical spending pattern for deep sea freight transportation by the Maritime Administration?

Analyzing historical spending patterns for deep sea freight transportation by the Maritime Administration (MARAD) requires access to detailed procurement databases and MARAD's budget allocations over multiple fiscal years. MARAD's mission often involves maintaining a U.S. maritime industrial base, supporting sealift capabilities, and managing government-owned vessels. Spending in this area can fluctuate based on national security needs, global shipping market conditions, and specific program requirements like the Ready Reserve Force or the Maritime Security Program. Without specific historical data for this contract vehicle or similar services, it's difficult to establish a precise pattern. However, federal spending on maritime transportation is generally significant, particularly when related to defense readiness and economic security.

What are the potential risks associated with a long-duration (over 3 years) cost-reimbursable contract?

Long-duration, cost-reimbursable contracts present several risks. Firstly, the extended period increases the government's exposure to fluctuating market costs for labor, fuel, and materials, which the contractor will pass through. Secondly, the lack of a fixed price over such a long term can lead to budget uncertainty. Thirdly, maintaining effective oversight and contract management becomes more challenging over time, requiring sustained vigilance to prevent cost overruns and ensure continued performance standards. Without strong controls and regular performance reviews, the contractor might have less incentive to innovate or seek cost efficiencies, as the government bears the financial burden. The risk of scope creep or unmanaged changes is also higher in longer contracts.

Industry Classification

NAICS: Transportation and Warehousing › Deep Sea, Coastal, and Great Lakes Water Transportation › Deep Sea Freight Transportation

Product/Service Code: OPERATION OF GOVT OWNED FACILITY › OPERATE GOVT OWNED BUILDINGS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST NO FEE (S)

Evaluated Preference: NONE

Contractor Details

Address: 1 BALA PLZ E STE 600, BALA CYNWYD, PA, 19004

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $25,314,016

Exercised Options: $25,314,016

Current Obligation: $25,314,016

Actual Outlays: $24,449,092

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Parent Contract

Parent Award PIID: 693JF721G000002

IDV Type: BOA

Timeline