Navy awards $1.1B shipbuilding contract to Bath Iron Works, a sole provider for destroyers

Contract Overview

Contract Amount: $1,096,795,876 ($1.1B)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2003-07-17

End Date: 2014-11-05

Contract Duration: 4,129 days

Daily Burn Rate: $265.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $1.10 billion to BATH IRON WORKS CORPORATION for work described as: Key points: 1. Contract awarded to a single, specialized shipyard, raising questions about competition and potential cost efficiencies. 2. Long-term contract duration suggests a significant commitment to a specific shipbuilding capability. 3. The firm-fixed-price structure aims to transfer some cost risk to the contractor. 4. Awarded by the Department of the Navy, indicating a critical defense procurement. 5. The contract falls under the 'Ship Building and Repairing' NAICS code, a capital-intensive sector. 6. No small business set-aside was utilized, suggesting the scale and nature of the work.

Value Assessment

Rating: fair

Benchmarking shipbuilding contracts is complex due to unique specifications and long lead times. However, the substantial value of this award, coupled with the sole-source nature of the contractor's role in producing these specific vessels, warrants scrutiny. Without comparable bids or alternative providers for this class of ship, assessing true value-for-money is challenging. The firm-fixed-price contract attempts to control costs, but the absence of competition limits the government's leverage in price negotiation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded under a sole-source justification, meaning Bath Iron Works was the only entity considered capable of fulfilling the requirement. While this may be due to specialized facilities, technology, or intellectual property, it significantly limits competitive pressure. The lack of multiple bidders means the government could not benefit from price discovery through a competitive bidding process, potentially leading to higher costs than if alternatives were available.

Taxpayer Impact: Taxpayers are likely paying a premium due to the absence of competition. The government has limited options to negotiate better terms or prices, as the contractor holds a de facto monopoly for this specific shipbuilding need.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical naval assets, and Bath Iron Works, which secures a major long-term production contract. The contract delivers advanced guided-missile destroyers, essential for national defense and power projection. The geographic impact is concentrated in Maine, supporting a significant industrial workforce and related supply chains. Workforce implications include the sustainment and potential growth of highly skilled shipbuilding jobs in Maine.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Long contract duration and high value present significant financial commitment and risk if program needs change.
Dependence on a single contractor for critical naval assets creates strategic vulnerability.
Lack of small business participation may limit opportunities for smaller firms in the supply chain.

Positive Signals

Firm-fixed-price contract shifts some cost overrun risk to the contractor.
Award to an established shipyard with a track record in naval construction provides a degree of reliability.
Contract supports critical defense capabilities and national security objectives.
Long-term nature provides stability for the contractor and its workforce.

Sector Analysis

The shipbuilding industry is characterized by high capital investment, complex engineering, long production cycles, and significant government reliance, particularly for naval vessels. Major shipyards often operate with limited competition due to the specialized infrastructure and expertise required. This contract represents a substantial portion of spending within the naval shipbuilding sector, where a few large contractors dominate. Comparable spending benchmarks are difficult due to the unique nature of each vessel class, but this award signifies a major investment in fleet modernization.

Small Business Impact

This contract did not include a small business set-aside, which is typical for large, complex defense procurements like shipbuilding where specialized facilities and extensive experience are paramount. While direct set-asides are absent, Bath Iron Works may engage small businesses as subcontractors for various components and services, contributing indirectly to the small business ecosystem. However, the primary award does not directly foster small business prime contracting opportunities.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Government Accountability Office (GAO) may review protests or audit expenditures. The Inspector General of the Department of Defense would have jurisdiction over investigations of fraud, waste, or abuse. Transparency is generally maintained through contract award announcements and public budget documents, though specific cost details may be sensitive.

Related Government Programs

DDG 51 Arleigh Burke-class destroyers
Naval shipbuilding programs
Defense procurement contracts
Shipbuilding and Repair Industry

Risk Flags

Sole-source award
High contract value
Long contract duration
Complex industrial production
Defense procurement

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.10 billion to BATH IRON WORKS CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is BATH IRON WORKS CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $1.10 billion.

What is the period of performance?

Start: 2003-07-17. End: 2014-11-05.

What is Bath Iron Works' track record with similar naval shipbuilding contracts?

Bath Iron Works has a long and established history of building naval vessels for the U.S. Navy, particularly destroyers. They are the primary builder of the Arleigh Burke-class (DDG 51) destroyers, the same class of ship this contract likely pertains to. Their track record includes delivering numerous ships within this class, though like many large defense programs, they have faced challenges related to cost overruns, schedule delays, and workforce issues on specific projects. However, they remain a critical and experienced supplier for the Navy's surface combatant fleet.

How does the value of this contract compare to other shipbuilding awards?

A contract valued at over $1 billion for a single vessel or a small class of vessels is substantial, reflecting the immense cost and complexity of modern warships. For context, individual Arleigh Burke-class destroyers can cost upwards of $1.8 billion each, depending on the specific configuration and year of construction. This award, covering multiple ships over several years, aligns with the high-end of major naval shipbuilding procurements. It is comparable to other large contracts awarded for aircraft carriers, submarines, or other classes of surface combatants, indicating a significant investment in naval fleet capabilities.

What are the primary risks associated with this sole-source shipbuilding contract?

The primary risks stem from its sole-source nature and the inherent complexities of shipbuilding. Sole-sourcing limits competitive pressure, potentially leading to higher prices and reduced innovation. The government is heavily reliant on Bath Iron Works, creating strategic risk if the contractor faces financial instability, labor disputes, or production issues. Furthermore, shipbuilding is prone to cost overruns and schedule delays due to intricate design, supply chain dependencies, and the need for highly specialized labor. Changes in naval requirements or budget constraints could also pose risks to the long-term viability of such a large, fixed commitment.

How effective is the firm-fixed-price (FFP) contract type in managing costs for this program?

The firm-fixed-price (FFP) contract type is intended to provide the government with cost certainty by placing the primary responsibility for cost control on the contractor. For Bath Iron Works, this means they bear the risk of cost overruns. This structure incentivizes efficient performance and cost management. However, in complex, long-duration projects like shipbuilding, where unforeseen technical challenges or material cost fluctuations can occur, contractors may build significant contingencies into their initial bids to protect against potential losses. While FFP is generally preferred for cost control, its effectiveness can be limited by the contractor's ability to accurately estimate costs and manage risks over the extended contract period.

What are the historical spending patterns for naval shipbuilding by the Department of the Navy?

The Department of the Navy consistently represents one of the largest components of the Department of Defense budget, with a significant portion allocated to shipbuilding and conversion. Historical spending patterns show a cyclical nature, influenced by geopolitical events, fleet readiness needs, and shipbuilding capacity. Major shipbuilding programs, such as the Arleigh Burke-class destroyers, littoral combat ships, Ford-class carriers, and Virginia-class submarines, represent multi-year, multi-billion dollar investments. Spending fluctuates based on the number of ships being procured in a given fiscal year and the stage of production for major platforms. The Navy prioritizes maintaining a certain number of battle force ships, driving sustained, albeit variable, shipbuilding expenditures.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 6

Pricing Type: FIRM FIXED PRICE (J)

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 700 WASHINGTON ST, BATH, ME, 01

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

Contract Characteristics

Cost or Pricing Data: NO

Timeline