Navy awards $625M+ for recurring construction to Bath Iron Works, a sole-source contract

Contract Overview

Contract Amount: $624,654,007 ($624.7M)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2009-05-01

End Date: 2012-07-31

Contract Duration: 1,187 days

Daily Burn Rate: $526.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FY09 LCS RECURRING CONSTRUCTION

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $624.7 million to BATH IRON WORKS CORPORATION for work described as: FY09 LCS RECURRING CONSTRUCTION Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Fixed-price incentive contract type suggests shared risk between government and contractor. 3. Long contract duration of nearly 4 years may indicate complex project requirements. 4. Significant historical spending on this contract category suggests ongoing need. 5. Focus on shipbuilding and repair aligns with core naval capabilities.

Value Assessment

Rating: fair

The contract's value of over $624 million for recurring construction is substantial. Without specific benchmarks for similar recurring construction contracts for naval vessels, a direct value-for-money assessment is challenging. However, the sole-source nature of the award raises concerns about potential overpricing compared to a competitive environment. The fixed-price incentive structure aims to control costs, but the ultimate price paid will depend on performance against targets.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Bath Iron Works was the only bidder. This approach is typically used when only one responsible source is available or when a public exigency does not permit a competitive solicitation. The lack of competition means there was no opportunity for price discovery through bidding, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to lower bids. The government did not benefit from the cost-saving mechanisms inherent in a competitive bidding process.

Public Impact

The primary beneficiary is the Department of the Navy, ensuring continued shipbuilding and repair capabilities. Services delivered include recurring construction, essential for maintaining and potentially expanding the naval fleet. The geographic impact is concentrated in Maine, where Bath Iron Works is located, supporting the local economy and workforce. Workforce implications include sustained employment for skilled laborers, engineers, and support staff at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Fixed-price incentive contracts can lead to cost overruns if performance targets are not met efficiently.
Long contract duration increases the risk of scope creep or unforeseen cost increases over time.

Positive Signals

Bath Iron Works is a long-standing, experienced shipbuilder with a track record in naval contracts.
The fixed-price incentive structure aligns contractor and government interests towards achieving performance goals.
Recurring construction indicates a stable, ongoing need that this contract addresses.

Sector Analysis

The shipbuilding and repair industry is a critical component of the defense sector, characterized by high barriers to entry, complex manufacturing processes, and significant government reliance. Major naval contracts are often awarded to a limited number of specialized firms. Spending in this sector is heavily influenced by national defense priorities and shipbuilding cycles. Comparable spending benchmarks are difficult to establish due to the unique nature of naval vessel construction and repair, which often involves custom designs and extensive integration.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb: false'. There is no explicit information regarding subcontracting plans for small businesses. The large scale of this contract suggests that prime contractors are typically large, established defense firms, and while they may utilize small businesses in their supply chain, the primary awardee is not a small business. The direct impact on the small business ecosystem is likely minimal unless specific subcontracting goals are mandated and met.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the fixed-price incentive contract terms, linking payment to performance against defined targets. Transparency may be limited due to the sole-source nature and the proprietary aspects of shipbuilding. The Inspector General for the Department of Defense would likely have jurisdiction for audits and investigations into potential fraud, waste, or abuse.

Related Government Programs

Naval Ship Construction
Ship Maintenance and Repair
Defense Procurement
Major Weapon Systems Acquisition

Risk Flags

Sole-source award
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $624.7 million to BATH IRON WORKS CORPORATION. FY09 LCS RECURRING CONSTRUCTION

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 $624.7 million.

What is the period of performance?

Start: 2009-05-01. End: 2012-07-31.

What is the historical spending trend for recurring construction contracts awarded to Bath Iron Works by the Department of the Navy?

Analyzing historical spending for recurring construction contracts awarded to Bath Iron Works by the Department of the Navy reveals a pattern of significant, long-term investment. While the provided data point is for FY09, a broader review would likely show consistent awards over multiple fiscal years, reflecting the ongoing need for shipbuilding and repair services. For instance, if similar contracts were awarded in preceding or subsequent years, it would indicate a sustained demand and a strong, established relationship between the Navy and Bath Iron Works. The total dollar amounts awarded in prior years, along with the contract types and durations, would provide context for the $624 million awarded in FY09, helping to determine if this represents a typical investment or an outlier. Understanding these historical patterns is crucial for assessing the long-term financial commitment and strategic importance of these contracts.

How does the pricing structure of this fixed-price incentive contract compare to other shipbuilding contracts?

The pricing structure of this fixed-price incentive (FPI) contract is designed to share risk and reward between the government and the contractor. In an FPI contract, there is a target cost, a target profit, and a price ceiling. If the contractor completes the work for less than the target cost, both parties share in the savings according to a pre-negotiated formula. Conversely, if the cost exceeds the target cost but remains below the ceiling, the profit is reduced. If the cost exceeds the ceiling, the contractor absorbs the loss. Compared to other shipbuilding contracts, FPI is common for programs where costs are not fully predictable but can be reasonably estimated. However, the specific incentive sharing ratio and price ceiling negotiated for this contract are critical for determining its cost-effectiveness relative to other contract types like firm-fixed-price (which places more risk on the contractor) or cost-plus (which places more risk on the government). Without knowing these specifics and comparing them to benchmarks for similar naval shipbuilding projects, a definitive assessment of its pricing advantage is difficult.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this contract?

Key performance indicators (KPIs) for a recurring construction contract like this would typically focus on schedule adherence, quality of work, cost control relative to targets, and meeting technical specifications for the vessels being built or repaired. Specific KPIs might include on-time delivery milestones, defect rates, adherence to engineering drawings, and performance against the negotiated incentive targets. Risk mitigation strategies would be embedded within the contract's structure and oversight. The FPI nature itself is a risk mitigation tool, incentivizing cost efficiency. The long duration necessitates robust project management, including regular progress reviews, change control processes to manage scope creep, and proactive identification of potential supply chain disruptions or labor issues. The government would likely employ quality assurance representatives on-site to monitor progress and ensure compliance with standards. Contingency planning for unforeseen technical challenges or material shortages would also be crucial.

What is the strategic importance of Bath Iron Works to the U.S. Navy's shipbuilding capacity?

Bath Iron Works (BIW) holds significant strategic importance to the U.S. Navy's shipbuilding capacity, particularly for certain classes of vessels. As one of the nation's premier builders of surface combatants, BIW is crucial for fulfilling the Navy's requirements for destroyers and other advanced warships. Its specialized facilities, experienced workforce, and established expertise in complex naval architecture and construction make it a vital asset. The Navy often relies on a limited number of shipyards for constructing major combatants, and BIW's capabilities are essential for maintaining the fleet's size and technological edge. The sole-source nature of some contracts, while raising cost concerns, can also reflect the unique capabilities and capacity constraints of these critical industrial bases. Disruptions to BIW's operations or its production capacity could have substantial negative impacts on the Navy's long-term shipbuilding plans and national security objectives.

Are there any known performance issues or past disputes related to Bath Iron Works' contracts with the Navy?

Assessing past performance issues or disputes for Bath Iron Works (BIW) requires a review of contract performance reports, litigation records, and government accountability office (GAO) decisions. While BIW is a long-standing and generally reputable contractor, like any major defense industrial base entity, it may have faced challenges. These could include schedule delays, cost overruns on specific programs, or disputes over contract terms or technical specifications. For example, large, complex shipbuilding programs are inherently prone to such issues due to technological complexity, evolving requirements, and long lead times. Publicly available information might include GAO bid protest decisions, contract modification histories, or news reports detailing specific program challenges. A thorough analysis would involve examining performance metrics from previous contracts, any penalties incurred, or instances where the government exercised contract clauses related to poor performance. Without specific data on this particular contract's predecessors or successors, a definitive statement on past issues is speculative.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002408R2307

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 700 WASHINGTON ST, BATH, ME, 04530

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $630,603,427

Exercised Options: $625,073,386

Current Obligation: $624,654,007

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline