Navy awards $2.3B to Bath Iron Works for DDG 51 Class Lead Yard Services, a sole-source contract

Contract Overview

Contract Amount: $230,800,854 ($230.8M)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2012-03-30

End Date: 2019-05-15

Contract Duration: 2,602 days

Daily Burn Rate: $88.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: DDG 51 CLASS LEAD YARD SERVICES

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $230.8 million to BATH IRON WORKS CORPORATION for work described as: DDG 51 CLASS LEAD YARD SERVICES Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Services encompass engineering and technical support for a critical naval shipbuilding program. 3. The contract duration of over 7 years suggests a long-term commitment to the contractor. 4. Performance risk is moderate given the specialized nature of lead yard services. 5. Bath Iron Works, as the incumbent, likely possesses unique institutional knowledge. 6. The contract type (Cost Plus Fixed Fee) may incentivize cost overruns. 7. This award represents a significant investment in naval fleet modernization.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The Cost Plus Fixed Fee (CPFF) structure, while common for complex engineering services, carries inherent risks of cost escalation. Without comparable sole-source awards for similar lead yard services, it's difficult to definitively assess if the pricing is optimal. However, the extended duration and scope suggest a substantial commitment, and the absence of competition means taxpayers rely heavily on the contractor's efficiency and the Navy's oversight to ensure value.

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 justified when a single contractor possesses unique capabilities or when the urgency of the requirement precludes a competitive process. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: Taxpayers are exposed to potentially higher costs due to the absence of competitive pressure. The government must rely on robust negotiation and oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Navy and its fleet modernization efforts, ensuring the continued development and support of the DDG 51 class destroyers. Services delivered include essential engineering, design, and technical support critical for shipbuilding and maintenance. The geographic impact is concentrated in Bath, Maine, supporting a significant industrial base and skilled workforce. Workforce implications include the sustained employment of engineers, technicians, and support staff at Bath Iron Works.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost Plus Fixed Fee contract type can incentivize higher costs.
Long contract duration increases exposure to potential cost overruns.
Lack of transparency in sole-source justification requires careful review.

Positive Signals

Bath Iron Works is a specialized shipyard with extensive experience in DDG 51 class construction.
The contract supports a critical national defense program.
The award ensures continuity of essential engineering services for the Navy.
The fixed fee component provides some cost certainty for the contractor's profit.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industrial base. The market for lead yard services for major naval platforms is highly concentrated, often dominated by the original shipbuilder or a closely affiliated entity due to the specialized knowledge and infrastructure required. Comparable spending benchmarks are difficult to establish due to the unique nature of lead yard roles, but the overall value reflects the complexity and strategic importance of naval shipbuilding programs.

Small Business Impact

This contract does not appear to include specific small business set-asides. As a sole-source award to a large prime contractor, the primary subcontracting opportunities would likely flow through Bath Iron Works. The impact on the small business ecosystem depends on Bath Iron Works' subcontracting strategy and its ability to engage small businesses for specialized components or services required for the DDG 51 class support.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Accountability measures would be embedded in the contract's performance metrics and reporting requirements. Transparency is limited due to the sole-source nature, but contract awards and modifications are generally publicly reported. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

DDG 51 Class Destroyer Program
Naval Shipbuilding and Conversion
Ship Design and Engineering Services
Department of Defense Major Contracts

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Potential for cost overruns
Limited competitive benchmarking

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $230.8 million to BATH IRON WORKS CORPORATION. DDG 51 CLASS LEAD YARD SERVICES

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 $230.8 million.

What is the period of performance?

Start: 2012-03-30. End: 2019-05-15.

What is the historical spending pattern for lead yard services for the DDG 51 class?

Historical spending for lead yard services for the DDG 51 class is primarily associated with Bath Iron Works, given their role as a builder of these vessels. While specific figures for 'lead yard services' as a distinct line item are not always publicly itemized across all historical contracts, the cumulative investment in the DDG 51 program, including design, engineering, and post-delivery support, runs into the tens of billions of dollars over several decades. This $2.3 billion award represents a significant portion of ongoing support and modernization efforts for the class, reflecting the long lifecycle of naval assets and the continuous need for specialized technical expertise.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other options for this type of service?

The Cost Plus Fixed Fee (CPFF) contract type is often used for complex, research-intensive, or development-oriented projects where the scope of work can be difficult to define precisely upfront, or where innovation is a key objective. In this case, it allows the Navy to leverage Bath Iron Works' specialized knowledge for engineering and technical support of the DDG 51 class. While CPFF provides flexibility and incentivizes the contractor to perform the work, it also carries a risk of cost overruns, as the contractor is reimbursed for actual costs incurred plus a fixed fee. Alternative contract types like Firm-Fixed-Price (FFP) offer greater cost certainty for the buyer but are less suitable when scope is uncertain or innovation is paramount. Incentive Fee contracts could also be considered to better align contractor performance with specific cost, schedule, or performance targets.

What are the key performance indicators (KPIs) typically associated with lead yard services for naval vessels?

Key performance indicators (KPIs) for lead yard services typically focus on technical accuracy, schedule adherence, and cost control within the defined scope. For the DDG 51 class, these might include the timeliness and quality of engineering change proposals, the accuracy of technical documentation updates, the efficiency of resolving design or production issues, and the effectiveness of providing technical support during construction and maintenance availabilities. Responsiveness to Navy inquiries, adherence to safety standards, and the successful integration of new technologies or modifications would also be critical. The Navy would likely establish specific metrics within the contract to measure Bath Iron Works' performance against these areas.

What is the track record of Bath Iron Works in managing large, complex defense contracts?

Bath Iron Works (BIW) has a long and established track record in managing large, complex defense contracts, particularly concerning the construction and support of naval vessels. As a primary builder of the Arleigh Burke (DDG 51) class destroyers, BIW possesses deep institutional knowledge and specialized facilities. They have successfully delivered numerous destroyers, often navigating the complexities of advanced shipbuilding, integration of new systems, and meeting demanding delivery schedules. While like any large industrial contractor, BIW has faced challenges related to production efficiency, labor relations, and schedule adjustments on specific programs, their overall history demonstrates a significant capability in executing major naval shipbuilding contracts.

How does the sole-source nature of this award impact the potential for innovation by the contractor?

The sole-source nature of this award can have a mixed impact on innovation. On one hand, without competitive pressure, the contractor might feel less urgency to innovate aggressively to win future work or secure better pricing. The CPFF structure, while allowing for costs associated with innovation, doesn't inherently reward cost savings from efficiency gains as strongly as other contract types might. On the other hand, a sole-source award for specialized services like lead yard support can provide the stability and long-term relationship necessary for the contractor to invest in process improvements, adopt new technologies, or develop innovative solutions that benefit the program over its lifecycle. The Navy's active oversight and specific requirements for innovation within the contract terms would be crucial in driving this.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002411R2302

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 700 WASHINGTON ST, BATH, ME, 04530

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: $261,781,115

Exercised Options: $259,534,975

Current Obligation: $230,800,854

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline