Navy awards $303M for DDG 51 lead yard services to Bath Iron Works, a sole-source contract

Contract Overview

Contract Amount: $302,900,871 ($302.9M)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2018-07-01

End Date: 2024-01-24

Contract Duration: 2,033 days

Daily Burn Rate: $149.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: DDG 51 LEAD YARD SERVICES FY18-22

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $302.9 million to BATH IRON WORKS CORPORATION for work described as: DDG 51 LEAD YARD SERVICES FY18-22 Key points: 1. The contract value of $303 million over six years represents a significant investment in naval shipbuilding. 2. As a sole-source award, the absence of competition may limit price discovery and potentially increase costs. 3. The Cost Plus Award Fee (CPAF) structure incentivizes performance but requires robust oversight to manage costs. 4. Bath Iron Works, as the incumbent, likely possesses specialized knowledge crucial for lead yard services. 5. The contract duration of 2033 days (approx. 5.5 years) indicates a long-term commitment to this service. 6. The lack of small business participation noted suggests potential for future subcontracting opportunities. 7. The contract's focus on shipbuilding and repair aligns with critical defense industrial base needs.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging due to the lack of competitive bids. The Cost Plus Award Fee (CPAF) structure means the final cost is variable and dependent on performance incentives. Without comparable contract data for similar lead yard services, it's difficult to definitively assess if the $303 million represents fair value. However, the absence of competition inherently raises concerns about potential overpricing compared to a fully competed scenario.

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 considered. This approach is typically used when only one responsible source is available or when there's a compelling justification for avoiding competition. The lack of multiple bidders means there was no competitive pressure to drive down prices or encourage innovative solutions from a wider market.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not have the benefit of multiple offers to negotiate the best possible price.

Public Impact

The primary beneficiary is Bath Iron Works, which secures a substantial contract for essential services. The services delivered are critical for the maintenance, modernization, and construction oversight of DDG 51 class destroyers. The geographic impact is concentrated in Bath, Maine, supporting local employment and the regional economy. This contract directly impacts the shipbuilding and repair workforce, requiring skilled labor in naval architecture, engineering, and manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Cost Plus Award Fee (CPAF) contracts require diligent oversight to prevent cost overruns and ensure value.
Lack of explicit small business set-aside raises questions about opportunities for smaller firms in the supply chain.
The long duration of the contract could lead to complacency if not actively managed.
Dependence on a single contractor for lead yard services creates a single point of failure risk.

Positive Signals

Bath Iron Works has a long-standing relationship and specialized expertise with the DDG 51 class.
The CPAF structure incentivizes contractor performance, potentially leading to higher quality outcomes.
The contract supports a critical component of the U.S. Navy's fleet modernization and readiness.
The award ensures continuity of essential services for a key naval asset.
The contract is located in Maine, supporting a significant industrial base and skilled workforce.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. This contract falls within the broader naval shipbuilding and repair market, which is dominated by a few large prime contractors. The total federal spending on shipbuilding and repair can fluctuate significantly based on geopolitical factors and naval modernization priorities. This specific contract for lead yard services is essential for managing the lifecycle of a major warship class.

Small Business Impact

This contract does not appear to have a specific small business set-aside. While Bath Iron Works is a large business, the nature of lead yard services might involve significant subcontracting opportunities. However, without explicit set-aside goals or detailed subcontracting plans, the direct impact on the small business ecosystem is unclear. Future analysis could explore the extent to which small businesses are engaged as subcontractors for specialized components or services.

Oversight & Accountability

Oversight for this Cost Plus Award Fee (CPAF) contract would primarily fall under the Department of the Navy's contracting and program management offices. The CPAF structure necessitates performance monitoring against defined criteria to determine award fees. Transparency is generally maintained through contract reporting mechanisms, though specific details of cost and performance may be sensitive. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

DDG 51 Class Destroyer Program
Naval Shipbuilding and Repair Contracts
Defense Industrial Base Support
Ship Maintenance and Modernization

Risk Flags

Sole-source award
Cost-plus contract type
Lack of competition
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $302.9 million to BATH IRON WORKS CORPORATION. DDG 51 LEAD YARD SERVICES FY18-22

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 $302.9 million.

What is the period of performance?

Start: 2018-07-01. End: 2024-01-24.

What is Bath Iron Works' track record with DDG 51 class lead yard services?

Bath Iron Works (BIW) has a long and established history as the builder of the DDG 51 Arleigh Burke-class destroyers. As the 'lead yard,' they are responsible for providing technical support, design services, and oversight for the construction and modernization of these vessels across multiple shipyards. Their extensive experience with the class, from initial design through production and sustainment, positions them as the incumbent with deep institutional knowledge. This continuity is often a key factor in sole-source or limited competition awards for such specialized, long-term roles. BIW's performance history with the DDG 51 program, while generally positive in terms of delivering ships, has also faced scrutiny regarding cost and schedule overruns on specific construction contracts, which is a common challenge in complex naval shipbuilding.

How does the $303 million contract value compare to historical spending on lead yard services for the DDG 51 class?

Direct historical spending figures specifically for 'lead yard services' as a distinct contract line item for the DDG 51 class are not readily available in the public domain. Lead yard responsibilities are often integrated into broader shipbuilding contracts or awarded through separate, but less frequently publicized, support agreements. The $303 million awarded to Bath Iron Works for FY18-FY22 (and extending into 2024) represents a significant, multi-year commitment. Given the scale of the DDG 51 program, which involves numerous hulls built over decades, this figure suggests a substantial ongoing investment in the technical and engineering support necessary to maintain the class's design integrity and facilitate upgrades. Without specific comparable contracts for lead yard services, a precise value-for-money comparison is difficult, but the amount reflects the complexity and criticality of supporting a large, modern destroyer fleet.

What are the primary risks associated with this sole-source Cost Plus Award Fee (CPAF) contract?

The primary risks associated with this sole-source CPAF contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs than if multiple bidders had vied for the contract. The government may not achieve the best possible price. Secondly, CPAF contracts, while incentivizing performance, carry inherent risks related to cost control. The 'cost-plus' element means the contractor is reimbursed for allowable costs, and the 'award fee' component is based on meeting or exceeding performance targets. If oversight is insufficient, or if performance targets are not rigorously defined and monitored, costs can escalate beyond initial projections. There's also a risk that the contractor might focus on achieving award fee criteria at the expense of other critical, but less incentivized, aspects of the service.

How effective is the Cost Plus Award Fee (CPAF) structure in ensuring program effectiveness for lead yard services?

The effectiveness of the CPAF structure hinges on the clarity and measurability of the performance objectives set forth in the contract. For lead yard services, which involve complex technical support, design evolution, and oversight, defining objective metrics can be challenging. When well-defined, CPAF can incentivize Bath Iron Works to provide high-quality technical support, timely issue resolution, and effective oversight, thereby enhancing the overall effectiveness of the DDG 51 program. However, if the metrics are too subjective or easily manipulated, the incentive may not translate into tangible improvements in program execution. Robust government oversight is crucial to ensure that award fees are genuinely earned based on superior performance that directly benefits the program's objectives, such as maintaining ship readiness and facilitating efficient construction.

What are the implications of the contract's duration (2033 days) for long-term fleet readiness?

The contract duration of 2033 days (approximately 5.5 years) provides a significant period of stability for the lead yard services supporting the DDG 51 class. This extended timeframe allows for consistent application of technical expertise, continuity in design support, and predictable oversight throughout a substantial portion of the ships' lifecycle. Such stability is crucial for long-term fleet readiness, as it ensures that the technical foundation for maintenance, upgrades, and potential future modifications remains robust and managed by a knowledgeable entity. It also allows the contractor, Bath Iron Works, to plan resources and investments effectively. However, a long duration also necessitates vigilant contract management to ensure that the services remain relevant and cost-effective as technology and naval requirements evolve over the contract period.

Are there any indications of potential cost overruns or inefficiencies given the contract type and award method?

The potential for cost overruns exists with any Cost Plus contract, including CPAF. The 'cost-plus' element means the government reimburses the contractor's allowable costs, which can exceed initial estimates if not managed tightly. The CPAF structure aims to mitigate this by linking a portion of the profit to performance, incentivizing efficiency. However, the sole-source nature of this award means there was no initial competitive benchmark to establish a baseline price expectation. Without access to detailed cost breakdowns and performance reports, it's difficult to definitively assess current or future inefficiencies. Vigilant government oversight, including audits and performance reviews, is essential to identify and address any potential cost escalations or inefficiencies proactively.

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: N0002418R2313

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

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: $331,791,535

Exercised Options: $323,261,424

Current Obligation: $302,900,871

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline