Naval shipbuilding contract awarded to Bath Iron Works for over $1.75 billion, spanning nearly 15 years

Contract Overview

Contract Amount: $1,751,650,717 ($1.8B)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 1998-03-06

End Date: 2013-06-13

Contract Duration: 5,578 days

Daily Burn Rate: $314.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: 199811!1700!2482!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2306 !A!*!* !19980306!20070830!045953718!045953718!001381284!N!70876!BATH IRON WORKS CORPORATION !700 WASHINGTON ST STOP 1 !BATH !ME!04530!03355!023!23!BATH !SAGADAHOC !MAINE !0001!+000009115511!N!Y!002118025331!1903!DESTROYERS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3731!3!*!*!*!B!A!*!A !Y!L!2!002!N!3A!A!N!D!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!D!N!*!*!*!*!*!

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530, UNITED STATES OF AMERICA

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $1.75 billion to BATH IRON WORKS CORPORATION for work described as: 199811!1700!2482!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2306 !A!*!* !19980306!20070830!045953718!045953718!001381284!N!70876!BATH IRON WORKS CORPORATION !700 WASHINGTON ST STOP 1 !BATH !ME!04530!03355!023!23!BATH !SAGADA… Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. Fixed Price Incentive contract type indicates shared risk between government and contractor for cost overruns. 3. Long contract duration of over 15 years for ship construction and repair implies significant program commitment. 4. The contract value of over $1.75 billion represents a substantial investment in naval capabilities. 5. The primary contractor, Bath Iron Works, is a major player in the shipbuilding sector. 6. The contract falls under the 'Ship Building and Repairing' NAICS code, indicating its specific industrial focus.

Value Assessment

Rating: good

The contract value of over $1.75 billion for ship building and repair over a 15-year period appears to be within a reasonable range for such complex, long-term defense projects. Benchmarking against similar large-scale naval vessel construction contracts would provide a more precise value-for-money assessment. The Fixed Price Incentive (FPI) contract type suggests an effort to control costs while allowing for adjustments based on performance and cost targets, which can be a good mechanism for managing large defense procurements.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of two bids suggests a competitive environment, though the exact number of potential bidders and the intensity of the competition are not detailed. A competitive process is generally favorable for price discovery and achieving better value for the government.

Taxpayer Impact: A full and open competition is beneficial for taxpayers as it encourages multiple companies to offer their best pricing and technical solutions, potentially leading to lower overall costs and higher quality outcomes.

Public Impact

The primary beneficiary is the U.S. Navy, which will receive advanced naval vessels. Services delivered include the construction and repair of ships, crucial for national defense. The geographic impact is centered in Bath, Maine, supporting local industry and employment. Workforce implications include job creation and the sustainment of specialized skills within the shipbuilding sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to contractor lock-in and reduced flexibility for future technological advancements.
Fixed Price Incentive contracts can sometimes lead to disputes over cost ceilings and performance incentives if not clearly defined.
Concentration of a large contract with a single entity may pose risks if that entity faces financial or operational challenges.

Positive Signals

Award through full and open competition suggests a robust process that likely yielded competitive pricing.
The contractor, Bath Iron Works, has a long history and established expertise in naval shipbuilding.
The contract's duration indicates a stable, long-term commitment to a critical defense capability.

Sector Analysis

This contract falls within the Ship Building and Repair industry, a critical component of the defense industrial base. The market is characterized by high barriers to entry due to specialized facilities, skilled labor, and significant capital investment. Major players like Bath Iron Works are essential for meeting the U.S. Navy's fleet requirements. Spending in this sector is heavily influenced by defense budgets and geopolitical priorities, with contracts often being multi-year and of substantial value.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions for this contract. Given the scale and nature of naval shipbuilding, it is likely that Bath Iron Works would engage subcontractors, potentially including small businesses, for various components and services. However, the direct impact on small business set-asides or subcontracting goals is not detailed in this record.

Oversight & Accountability

Oversight for this contract would typically be managed by the Naval Sea Systems Command (NAVSEA), responsible for the acquisition, construction, and repair of naval vessels. Accountability measures would be embedded within the Fixed Price Incentive contract terms, focusing on cost, schedule, and performance milestones. Transparency is generally maintained through contract awards databases and program management reviews, though specific operational details may be sensitive.

Related Government Programs

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

Risk Flags

Long contract duration may increase risk of cost escalation or obsolescence.
Fixed Price Incentive contracts require careful monitoring of cost and performance targets.
Concentration in a single contractor for major naval platforms carries inherent risks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.75 billion to BATH IRON WORKS CORPORATION. 199811!1700!2482!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2306 !A!*!* !19980306!20070830!045953718!045953718!001381284!N!70876!BATH IRON WORKS CORPORATION !700 WASHINGTON ST STOP 1 !BATH !ME!04530!03355!023!23!BATH !SAGADAHOC !MAINE !0001!+000009115511!N!Y!002118025331!1903!DESTROYERS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3731!3!*!*!*!B!A!*!A !Y!L!2!0

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 $1.75 billion.

What is the period of performance?

Start: 1998-03-06. End: 2013-06-13.

What is the historical spending trend for Bath Iron Works with the Department of Defense, particularly for similar shipbuilding contracts?

Analyzing Bath Iron Works' historical spending with the Department of Defense reveals a long-standing relationship, primarily focused on naval shipbuilding. Over the years, the company has secured numerous contracts for destroyers and other vessels. For instance, prior to this specific contract, Bath Iron Works would have had contracts for similar classes of ships, likely in the hundreds of millions or billions of dollars, depending on the scope and number of vessels. Examining the period leading up to this award would show a pattern of significant, multi-year commitments from the Navy to Bath Iron Works, reflecting its role as a key shipyard. This historical context suggests that the $1.75 billion award was part of an ongoing, substantial investment in naval fleet modernization and expansion, rather than an isolated or novel expenditure.

How does the per-unit cost of the ships procured under this contract compare to similar naval vessels built by other contractors or in other countries?

Determining the precise per-unit cost requires knowing the exact number and class of ships procured under this $1.75 billion contract, which is not explicitly detailed in the provided data. However, naval vessels, particularly destroyers and larger combatants, are inherently expensive due to advanced technology, complex systems, and stringent military specifications. Contracts like this, awarded through full and open competition, aim to achieve competitive pricing. Benchmarking against publicly available data for similar classes of destroyers (e.g., Arleigh Burke-class) built by Bath Iron Works or competitors like Huntington Ingalls Industries would be necessary. International comparisons can be complex due to differing design philosophies, labor costs, and technological integration. Generally, U.S. Navy shipbuilding costs are considered high due to the demanding requirements and the industrial base structure, but competitive bidding aims to optimize value within these constraints.

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

For a Fixed Price Incentive (FPI) contract of this magnitude, key performance indicators (KPIs) would likely revolve around meeting specific technical specifications for the vessels, adhering to delivery schedules, and managing costs within agreed-upon targets. The 'incentive' aspect means that both the government and the contractor share in any cost savings or overruns beyond a target price, up to a ceiling price. Risk mitigation strategies would include robust government oversight of production, detailed milestone tracking, independent verification of quality and performance, and clear contractual clauses defining cost sharing and profit adjustments. The contractor's primary risk is exceeding the ceiling price, while the government's risk is paying more than initially anticipated if costs escalate significantly. Effective communication and collaborative problem-solving between the Navy and Bath Iron Works would be crucial for managing these risks.

What is the projected economic impact on the region where Bath Iron Works is located, considering the contract's duration and value?

A contract valued at over $1.75 billion, spanning nearly 15 years, would have a substantial and sustained positive economic impact on the region where Bath Iron Works is located, primarily Bath, Maine, and surrounding areas in Sagadahoc County. This includes the direct creation and sustainment of hundreds, if not thousands, of high-skilled jobs in shipbuilding, engineering, manufacturing, and support services. Indirect economic benefits would ripple through the local economy via increased demand for goods and services from local suppliers, increased consumer spending by employees, and potential growth in supporting industries. The long-term nature of the contract provides economic stability and predictability for the workforce and local businesses, making it a significant anchor for the regional economy.

How has the competition level for naval shipbuilding contracts evolved, and does this award reflect current market dynamics?

The competition level for major naval shipbuilding contracts has historically been limited due to the high capital investment, specialized infrastructure, and long lead times required. For large combatants like destroyers, the number of prime contractors capable of undertaking such programs in the U.S. has been relatively small, often consolidating to a few key players like Bath Iron Works and Huntington Ingalls Industries. This contract, awarded under 'full and open competition' with two bidders, suggests a reasonably competitive environment for this specific award, reflecting the ongoing need for naval assets and the government's effort to solicit multiple proposals. However, the overall market remains concentrated. The evolution of competition is also influenced by defense budget priorities, technological advancements, and potential new entrants, though the barriers to entry remain very high.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

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

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Timeline