DoD's $27.7M deep sea freight contract with Hapag-Lloyd USA, LLC awarded via full and open competition

Contract Overview

Contract Amount: $27,689,187 ($27.7M)

Contractor: Hapag-Lloyd USA, LLC

Awarding Agency: Department of Defense

Start Date: 2013-08-31

End Date: 2013-08-31

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 22

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Transportation

Official Description: IGF::OT::IGF CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS

Plain-Language Summary

Department of Defense obligated $27.7 million to HAPAG-LLOYD USA, LLC for work described as: IGF::OT::IGF CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS Key points: 1. Contract awarded for deep sea freight transportation services. 2. Services were procured through a full and open competition. 3. The contract was awarded as a delivery order. 4. The contract type is Fixed Price with Economic Price Adjustment. 5. The contract was awarded to Hapag-Lloyd USA, LLC. 6. The total value of the contract is approximately $27.7 million. 7. The contract was awarded by the Department of Defense. 8. The awarding agency is USTRANSCOM.

Value Assessment

Rating: good

The contract value of $27.7 million for deep sea freight transportation appears reasonable given the scope of services typically required by the Department of Defense for global logistics. Benchmarking against similar large-scale freight contracts would provide a more precise value-for-money assessment. The Fixed Price with Economic Price Adjustment (FPEPA) contract type suggests an effort to manage cost fluctuations in fuel and other market-sensitive components of shipping, which can be beneficial for long-term predictability.

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 22 bids suggests a robust competitive environment for these deep sea freight services. A high number of bidders generally leads to better price discovery and potentially more favorable terms for the government, as contractors vie to win the award.

Taxpayer Impact: The full and open competition for this significant freight contract likely resulted in competitive pricing, maximizing the value of taxpayer dollars spent on essential transportation services.

Public Impact

Benefits the Department of Defense by ensuring the reliable and efficient movement of goods and equipment globally. Provides critical deep sea freight transportation services essential for military operations and logistics. Supports the global supply chain for national defense, impacting readiness and operational capabilities. Indirectly impacts the maritime industry and associated workforce involved in freight operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price volatility due to the 'Economic Price Adjustment' clause, which could increase costs if market conditions change unfavorably.
Reliance on a single contractor for a significant portion of deep sea freight could pose risks if the contractor faces operational disruptions.

Positive Signals

Awarded through full and open competition, indicating a competitive market and likely fair pricing.
The use of a delivery order structure allows for flexibility in managing specific transportation needs.
The contract type (FPEPA) aims to balance cost certainty with market realities for essential services.

Sector Analysis

Deep sea freight transportation is a critical component of the global logistics and shipping industry, essential for international trade and military sustainment. The market is characterized by large, specialized carriers capable of handling significant volumes and complex logistical requirements. This contract fits within the broader defense logistics sector, where reliable and cost-effective transportation is paramount for operational readiness. Comparable spending benchmarks would involve analyzing other large-scale freight contracts awarded by government agencies for similar international shipping needs.

Small Business Impact

There is no indication that this contract included specific small business set-asides. Given the nature of deep sea freight transportation, which typically requires large vessels and extensive global infrastructure, it is less likely to be directly subcontracted to small businesses unless for ancillary services. The primary focus is on large, established carriers. Further analysis would be needed to determine if any subcontracting opportunities exist for small businesses within the broader logistics chain.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the U.S. Transportation Command (USTRANSCOM) and the Department of Defense's contracting and financial management offices. Accountability measures would include performance monitoring, adherence to delivery schedules, and compliance with contract terms. Transparency is generally maintained through contract databases and reporting requirements, though specific operational details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Defense Logistics Agency (DLA) Transportation Services
Military Sealift Command (MSC) Contracts
Global Freight Forwarding Services
Ocean Freight Transportation Contracts

Risk Flags

Potential for cost increases due to Economic Price Adjustment clause.
Reliance on a single primary contractor for critical freight services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.7 million to HAPAG-LLOYD USA, LLC. IGF::OT::IGF CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS

Who is the contractor on this award?

The obligated recipient is HAPAG-LLOYD USA, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (USTRANSCOM).

What is the total obligated amount?

The obligated amount is $27.7 million.

What is the period of performance?

Start: 2013-08-31. End: 2013-08-31.

What is the historical spending pattern for deep sea freight transportation by the Department of Defense?

Historical spending on deep sea freight by the Department of Defense has been substantial, reflecting its global operational footprint. USTRANSCOM, the primary entity responsible for military transportation, manages a vast network of contracts for various modes of transport, including ocean freight. Annual spending can fluctuate based on geopolitical events, deployment levels, and strategic priorities. For instance, during periods of increased military engagement or major logistical operations, spending on freight services, including deep sea transport, tends to rise. Analyzing past contract awards and their values provides insight into the scale of these requirements and the typical cost structures involved. Benchmarking this $27.7 million contract against previous awards for similar services would help assess its relative size and cost-effectiveness over time.

How does the pricing of this contract compare to similar deep sea freight contracts awarded by other federal agencies?

Comparing the pricing of this $27.7 million contract to similar deep sea freight contracts awarded by other federal agencies requires access to detailed pricing data and service level agreements for comparable procurements. Generally, pricing in freight transportation is influenced by factors such as route, cargo volume, vessel type, fuel costs, and market demand. Contracts awarded through full and open competition, like this one, are expected to yield competitive rates. However, specific benchmarks are difficult to establish without direct comparison data. Agencies like the General Services Administration (GSA) or the Department of Homeland Security might procure similar services, and their contract vehicles could offer comparative insights. The 'Economic Price Adjustment' clause also complicates direct price comparisons, as actual final costs can vary.

What are the key performance indicators (KPIs) used to evaluate the performance of Hapag-Lloyd USA, LLC under this contract?

Key Performance Indicators (KPIs) for a deep sea freight transportation contract typically focus on reliability, timeliness, and cost control. For Hapag-Lloyd USA, LLC, under this Department of Defense contract, likely KPIs would include on-time delivery rates, transit time adherence, cargo damage rates, and compliance with scheduling. USTRANSCOM would monitor the carrier's ability to meet agreed-upon delivery windows and maintain the integrity of the cargo throughout the voyage. Furthermore, adherence to safety regulations and environmental standards would also be critical performance metrics. The 'Economic Price Adjustment' clause might also be monitored to ensure it is applied correctly based on agreed-upon indices, preventing unwarranted cost increases. Performance evaluations would inform future contract awards and potential incentive or penalty structures.

What is the potential impact of the 'Economic Price Adjustment' clause on the total cost of the contract?

The 'Economic Price Adjustment' (EPA) clause in this contract allows for adjustments to the contract price based on fluctuations in specific economic factors, most commonly fuel costs, but potentially also labor or material costs, as defined in the contract. The primary impact is that the final cost of the contract is not fixed at the time of award. If the specified economic indicators (e.g., fuel prices) increase significantly during the contract period, the total cost to the government could rise above the initial estimated value. Conversely, if these indicators decrease, the price could be adjusted downward. The extent of this impact depends heavily on the volatility of the underlying economic factors and the specific formula or indices used for adjustment, as detailed within the contract's EPA provisions. This clause aims to protect both the contractor from unforeseen cost increases and the government from potentially inflated fixed prices in a volatile market.

How does this contract contribute to the overall mission readiness of the Department of Defense?

This contract is crucial for the Department of Defense's mission readiness by ensuring the timely and reliable transportation of essential equipment, supplies, and personnel across vast oceanic distances. Effective deep sea freight capabilities are fundamental to projecting power, supporting deployed forces, and maintaining global supply chains. Without robust and dependable shipping services, the DoD's ability to respond to crises, conduct sustained operations, and maintain its strategic posture would be severely compromised. This contract, awarded through competition, aims to secure these vital services efficiently, thereby directly supporting the operational effectiveness and logistical backbone required for national security objectives.

Industry Classification

NAICS: Transportation and Warehousing › Deep Sea, Coastal, and Great Lakes Water Transportation › Deep Sea Freight Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: HTC71111RW004

Offers Received: 22

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Hamburgische Seefahrtsbeteiligung Albert Ballin Gmbh & CO. (UEI: 341016317)

Address: 401 E JACKSON ST STE 3300, TAMPA, FL, 33602

Business Categories: Category Business, Foreign-Owned and U.S.-Incorporated Business, Limited Liability Corporation, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $27,689,187

Exercised Options: $27,689,187

Current Obligation: $27,689,187

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HTC71112DW011

IDV Type: IDC

Timeline