DoD's $29M freight contract with Maersk Line, Limited shows full and open competition after source exclusion

Contract Overview

Contract Amount: $29,060,406 ($29.1M)

Contractor: Maersk Line, Limited

Awarding Agency: Department of Defense

Start Date: 2019-08-31

End Date: 2019-08-31

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 29

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Transportation

Official Description: CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS

Plain-Language Summary

Department of Defense obligated $29.1 million to MAERSK LINE, LIMITED for work described as: CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS Key points: 1. The contract was awarded using full and open competition after exclusion of sources, indicating a deliberate selection process. 2. The fixed-price contract with economic price adjustment suggests potential for cost fluctuations based on market conditions. 3. The contract's duration of less than a year implies a focus on specific, short-term transportation needs. 4. The award to a single contractor, Maersk Line, Limited, warrants examination of the competitive landscape and potential for future competition. 5. The service provided, deep sea freight transportation, is critical for global logistics and supply chain resilience. 6. The absence of small business set-asides or subcontracting requirements suggests this contract was not specifically designed to benefit smaller enterprises.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without more granular data on the scope of services and market rates for deep sea freight at the time of award. The total award amount of approximately $29 million for a single day's service delivery order suggests a significant volume or value of shipments. However, without comparable contracts for similar durations and volumes, assessing whether this represents excellent or fair value is difficult. The fixed-price with economic price adjustment structure introduces a layer of uncertainty regarding the final cost.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This designation implies that while the competition was open, certain sources were excluded from consideration, possibly due to specific requirements or prior vetting. The number of bids received is not explicitly stated, but the process suggests a structured approach to selecting a provider. The exclusion of sources could potentially limit the breadth of competition, but the 'full and open' aspect indicates that multiple qualified bidders were likely considered.

Taxpayer Impact: The use of full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to better pricing and service. However, the exclusion of sources warrants scrutiny to ensure it did not unduly restrict competition and lead to higher costs than might otherwise be achieved.

Public Impact

The Department of Defense benefits through the reliable and efficient transportation of consolidated shipments. This contract facilitates the movement of goods essential for military operations and logistical support. The geographic impact is global, given the nature of deep sea freight transportation. The contract supports the broader defense supply chain, ensuring critical components and supplies reach their destinations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The exclusion of sources in a 'full and open' competition could potentially limit the range of available solutions and pricing.
The economic price adjustment clause introduces a risk of cost overruns if market rates for fuel or other factors increase significantly.
The short duration of the delivery order might indicate a need for more frequent, smaller contracts, potentially increasing administrative overhead.
Lack of transparency on the specific criteria for excluding sources could obscure potential biases or inefficiencies in the procurement process.

Positive Signals

The use of 'full and open competition' suggests an effort to leverage market forces for the best possible outcome.
The award to a known entity like Maersk Line, Limited, may indicate a reliance on established providers with proven capabilities in complex logistics.
The consolidation of shipments likely leads to economies of scale and more efficient use of transportation resources.

Sector Analysis

This contract falls within the broader transportation and logistics sector, specifically focusing on deep sea freight. This sector is characterized by global reach, significant capital investment in vessels and infrastructure, and complex regulatory environments. The market is dominated by a few large international carriers. Benchmarking this contract's value is difficult without specific details on the volume and routes, but it represents a component of the substantial federal spending on logistics and supply chain management, which is critical for national security and economic stability.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). There is no information regarding subcontracting plans. This suggests that the primary contractor, Maersk Line, Limited, is likely a large business, and the contract's value and scope were not tailored to encourage small business participation through set-asides or mandated subcontracting.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management regulations, managed by USTRANSCOM. Accountability measures are inherent in the fixed-price contract structure, with performance expectations tied to delivery. Transparency is facilitated by the Federal Procurement Data System (FPDS), where contract awards are recorded. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Military Sealift Command Contracts
Global Freight Transportation Services
Department of Defense Logistics Support
Ocean Freight Services
Transportation of Goods

Risk Flags

Potential for limited competition due to source exclusion.
Cost uncertainty introduced by Economic Price Adjustment.
Short duration may indicate fragmented service delivery.
Lack of small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $29.1 million to MAERSK LINE, LIMITED. CONSOLIDATED TRANSPORTATION SHIPMENTS MADE BY DECENTRALIZED ORDERING OFFICERS

Who is the contractor on this award?

The obligated recipient is MAERSK LINE, LIMITED.

Which agency awarded this contract?

Awarding agency: Department of Defense (USTRANSCOM).

What is the total obligated amount?

The obligated amount is $29.1 million.

What is the period of performance?

Start: 2019-08-31. End: 2019-08-31.

What is the track record of Maersk Line, Limited with the Department of Defense?

Maersk Line, Limited has a significant history of contracting with the U.S. Department of Defense, particularly through its U.S. military logistics arm, the Military Sealift Command (MSC). They are a major provider of global ocean transportation services, including containerized cargo and specialized vessel operations. Their involvement often spans large-scale, long-term contracts for fleet operations and strategic sealift capabilities. While this specific award is a delivery order, it aligns with their broader role in supporting DoD's global logistics requirements. Assessing their overall track record would involve reviewing past performance evaluations, any disputes or claims, and their capacity to meet the demanding operational tempo and security requirements of military transportation.

How does the pricing structure (Fixed Price with Economic Price Adjustment) typically impact cost certainty for the DoD?

The Fixed Price with Economic Price Adjustment (FPEPA) contract type offers a balance between cost certainty and flexibility. The 'Fixed Price' component provides a baseline cost, offering some predictability. However, the 'Economic Price Adjustment' (EPA) clause allows for adjustments to the contract price based on specified economic factors, most commonly fluctuations in fuel costs or labor rates. For the DoD, this means that while the initial price is set, the final cost can vary. This structure is often used in industries with volatile input costs, like shipping, to ensure fair compensation for the contractor while mitigating excessive risk. The DoD benefits by securing services that might be priced too high under a purely fixed-price contract in a volatile market, but it introduces a degree of uncertainty regarding the ultimate expenditure compared to a firm fixed-price contract.

What are the potential risks associated with excluding certain sources in a 'full and open' competition?

Excluding certain sources in a 'full and open' competition, even when justified, carries potential risks. Primarily, it can limit the pool of qualified bidders, potentially reducing the level of competition. This reduced competition might lead to less favorable pricing or service terms for the government than if a broader range of sources were considered. Furthermore, if the exclusion criteria are not clearly defined, transparent, or consistently applied, it could raise concerns about fairness and potentially lead to protests or legal challenges. The government must ensure that any exclusions are based on legitimate, documented requirements and serve the best interests of the taxpayer by not unnecessarily stifling competition or creating barriers to entry for capable providers.

What is the significance of this contract being a 'Delivery Order' rather than a base contract?

A 'Delivery Order' (aw: DELIVERY ORDER) signifies that this contract is a tasking under a previously awarded indefinite-delivery/indefinite-quantity (IDIQ) or similar type of contract vehicle. It means that the broader terms, conditions, and pricing structure were established in a preceding contract, and this delivery order specifies the quantity, delivery date, and specific performance requirements for a particular shipment or set of shipments. The significance for the DoD is flexibility and efficiency; they can quickly procure necessary services as needed without initiating a full new procurement process each time. For analysts, it means that the $29 million figure represents a specific instance of service, and the overall value and scope of the underlying contract vehicle would need to be examined for a complete picture of federal spending in this area.

How does the nature of 'Deep Sea Freight Transportation' influence the contract's complexity and risk?

Deep sea freight transportation is inherently complex and carries significant risks. This involves navigating international waters, adhering to diverse maritime regulations, managing port operations, and mitigating risks associated with weather, piracy, and geopolitical instability. The scale of operations requires substantial capital investment in vessels and infrastructure. For the DoD, reliance on this service means ensuring the security and timely delivery of critical assets across vast distances. Risks include potential delays due to port congestion, vessel mechanical failures, or disruptions in global trade routes. The economic price adjustment clause in this contract specifically addresses the volatility of fuel costs, a major component of operating expenses in this sector.

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 AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 29

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

Evaluated Preference: NONE

Contractor Details

Parent Company: APM Terminals Pacific LLC (UEI: 308621259)

Address: 2510 WALMER AVE STE C, NORFOLK, VA, 23513

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $29,060,406

Exercised Options: $29,060,406

Current Obligation: $29,060,406

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: HTC71116DW014

IDV Type: IDC

Timeline