Navy awards $9.4B shipbuilding contract to Electric Boat Corporation, extending through 2025

Contract Overview

Contract Amount: $9,397,332,305 ($9.4B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2003-08-14

End Date: 2025-05-06

Contract Duration: 7,936 days

Daily Burn Rate: $1.2M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $9.40 billion to ELECTRIC BOAT CORPORATION for work described as: Key points: 1. Contract awarded via sole-source negotiation, raising questions about price discovery and potential for cost overruns. 2. Long-term duration of nearly 8,000 days suggests a significant, ongoing need for shipbuilding services. 3. Fixed Price Incentive (FPI) contract type aims to balance cost control with contractor performance incentives. 4. High dollar value indicates a critical national security asset, likely submarines, requiring specialized expertise. 5. Lack of competition suggests limited market alternatives or unique capabilities held by the incumbent contractor. 6. Performance period extends well into the future, requiring sustained oversight and risk management.

Value Assessment

Rating: questionable

The contract's substantial value of over $9.4 billion, awarded without competition, warrants careful scrutiny. Benchmarking this price is challenging due to the sole-source nature and specialized requirements of naval shipbuilding. The Fixed Price Incentive (FPI) structure suggests an attempt to manage costs, but the absence of competitive bids means there's no direct market comparison to assess value for money. The long duration and high value necessitate robust oversight to ensure costs remain aligned with performance and national security needs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that the Department of the Navy identified Electric Boat Corporation as the only responsible source capable of meeting the requirement. This typically occurs when a contractor possesses unique capabilities, intellectual property, or has a long-standing, integrated relationship with the government for a specific platform. The lack of competition limits the government's ability to leverage market forces to drive down prices or encourage innovation from other potential suppliers.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive pricing, potentially leading to higher costs than if multiple bidders had vied for the contract.

Public Impact

The primary beneficiaries are the U.S. Navy and national defense, ensuring the continued operation and maintenance of critical naval assets. Services delivered include shipbuilding and repair, essential for maintaining the fleet's operational readiness. The geographic impact is concentrated in Connecticut, where Electric Boat Corporation is located, supporting a significant industrial base. Workforce implications include the sustained employment of thousands of skilled laborers, engineers, and technicians in the shipbuilding sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost escalation due to sole-source award and long-term nature.
Risk of contractor complacency without competitive pressure.
Dependency on a single supplier for critical defense capabilities.
Challenges in benchmarking performance and cost against market alternatives.

Positive Signals

Established relationship and proven track record of Electric Boat Corporation in naval shipbuilding.
FPI contract type incentivizes performance and cost control.
Long-term award provides stability for critical defense production.
Focus on a specialized, high-value defense capability.

Sector Analysis

Naval shipbuilding is a highly specialized and capital-intensive sector dominated by a few large, experienced contractors. This contract falls within the broader defense industrial base, specifically focusing on the construction and maintenance of naval vessels, likely submarines given the contractor. The market is characterized by long production cycles, significant government investment, and stringent regulatory requirements. Comparable spending benchmarks are difficult to establish due to the unique nature of each vessel class and the limited number of qualified shipyards.

Small Business Impact

This contract does not appear to include a small business set-aside. Given the nature of large-scale naval shipbuilding, the primary contractor, Electric Boat Corporation, is a major entity. However, significant subcontracting opportunities likely exist for smaller businesses specializing in components, materials, and specialized services, which could indirectly benefit the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Inspector General of the Department of Defense would also have jurisdiction to investigate potential fraud, waste, and abuse. Transparency is typically managed through contract reporting mechanisms, but detailed public disclosure of specific performance metrics or cost breakdowns may be limited due to national security considerations.

Related Government Programs

Submarine Construction Programs
Naval Ship Maintenance and Modernization
Defense Industrial Base Support
Major Weapons Systems Acquisition

Risk Flags

Sole-source award
Long-term contract duration
High contract value
Potential for cost escalation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $9.40 billion to ELECTRIC BOAT CORPORATION. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is ELECTRIC BOAT 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 $9.40 billion.

What is the period of performance?

Start: 2003-08-14. End: 2025-05-06.

What is the historical spending pattern for similar shipbuilding contracts awarded to Electric Boat Corporation by the Department of the Navy?

Historical data indicates that Electric Boat Corporation has been a primary contractor for U.S. Navy submarine programs for decades. Major contracts have consistently been in the multi-billion dollar range, reflecting the complexity and cost of nuclear-powered submarines. For instance, previous contracts for Virginia-class and Columbia-class submarine construction have spanned many years and involved substantial funding. The current award of $9.4 billion is consistent with the scale of previous major shipbuilding awards, underscoring the long-term, high-value nature of the relationship between the Navy and Electric Boat for these critical platforms. Analyzing specific historical awards would reveal trends in cost escalation, delivery schedules, and the evolution of contract types used.

How does the Fixed Price Incentive (FPI) contract type typically perform in long-term, complex defense projects compared to other contract types?

Fixed Price Incentive (FPI) contracts are designed to provide a middle ground between fixed-price and cost-reimbursement contracts. In long-term, complex defense projects, FPI aims to incentivize the contractor to control costs by establishing a target cost and a ceiling price. If the final cost is below the target, both the government and contractor share in the savings (under-run). If the final cost exceeds the target but remains below the ceiling, the contractor absorbs a portion of the overage. This structure encourages efficiency and cost consciousness while acknowledging the inherent uncertainties in complex projects. However, the effectiveness of FPI can be diminished if the target cost is set too high or if the incentive sharing formula is not sufficiently motivating. In sole-source situations, the government's ability to negotiate a realistic and challenging target cost is paramount.

What are the primary risks associated with a sole-source award for a contract of this magnitude and duration?

The primary risks associated with a sole-source award for a contract of this magnitude and duration include potential cost overruns, reduced innovation, and a lack of competitive pressure on the contractor. Without competing bids, the government may not achieve the best possible price, as there is no market benchmark to ensure cost-effectiveness. The contractor, knowing they are the only option, might have less incentive to aggressively manage costs or explore innovative solutions. Furthermore, long-term sole-source contracts can create a dependency on a single supplier, making it difficult and costly to switch providers if performance issues arise or if market conditions change. Robust oversight and strong negotiation skills from the government are crucial to mitigate these risks.

What specific performance metrics or milestones are likely being tracked under this contract to ensure value for taxpayer money?

Under a Fixed Price Incentive (FPI) contract for naval shipbuilding, performance metrics and milestones are typically tied to the design, construction, testing, and delivery of vessels. Key indicators would likely include adherence to the production schedule, meeting quality and technical specifications, achieving cost targets, and successful completion of sea trials and inspections. For FPI contracts, specific cost-sharing arrangements are defined based on achieving or exceeding cost targets. The government would closely monitor progress against these defined milestones, with payments contingent upon successful completion. Deviations from schedule or cost targets would trigger specific contractual remedies or adjustments to profit/loss sharing, ensuring that the contractor is held accountable for performance and cost control.

How does the 'Ship Building and Repairing' NAICS code relate to the broader defense industrial base and national security objectives?

The 'Ship Building and Repairing' (NAICS 336611) sector is a cornerstone of the broader defense industrial base, directly supporting national security objectives by ensuring the U.S. maintains a capable and modern naval fleet. This sector encompasses the design, construction, conversion, and repair of ships and large marine structures. For the Navy, this means having the capacity to build and maintain vessels ranging from aircraft carriers and submarines to destroyers and amphibious assault ships. A robust shipbuilding and repair capability is essential for projecting power, maintaining sea lanes, and responding to global threats. Disruptions or weaknesses in this sector can have significant implications for military readiness and geopolitical influence.

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

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Contractor Details

Address: 75 EASTERN POINT RD, GROTON, CT, 06340

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline