Navy awards $85.4M contract for shipbuilding and repair services to National Steel and Shipbuilding Company

Contract Overview

Contract Amount: $85,378,647 ($85.4M)

Contractor: National Steel and Shipbuilding Company

Awarding Agency: Department of Defense

Start Date: 2003-08-05

End Date: 2006-09-30

Contract Duration: 1,152 days

Daily Burn Rate: $74.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92136

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $85.4 million to NATIONAL STEEL AND SHIPBUILDING COMPANY for work described as: Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Award Fee, which incentivizes contractor performance. 3. The duration of the contract is 1152 days, indicating a significant, long-term commitment. 4. The contract was awarded by the Department of the Navy, a major defense spender. 5. The North American Industry Classification System (NAICS) code 336611 points to shipbuilding and repair activities. 6. The contract value of $85.4 million represents a substantial investment in naval infrastructure.

Value Assessment

Rating: fair

Benchmarking the value of this contract requires more detailed cost breakdowns and comparisons to similar shipbuilding and repair contracts. The Cost Plus Award Fee structure allows for performance-based incentives, but the ultimate cost can fluctuate. Without specific performance metrics and award fee payouts, a definitive value-for-money assessment is challenging. However, the contract value itself is significant, reflecting the complexity and scale of naval shipbuilding and repair.

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 degree of competition, but the exact number of interested parties and the rigor of the evaluation process would provide a clearer picture of the competitive landscape. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best value through a robust bidding process, potentially leading to more competitive pricing.

Public Impact

The primary beneficiaries are the Department of the Navy and its operational readiness, through the maintenance and potential construction of naval vessels. Services delivered include shipbuilding and repair, crucial for maintaining a modern and effective fleet. The geographic impact is centered in California, where National Steel and Shipbuilding Company is located, potentially supporting local jobs and the regional economy. Workforce implications include employment for skilled laborers, engineers, and support staff within the shipbuilding and repair industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can sometimes lead to higher overall costs if not managed tightly, as the government covers costs plus an incentive fee.
The long duration of the contract may present risks related to changing technological requirements or economic conditions over time.
Limited public information on the specific award fee criteria makes it difficult to assess the effectiveness of the incentive structure.

Positive Signals

Awarding under full and open competition suggests a commitment to achieving competitive pricing and best value.
The Cost Plus Award Fee structure is designed to incentivize contractor performance and efficiency.
The contract supports critical naval capabilities, contributing to national security.

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 manufacturing and defense services industry. Comparable spending benchmarks would involve analyzing other large naval vessel construction and maintenance contracts, which often run into hundreds of millions or billions of dollars, depending on the scope and complexity of the vessels involved.

Small Business Impact

There is no indication from the provided data that this contract included a small business set-aside. The prime contractor, National Steel and Shipbuilding Company, is a large entity. Subcontracting opportunities for small businesses may exist, but this would depend on the prime contractor's subcontracting plan and the nature of the work required. The impact on the small business ecosystem is not directly evident without further details on subcontracting.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Cost Plus Award Fee structure, which ties a portion of the payment to performance. Transparency is generally facilitated through contract award announcements and reporting requirements, though detailed performance data may be limited. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Ship Production
Ship Maintenance and Repair
Defense Procurement
Naval Vessel Construction
Shipbuilding Industry Support

Risk Flags

Potential for cost overruns in CPAF contracts if not managed effectively.
Long contract duration may introduce risks related to obsolescence or changing requirements.
Dependence on a single large contractor for critical shipbuilding and repair services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $85.4 million to NATIONAL STEEL AND SHIPBUILDING COMPANY. See the official description on USAspending.

Who is the contractor on this award?

The obligated recipient is NATIONAL STEEL AND SHIPBUILDING COMPANY.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $85.4 million.

What is the period of performance?

Start: 2003-08-05. End: 2006-09-30.

What is the historical spending pattern for shipbuilding and repair services by the Department of the Navy?

The Department of the Navy has a long and substantial history of spending on shipbuilding and repair services, reflecting its role in maintaining a global presence and technological superiority. Annual spending can fluctuate significantly based on shipbuilding programs, modernization efforts, and maintenance cycles. Historically, these expenditures represent a major portion of the Navy's budget, often running into tens of billions of dollars annually. This includes funding for new vessel construction, major overhauls, routine maintenance, and specialized repairs. The specific amount for any given year depends on factors such as the number of ships in the fleet, their age, the geopolitical environment, and strategic priorities. Analyzing trends over several fiscal years is crucial to understanding the overall investment in naval readiness and shipbuilding capacity.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types in terms of cost control for shipbuilding?

Cost Plus Award Fee (CPAF) contracts are designed to provide flexibility for complex projects where costs are difficult to estimate precisely upfront, such as shipbuilding. In a CPAF contract, the government reimburses the contractor for allowable costs incurred, plus a base fee and an award fee. The award fee is earned based on the contractor's performance against pre-defined criteria, incentivizing them to exceed expectations. Compared to fixed-price contracts, CPAF offers less cost certainty for the government but allows for greater adaptability to evolving project requirements. It can be more cost-effective than Cost Plus Incentive Fee (CPIF) if performance metrics are well-defined and achievable, as it focuses on overall performance rather than just cost reduction. However, robust government oversight is critical to ensure that costs remain reasonable and that the award fee criteria are objective and effectively drive desired outcomes, preventing potential cost overruns.

What are the key performance indicators typically used in shipbuilding and repair contracts awarded under CPAF?

Key performance indicators (KPIs) for shipbuilding and repair contracts under a Cost Plus Award Fee (CPAF) structure are crucial for determining the award fee. These KPIs are typically tailored to the specific project but often include metrics related to schedule adherence (e.g., meeting key milestones, on-time delivery), quality of work (e.g., defect rates, rework required, adherence to specifications), cost management (e.g., staying within projected cost targets, efficient resource utilization), safety performance (e.g., incident rates, compliance with safety protocols), and technical performance (e.g., meeting performance specifications, successful testing and trials). The government establishes objective criteria for evaluating performance against these KPIs, and the contractor's achievement level directly influences the amount of award fee earned. Effective KPIs are measurable, relevant, and clearly communicated to the contractor.

What is the typical profit margin for shipbuilding and repair contractors in the defense sector?

Profit margins for shipbuilding and repair contractors in the defense sector can vary significantly based on contract type, competition level, company size, and specific project risks. Under Cost Plus Award Fee (CPAF) contracts, the profit is composed of a base fee and an award fee. The base fee is typically a small percentage of the estimated cost, often in the range of 5-10%. The award fee component can add a significant amount, potentially doubling the base fee or more, if the contractor achieves exceptional performance against defined metrics. In competitive fixed-price environments, profit margins might be tighter, reflecting market pressures. Generally, defense contractors aim for a total profit (base fee plus award fee) that is competitive within the industry, often seeking to achieve an overall profit margin in the low to mid-teens percentage of total contract value, though this can be higher for highly specialized or risky endeavors and lower for more commoditized services.

How does the geographic location of the contractor (California) impact the cost and logistics of this naval contract?

The geographic location of National Steel and Shipbuilding Company in California can have several impacts on this naval contract. California has a significant maritime industry presence, which may translate to a skilled labor pool and established supply chains for shipbuilding and repair, potentially leading to efficiencies. However, labor costs in California are generally higher than in many other regions of the U.S., which could increase the overall cost of the contract. Furthermore, the location may influence logistics, particularly if naval assets need to be transported to or from the West Coast for servicing. Proximity to major naval bases on the West Coast could offer logistical advantages for certain operations. The state's regulatory environment and environmental standards might also add complexity or cost to operations compared to other locations. Ultimately, the impact is a balance of potential advantages in skilled labor and infrastructure against potentially higher operating costs.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › NON-NUCLEAR SHIP REPAIR

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 2798 HARBOR DRIVE, SAN DIEGO, CA, 90

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

Contract Characteristics

Cost or Pricing Data: YES

Timeline