Navy awards $1.11B engineering services contract to Electric Boat Corp. for submarine support

Contract Overview

Contract Amount: $1,111,869,099 ($1.1B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2004-03-03

End Date: 2016-02-18

Contract Duration: 4,369 days

Daily Burn Rate: $254.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $1.11 billion to ELECTRIC BOAT CORPORATION for work described as: Key points: 1. Contract awarded on a sole-source basis, raising questions about price competition. 2. Long contract duration (over 12 years) suggests a sustained need for specialized services. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring robust oversight. 4. Engineering services are critical for maintaining complex naval assets. 5. Focus on submarine support indicates a strategic area of defense spending. 6. Contract value is substantial, representing a significant investment in naval readiness.

Value Assessment

Rating: fair

The contract value of $1.11 billion over its extended period indicates a significant investment. Benchmarking this specific engineering service contract is challenging due to its specialized nature and sole-source award. However, the cost-plus-fixed-fee (CPFF) pricing structure, while common for complex R&D or services where costs are uncertain, can lead to higher overall costs compared to fixed-price contracts if not managed diligently. The lack of competitive bidding means direct price comparisons are unavailable, making a definitive value-for-money assessment difficult without further insight into the cost drivers and profit margins.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Electric Boat Corporation, was solicited. This approach is typically used when only one source is capable of meeting the agency's needs, often due to proprietary technology, unique expertise, or urgent requirements. The absence of competition means there was no opportunity for price discovery through a bidding process, potentially leading to higher costs for the government than if multiple firms had competed.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from the cost savings that typically arise from a competitive bidding process. This could result in a higher overall expenditure for the services rendered.

Public Impact

The primary beneficiaries are the U.S. Navy and its submarine fleet, ensuring operational readiness and maintenance. Services delivered include critical engineering support essential for the design, construction, and maintenance of submarines. The geographic impact is concentrated around Electric Boat Corporation's facilities, primarily in Connecticut. This contract supports a highly specialized workforce of engineers and technical personnel within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can lead to cost overruns if not closely monitored.
Long contract duration may reduce flexibility to adapt to changing technological needs or market conditions.
Lack of transparency in the sole-source justification requires scrutiny.
Potential for contractor lock-in due to specialized knowledge and long-term relationship.

Positive Signals

Electric Boat Corporation is a long-standing and experienced provider of submarine engineering services.
The contract addresses a critical national security need for submarine maintenance and support.
The fixed-fee component of the CPFF contract provides some level of cost certainty for the contractor's profit.
The sustained nature of the contract ensures continuity of essential services for the Navy.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industry's complex naval systems. The market for submarine engineering and maintenance is highly specialized, with a limited number of qualified contractors. Electric Boat Corporation is a dominant player in this niche. Comparable spending benchmarks are difficult to establish due to the unique nature of submarine platforms and the sole-source award.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the specialized nature of submarine engineering services and the sole-source award to a large prime contractor, the direct impact on small businesses through set-asides is unlikely. However, Electric Boat Corporation may engage small businesses as subcontractors, contributing indirectly to the small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. The cost-plus-fixed-fee structure necessitates rigorous oversight of incurred costs and performance to ensure the fixed fee is earned appropriately and that costs remain reasonable. Transparency is limited due to the sole-source nature. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems Engineering
Submarine Maintenance and Modernization
Defense Engineering Services
Strategic Weapons Systems Support
Shipbuilding and Repair Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.11 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 $1.11 billion.

What is the period of performance?

Start: 2004-03-03. End: 2016-02-18.

What is Electric Boat Corporation's track record with similar sole-source engineering contracts for the Department of the Navy?

Electric Boat Corporation (EBC) has a long and established history of sole-source contracts with the Department of the Navy, particularly concerning the design, construction, and maintenance of nuclear-powered submarines. As the primary builder of U.S. Navy submarines, EBC often holds sole-source positions for specific, highly specialized engineering services that are integral to its unique manufacturing capabilities and intellectual property. While specific details of past sole-source contracts are often sensitive, EBC's sustained relationship with the Navy indicates a consistent ability to meet the service's demanding requirements. However, the recurring nature of sole-source awards necessitates ongoing scrutiny to ensure fair pricing and prevent potential cost inefficiencies that could arise from a lack of competitive pressure.

How does the $1.11 billion contract value compare to historical spending on submarine engineering services?

The $1.11 billion contract value represents a significant, long-term investment in submarine engineering services. Historical spending on submarine programs is substantial, given the complexity and strategic importance of these assets. For instance, the lifecycle costs of a single nuclear submarine can run into tens of billions of dollars, encompassing design, construction, operation, maintenance, and eventual decommissioning. Engineering services form a critical component of these lifecycle costs. While direct comparisons to specific historical engineering service contracts are difficult due to varying scopes, contract types, and inflation, this award aligns with the high-value, long-duration nature of major defense procurement and sustainment programs. The extended period (over 12 years) suggests that this figure reflects a sustained need for specialized technical support rather than a one-time procurement.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for engineering services?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract for engineering services are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive environment. The government relies heavily on the contractor's cost proposals and the agency's negotiation skills to secure a fair price. Secondly, the CPFF structure, while providing flexibility for uncertain costs, carries the risk of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee representing profit. If cost controls are weak or if the scope of work expands without adequate adjustments, total costs can significantly exceed initial estimates. Robust government oversight, detailed cost accounting, and clear performance metrics are crucial to mitigate these risks.

How effective is the cost-plus-fixed-fee structure in ensuring program effectiveness for complex engineering tasks?

The cost-plus-fixed-fee (CPFF) structure can be effective for complex engineering tasks where the scope of work is not fully defined at the outset or involves significant research and development. It allows the contractor to incur necessary costs while providing a defined profit margin (the fixed fee), incentivizing completion of the work. For program effectiveness, the CPFF structure relies heavily on the government's ability to define clear performance objectives and milestones. If these are well-articulated and monitored, the contractor is motivated to meet them to earn the fixed fee. However, effectiveness can be hampered if the government lacks the technical expertise to oversee the contractor's cost and performance, or if the fixed fee is disproportionately high relative to the risk undertaken by the contractor. In such cases, the focus might shift from optimal technical solutions to cost recovery.

What are the historical spending patterns for engineering services within the Department of the Navy, and how does this contract fit?

The Department of the Navy historically allocates substantial funds towards engineering services, reflecting the complexity and scale of its operations, which include shipbuilding, maintenance, research, and development of advanced naval platforms. Spending patterns often show a significant portion directed towards sustainment and modernization of existing fleets, as well as the development of new platforms like submarines and aircraft carriers. This $1.11 billion contract for engineering services, awarded to Electric Boat Corporation, fits within this pattern as a major component of submarine sustainment and potentially new platform development support. Its long duration and substantial value indicate a strategic, long-term commitment to maintaining and advancing the Navy's submarine capabilities, aligning with consistent historical investments in this critical area.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

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

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline