DoD's $81M Ship Repair Contract with BAE Systems Faces Scrutiny Over Cost-Plus Structure
Contract Overview
Contract Amount: $81,140,871 ($81.1M)
Contractor: BAE Systems Maritime Solutions Norfolk Inc.
Awarding Agency: Department of Defense
Start Date: 2005-08-30
End Date: 2011-03-31
Contract Duration: 2,039 days
Daily Burn Rate: $39.8K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 3
Pricing Type: COST PLUS AWARD FEE
Sector: Defense
Place of Performance
Location: NORFOLK, NORFOLK (CITY) County, VIRGINIA, 23523
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $81.1 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: Key points: 1. The contract awarded to BAE Systems Maritime Solutions represents a significant investment in naval shipbuilding and repair. 2. Competition details are limited, but the 'Full and Open Competition' tag suggests an initial effort to solicit broad interest. 3. The Cost Plus Award Fee (CPA) structure introduces inherent risks related to cost control and potential overruns. 4. The sector is critical for national defense, but also known for complex and high-value contracts.
Value Assessment
Rating: questionable
The Cost Plus Award Fee (CPA) structure can incentivize contractors to increase costs to achieve higher fees, potentially leading to prices above fair market value. Benchmarking is difficult without detailed cost breakdowns, but the duration and value suggest a need for rigorous oversight.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
While initially competed openly, the long duration and cost-plus nature of the contract raise questions about sustained price discovery and competitive pressure throughout its life cycle. The award fee component adds complexity to assessing true cost-effectiveness.
Taxpayer Impact: Taxpayer funds are at risk due to the potential for cost overruns inherent in CPA contracts, especially over a long period. Effective oversight is crucial to mitigate this risk.
Public Impact
Ensures continued operational readiness of naval vessels through essential repair and maintenance services. Supports a major defense contractor, contributing to jobs and economic activity within the defense industrial base. Highlights the government's reliance on specialized private sector capabilities for complex maritime needs. Raises questions about long-term cost management in large-scale, multi-year defense contracts.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost-Plus Award Fee structure
- Long contract duration (2005-2011)
- Lack of detailed cost transparency
- Potential for scope creep
Positive Signals
- Initial full and open competition
- Award fee incentivizes performance
- Supports critical naval readiness
Sector Analysis
This contract falls within the Ship Building and Repairing sector, a critical component of the defense industrial base. Spending in this area is often characterized by high dollar values, long lead times, and specialized technical requirements, making robust oversight essential.
Small Business Impact
The data indicates this contract was not awarded to small businesses. Large defense contracts often involve prime contractors who may subcontract, but direct award data does not reflect small business participation.
Oversight & Accountability
The contract's long duration and cost-plus structure necessitate strong government oversight to ensure cost control, prevent fraud, and verify performance against award fee criteria. Regular audits and performance reviews are critical.
Related Government Programs
- Ship Building and Repairing
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Cost overruns due to CPA structure
- Potential for contractor inefficiency
- Difficulty in benchmarking fair price
- Long-term cost uncertainty
- Limited transparency on award fee justification
Tags
ship-building-and-repairing, department-of-defense, va, dca, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $81.1 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. See the official description on USAspending.
Who is the contractor on this award?
The obligated recipient is BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC..
Which agency awarded this contract?
Awarding agency: Department of Defense (Department of the Navy).
What is the total obligated amount?
The obligated amount is $81.1 million.
What is the period of performance?
Start: 2005-08-30. End: 2011-03-31.
What was the final award fee paid and how did it correlate with the contractor's performance and cost management?
Determining the final award fee paid requires access to contract performance reports and the government's assessment of BAE Systems' adherence to cost targets and delivery schedules. Without this specific data, it's difficult to ascertain if the award fee effectively incentivized efficiency or simply rewarded meeting baseline requirements, potentially inflating the overall cost to taxpayers.
How did the actual costs compare to the initial estimates under the Cost Plus Award Fee structure?
The Cost Plus Award Fee (CPA) structure inherently allows for costs to exceed initial estimates, with the 'award' component tied to performance metrics. A detailed analysis would compare the final incurred costs against the baseline estimate and assess how the award fee influenced the contractor's decisions regarding cost control versus performance maximization.
What mechanisms were in place to ensure the 'Full and Open Competition' remained effective throughout the contract's lifecycle?
While initially competed openly, the effectiveness of competition over a long-duration CPA contract depends on ongoing oversight. Mechanisms like regular performance reviews, potential for re-competition of specific task orders if feasible, and strict change order management are crucial to prevent vendor lock-in and ensure continued value for money.
Industry Classification
NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing
Product/Service Code: TECHNICAL REPRESENTATIVE SVCS. › TECHNICAL REPRESENTATIVE SERVICES
Competition & Pricing
Extent Competed: FULL AND OPEN COMPETITION
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 3
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: BAE Systems PLC (UEI: 217304393)
Address: 750 W BERKLEY AVE, NORFOLK, VA, 03
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Contract Characteristics
Cost or Pricing Data: NO
Timeline
Start Date: 2005-08-30
Current End Date: 2011-03-31
Potential End Date: 2011-03-31 00:00:00
Last Modified: 2011-02-09
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