Naval Sea Systems Command awards $413M contract for non-nuclear ship repair to BAE Systems

Contract Overview

Contract Amount: $412,978,438 ($413.0M)

Contractor: BAE Systems Maritime Solutions SAN Diego Inc.

Awarding Agency: Department of Defense

Start Date: 2005-03-24

End Date: 2010-05-13

Contract Duration: 1,876 days

Daily Burn Rate: $220.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200506!179106!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C4409 !A!N! !N! ! !20050324!20100930!080911274!824825459!217304393!N!BAE SYSTEMS SAN DIEGO SHIP REP!FOOT OF SAMPSON ST !SAN DIEGO !CA!92170!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000027495!N!N!000044294130!J999!NON-NUCLEAR SHIP REPAIR (WEST) !A3 !SHIPS !000 !* !336611!E! !3! ! ! ! ! !20200930!B! ! !A! !A!U!R!2!002!B! !Z!N!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!B!Y! !N! !Y!1700!N00024!0001! !

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $413.0 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC. for work described as: 200506!179106!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C4409 !A!N! !N! ! !20050324!20100930!080911274!824825459!217304393!N!BAE SYSTEMS SAN DIEGO SHIP REP!FOOT OF SAMPSON ST !SAN DIEGO !CA!92170!66000!073!06!SAN DIEGO !SAN … Key points: 1. Contract awarded through full and open competition, indicating a competitive bidding process. 2. The contract value of $413 million represents a significant investment in naval infrastructure. 3. BAE Systems, a major defense contractor, secured this award, highlighting its role in ship maintenance. 4. The contract duration of approximately 5 years suggests a long-term need for these services. 5. The geographic focus on the West Coast (California) points to regional naval operational needs. 6. The contract type (Cost Plus Award Fee) incentivizes performance while managing costs.

Value Assessment

Rating: good

The contract value of $413 million for non-nuclear ship repair over roughly five years appears reasonable given the scope of services typically required for naval vessels. Benchmarking against similar contracts for large-scale ship maintenance and repair would provide a more precise value-for-money assessment. The Cost Plus Award Fee (CPAF) structure allows for flexibility and incentivizes contractor performance, which can be beneficial for complex projects, but also requires robust oversight to ensure costs remain controlled and value is maximized.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple capable bidders had the opportunity to submit proposals. The presence of two bids indicates a degree of competition, which is generally favorable for price discovery and ensuring the government receives competitive pricing. The specific number of bidders (two) is on the lower side for full and open competition, which could warrant further investigation into potential barriers to entry or market concentration.

Taxpayer Impact: Full and open competition, even with a limited number of bidders, generally benefits taxpayers by fostering a more competitive environment that can lead to better pricing and service quality compared to sole-source or limited competition scenarios.

Public Impact

The primary beneficiaries are the U.S. Navy's Pacific Fleet, ensuring operational readiness through essential ship repair and maintenance. Services delivered include comprehensive repair and maintenance for non-nuclear naval vessels, crucial for maintaining fleet capabilities. The geographic impact is concentrated on the West Coast, specifically supporting naval operations and infrastructure in California. Workforce implications include job creation and sustainment within the shipbuilding and repair sector in the San Diego area, supporting skilled labor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Award Fee contracts if not rigorously managed.
Limited number of bidders (two) in a full and open competition could indicate market consolidation or high barriers to entry.
Dependence on a single contractor for critical ship repair services in a specific region could pose supply chain risks.

Positive Signals

Awarded through full and open competition, promoting a fair and transparent process.
Cost Plus Award Fee structure incentivizes contractor performance and efficiency.
BAE Systems is a large, established defense contractor with significant experience in naval shipbuilding and repair.
Contract duration suggests a stable, long-term need being met, providing predictability for both the Navy and the contractor.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base, supporting naval readiness and national security. This contract falls within the broader 'Ship Building and Repairing' industry, which is characterized by large, complex projects requiring specialized facilities and skilled labor. Spending in this sector is often driven by fleet modernization, maintenance schedules, and geopolitical demands. Comparable spending benchmarks would involve analyzing other major naval repair contracts awarded by the Department of Defense, particularly those for similar vessel types and service scopes.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as indicated by the 'N' for small business status. However, large defense contracts often have subcontracting requirements. It is possible that BAE Systems will engage small businesses for specialized services or supplies as part of its subcontracting plan, contributing to the small business ecosystem. Further analysis of the subcontracting plan would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Naval Sea Systems Command (NAVSEA) and potentially the Department of Defense's Inspector General. The Cost Plus Award Fee structure necessitates close monitoring of costs, performance metrics, and adherence to contract terms to ensure accountability and prevent waste. Transparency is facilitated through contract award databases and reporting requirements, though detailed performance data may be sensitive.

Related Government Programs

Naval Ship Maintenance Contracts
Defense Industrial Base Support
Ship Building and Repair Services
Department of the Navy Procurement

Risk Flags

Cost Overrun Risk
Performance Measurement Challenges
Market Concentration in Defense Contracting
Potential for Scope Creep

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $413.0 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC.. 200506!179106!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002405C4409 !A!N! !N! ! !20050324!20100930!080911274!824825459!217304393!N!BAE SYSTEMS SAN DIEGO SHIP REP!FOOT OF SAMPSON ST !SAN DIEGO !CA!92170!66000!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000027495!N!N!000044294130!J999!NON-NUCLEAR SHIP REPAIR (WEST) !A3 !SHIPS !000 !* !336611!E! !3! ! ! ! ! !202

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO 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 $413.0 million.

What is the period of performance?

Start: 2005-03-24. End: 2010-05-13.

What is BAE Systems' track record with similar naval repair contracts?

BAE Systems has a substantial track record in naval shipbuilding and repair, having been involved in numerous contracts with the U.S. Navy and other maritime forces. They are a major player in the defense sector, known for undertaking large, complex projects. Their experience spans new construction, modernization, and extensive repair work on a variety of naval vessels, including aircraft carriers, destroyers, and submarines. Analyzing their past performance on Cost Plus Award Fee contracts specifically would provide insight into their ability to manage costs and meet performance targets effectively. Historical data on contract modifications, cost variances, and award fee scores for BAE Systems on similar naval contracts would be crucial for a comprehensive assessment of their reliability and efficiency in this domain.

How does the $413 million contract value compare to industry benchmarks for non-nuclear ship repair?

The $413 million contract value for non-nuclear ship repair over approximately five years is substantial and aligns with the scale of major maintenance and overhaul projects for naval fleets. Benchmarking requires comparing this figure against similar contracts awarded by the Department of Defense or other navies for comparable vessel types (e.g., destroyers, cruisers, amphibious assault ships) and service scopes (e.g., routine maintenance, major overhauls, modernization). Factors such as the specific class of ships, the complexity of repairs, labor rates in the San Diego region, and the duration of the contract all influence the overall cost. Without access to a detailed breakdown of the work required and specific cost drivers, a precise comparison is difficult, but the amount suggests a significant undertaking critical to fleet readiness.

What are the primary risks associated with this Cost Plus Award Fee (CPAF) contract?

The primary risks associated with this Cost Plus Award Fee (CPAF) contract revolve around cost control and contractor performance management. CPAF contracts reimburse the contractor for allowable costs plus a fixed fee, with the potential for an award fee based on performance against specific criteria. The risk for the government is that costs could escalate beyond initial projections if not managed diligently, and the award fee might be paid even if performance is only marginally satisfactory. Effective oversight is crucial to ensure that the contractor is incentivized to control costs while meeting or exceeding performance expectations. Potential risks also include contractor inefficiencies, scope creep, and challenges in accurately measuring and evaluating performance metrics, which could lead to suboptimal value for the taxpayer.

How effective is the 'full and open competition' approach for this type of specialized naval service?

The 'full and open competition' approach is generally considered the most effective method for ensuring fair pricing and maximizing value for specialized naval services, provided there is sufficient market capacity. For non-nuclear ship repair, this approach allows multiple qualified contractors to bid, fostering competition that can drive down costs and encourage innovation. However, the effectiveness is contingent on the number of capable bidders and the clarity of the solicitation requirements. If the market is concentrated or barriers to entry are high, even full and open competition might result in limited bids. In such cases, the government must ensure robust evaluation criteria and negotiation strategies to secure the best possible outcome for taxpayers.

What are the historical spending patterns for non-nuclear ship repair on the West Coast?

Historical spending patterns for non-nuclear ship repair on the West Coast, particularly in regions like San Diego, typically show consistent demand driven by the presence of major naval bases and fleets. Spending levels fluctuate based on fleet maintenance schedules, ship modernization programs, and budget allocations. Major contracts, like this one awarded to BAE Systems, represent significant portions of annual spending. Analyzing historical data from NAVSEA and other defense agencies would reveal trends in contract values, durations, and the distribution of work among prime contractors and their subcontractors. Understanding these patterns helps in assessing whether current spending is in line with historical norms or represents a significant deviation, potentially indicating changes in operational tempo, fleet size, or maintenance strategies.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: FOOT OF SAMPSON ST, 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: NO

Timeline