Naval Sea Systems Command awards $400.6M for non-nuclear ship repair, with National Steel & Shipbuilding Company as prime

Contract Overview

Contract Amount: $400,607,587 ($400.6M)

Contractor: National Steel and Shipbuilding Company

Awarding Agency: Department of Defense

Start Date: 2005-12-05

End Date: 2016-08-09

Contract Duration: 3,900 days

Daily Burn Rate: $102.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200603!155059!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4402 !A!N! !N! ! !20051205!20121205!009158932!009158932!001381284!N!NATIONAL STEEL & SHIPBUILDING !2798 HARBOR DR !SAN DIEGO !CA!92113!99073!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000099358!N!N!000000099358!J999!NON-NUCLEAR SHIP REPAIR (WEST) !A3 !SHIPS !000 !NOT DISCERNABLE !336611!A!A!3! ! ! ! ! !99990909!B! ! !A! !A!U!R!2!002!B! !A!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, 92186

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $400.6 million to NATIONAL STEEL AND SHIPBUILDING COMPANY for work described as: 200603!155059!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4402 !A!N! !N! ! !20051205!20121205!009158932!009158932!001381284!N!NATIONAL STEEL & SHIPBUILDING !2798 HARBOR DR !SAN DIEGO !CA!92113!99073!073!06!SAN DIEGO !SAN … 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 performance but can lead to cost overruns. 3. The duration of the contract is substantial, spanning over 10 years, indicating a long-term need for services. 4. The prime contractor, National Steel & Shipbuilding Company, has a significant presence in the shipbuilding and repair sector. 5. The North American Industry Classification System (NAICS) code 336611 points to a specialized industry segment. 6. The contract value of $400.6 million represents a considerable investment in naval readiness and maintenance.

Value Assessment

Rating: fair

The contract value of $400.6 million for ship repair over a decade appears substantial. Benchmarking against similar long-term, complex naval repair contracts is necessary for a precise value-for-money assessment. The Cost Plus Award Fee structure introduces variability in the final cost, making direct price comparisons challenging without detailed performance data and award fee payouts. However, the duration and scope suggest a significant commitment of resources.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely solicited and considered. The presence of two bids suggests a degree of competition, but the exact number of proposals received and the evaluation process details are not provided. A competitive process is generally expected to yield better pricing and terms for the government.

Taxpayer Impact: Full and open competition is favorable for taxpayers as it typically drives down costs through market forces, ensuring the government receives competitive pricing for essential services.

Public Impact

The primary beneficiaries are the U.S. Navy, ensuring the operational readiness of its fleet through essential ship repair and maintenance. Services delivered include non-nuclear ship repair, crucial for maintaining the seaworthiness and functionality of naval vessels. The geographic impact is centered around San Diego, California, a major naval hub, supporting local industry and employment. Workforce implications include job creation and sustainment for skilled labor in the shipbuilding and repair sector within the San Diego region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can lead to higher final costs if award criteria are not tightly managed.
The long contract duration (over 10 years) may limit flexibility to adopt newer technologies or repair methods if they emerge.
Reliance on a single prime contractor for such a long period could pose risks if their performance or financial stability declines.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process.
The prime contractor, National Steel & Shipbuilding Company, is an established entity in the maritime industry.
The contract addresses a critical need for naval ship maintenance, directly supporting national defense objectives.

Sector Analysis

This contract falls within the broader shipbuilding and repair industry, a critical component of the defense industrial base. The NAICS code 336611 specifically covers establishments primarily engaged in building and repairing ships and boats. The market is characterized by high barriers to entry, specialized labor, and significant capital investment. Federal spending in this sector is heavily influenced by defense appropriations and naval modernization programs. Comparable spending benchmarks would involve analyzing other large-scale naval vessel maintenance and repair contracts awarded by the Department of Defense.

Small Business Impact

There is no explicit indication of small business set-asides for this prime contract. However, as a large-scale defense contract, there are likely subcontracting opportunities for small businesses within the shipbuilding and repair ecosystem. The prime contractor's adherence to small business subcontracting goals would be a key factor in assessing the impact on the small business sector.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Naval Sea Systems Command (NAVSEA). Accountability measures are embedded within the Cost Plus Award Fee structure, which ties a portion of the payment to performance outcomes. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance metrics and award fee details may be considered sensitive. The Inspector General for the Department of Defense would have jurisdiction over potential fraud, waste, or abuse.

Related Government Programs

Naval Ship Repair Contracts
Defense Shipbuilding and Repair
Fleet Maintenance Programs
Department of Defense Shipyard Services

Risk Flags

Long contract duration may lead to cost escalations or technological obsolescence.
Cost Plus Award Fee structure requires careful monitoring to ensure value for money.
Potential for contractor performance degradation over the extended contract period.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $400.6 million to NATIONAL STEEL AND SHIPBUILDING COMPANY. 200603!155059!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4402 !A!N! !N! ! !20051205!20121205!009158932!009158932!001381284!N!NATIONAL STEEL & SHIPBUILDING !2798 HARBOR DR !SAN DIEGO !CA!92113!99073!073!06!SAN DIEGO !SAN DIEGO !CALIFORNIA!+000000099358!N!N!000000099358!J999!NON-NUCLEAR SHIP REPAIR (WEST) !A3 !SHIPS !000 !NOT DISCERNABLE !336611!A!A!3! ! ! ! ! !999

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 $400.6 million.

What is the period of performance?

Start: 2005-12-05. End: 2016-08-09.

What is the historical spending pattern for non-nuclear ship repair services by the Naval Sea Systems Command?

Historical spending data for non-nuclear ship repair by NAVSEA reveals a consistent and significant investment in maintaining the U.S. Navy's fleet. Over the past decade, annual obligations for ship repair and maintenance have fluctuated, influenced by fleet size, operational tempo, and budget allocations. For instance, in fiscal years prior to this contract's award, NAVSEA consistently obligated hundreds of millions, and sometimes billions, of dollars towards ship maintenance. This specific $400.6 million contract represents a substantial, long-term commitment within that broader spending context. Analyzing trends shows a strategic focus on extending the service life of vessels and ensuring operational readiness, with spending often concentrated in key naval hubs like San Diego, Norfolk, and Puget Sound. The nature of these contracts, often long-term and complex, means that individual awards can represent a significant portion of annual spending for specific repair capabilities.

How does the Cost Plus Award Fee (CPAF) structure impact the final cost and contractor performance for this contract?

The Cost Plus Award Fee (CPAF) structure for this contract means the contractor is reimbursed for allowable costs plus a fixed fee, with the potential for an additional award fee based on performance against defined criteria. This structure incentivizes the contractor, National Steel & Shipbuilding Company, to exceed minimum performance standards, potentially leading to higher quality work and efficiency. However, it also introduces uncertainty regarding the final cost, as the award fee component can increase the total payment. For taxpayers, this means the government aims for better outcomes but must carefully define and monitor award criteria to ensure the additional cost is justified by superior performance. Effective oversight is crucial to prevent inflated costs or manipulation of performance metrics to maximize award fees without commensurate value.

What is the track record of National Steel & Shipbuilding Company with similar large-scale naval repair contracts?

National Steel & Shipbuilding Company (NASSCO) has a long and established track record in the shipbuilding and repair industry, including significant work with the U.S. Navy. They have been involved in constructing and repairing various naval vessels, including auxiliary ships and tankers, as well as performing major overhauls and conversions. Their experience with large, complex projects suggests a capability to handle the scope and technical demands of this $400.6 million contract. Past performance evaluations, available through government contracting databases, would provide specific insights into their on-time delivery, cost control, and quality of work on previous naval contracts. Generally, companies undertaking such large contracts have demonstrated a capacity for managing complex logistics, skilled labor, and stringent quality control required by the Navy.

What are the potential risks associated with a contract of this duration (over 10 years)?

Contracts spanning over a decade carry several inherent risks. Firstly, there's the risk of technological obsolescence; repair methods or required upgrades might evolve significantly during the contract period, potentially making the contracted services less efficient or outdated. Secondly, economic volatility could impact the long-term cost estimates, especially with a Cost Plus structure. Inflation, material cost fluctuations, and changes in labor rates can affect the final expenditure. Thirdly, contractor performance stability is a concern; a company's financial health, management, or workforce capabilities could change over such a long period, potentially impacting service delivery. Lastly, changes in strategic defense priorities or budget constraints within the government could lead to contract modifications, scope reductions, or even early termination, although the latter is less common for essential services like ship repair.

How does the geographic concentration in San Diego, California, impact the contract's execution and local economy?

The concentration of this contract's execution in San Diego, California, leverages the significant naval infrastructure and skilled workforce available in that region. San Diego is a major homeport for the U.S. Pacific Fleet, meaning a high density of vessels requiring maintenance and repair services. This geographic focus allows for potentially faster response times and reduced logistical complexities compared to servicing ships at distant locations. For the local economy, this contract represents a substantial injection of capital, supporting jobs directly at National Steel & Shipbuilding Company and indirectly through its supply chain. It reinforces San Diego's position as a critical hub for naval operations and maritime services, contributing to regional economic stability and expertise in shipbuilding and repair.

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: General Dynamics Corp (UEI: 001381284)

Address: 2798 HARBOR DR, SAN DIEGO, CA, 92113

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline