Navy awards $446M contract for cruiser modernization, with BAE Systems as prime

Contract Overview

Contract Amount: $446,410,972 ($446.4M)

Contractor: BAE Systems Maritime Solutions Norfolk Inc.

Awarding Agency: Department of Defense

Start Date: 2006-05-18

End Date: 2016-07-11

Contract Duration: 3,707 days

Daily Burn Rate: $120.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: 200608!445660!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4415 !A!N! !N! ! !20060518!20110817!003175072!824825459!217304393!N!BAE SYSTEMS NORFOLK SHIP REPAI!750 W BERKLEY AVE !NORFOLK !VA!23523!57000!710!51!NORFOLK !NORFOLK (CITY) !VIRGINIA !+000027947320!N!N!000030611843!1902!CRUISERS !A3 !SHIPS !000 !NOT DISCERNABLE !561990!A!A!3! ! ! ! ! !99990909!B! ! !A! !A!U!R!2!003!B! !A!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! !Y!1700!N00024!0001! !

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $446.4 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: 200608!445660!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4415 !A!N! !N! ! !20060518!20110817!003175072!824825459!217304393!N!BAE SYSTEMS NORFOLK SHIP REPAI!750 W BERKLEY AVE !NORFOLK !VA!23523!57000!710!51!NORFOLK !NORF… Key points: 1. Contract value of over $446 million indicates significant investment in naval capabilities. 2. BAE Systems, a major defense contractor, holds the prime position for this complex project. 3. The contract's duration of over 10 years suggests a long-term commitment to ship maintenance and upgrades. 4. Awarded under full and open competition, this contract implies a robust bidding process. 5. The focus on cruisers highlights a strategic allocation of resources to specific naval assets. 6. The use of a Cost Plus Award Fee (CPAF) contract type suggests performance incentives are tied to project outcomes.

Value Assessment

Rating: good

The total award amount of $446,410,971.95 for cruiser modernization appears substantial, reflecting the complexity and scope of naval ship repair and upgrades. Benchmarking this against similar large-scale naval modernization contracts would provide a clearer picture of its value for money. The Cost Plus Award Fee (CPAF) structure suggests that BAE Systems has incentives to perform efficiently and effectively, which can be a positive indicator for value, provided the award fees are tied to meaningful performance metrics. Without specific cost breakdowns or comparisons to industry standards for similar modernization efforts, a definitive value assessment is challenging, but the scale suggests a significant investment.

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 multiple bidders (implied by 'full and open') generally fosters a competitive environment, which can lead to more favorable pricing and better terms for the government. The specific number of bidders is not provided in the data, but the competition type suggests a deliberate effort to solicit a wide range of proposals.

Taxpayer Impact: A full and open competition process is beneficial for taxpayers as it increases the likelihood of obtaining the best value by encouraging competitive pricing and innovation from multiple contractors.

Public Impact

The U.S. Navy benefits from the modernization and sustainment of its cruiser fleet, ensuring operational readiness. Services delivered include ship repair, maintenance, and potential upgrades to critical naval assets. The geographic impact is centered around Norfolk, Virginia, a major naval hub, supporting regional economic activity. Workforce implications include employment opportunities for skilled labor in shipbuilding and repair within the Norfolk area.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Award Fee (CPAF) contracts if performance metrics are not tightly managed.
Long contract duration increases the risk of scope creep or evolving technological requirements not being fully addressed.
Reliance on a single prime contractor (BAE Systems) could limit flexibility if unforeseen issues arise.
The specific nature of 'cruiser modernization' can be complex, with potential for unforeseen technical challenges impacting schedule and cost.

Positive Signals

Awarded through full and open competition, suggesting a competitive process that should drive value.
The CPAF structure includes award fees, incentivizing contractor performance and potentially leading to better outcomes.
BAE Systems is a large, established defense contractor with significant experience in shipbuilding and repair, indicating a capable partner.
The contract's long duration allows for sustained focus on maintaining and upgrading a critical asset class.

Sector Analysis

The Ship Building and Repairing sector (NAICS 336611) is a critical component of the U.S. defense industrial base. This contract falls within the broader defense sector, specifically supporting naval fleet readiness. The market is characterized by large, specialized firms capable of handling complex, high-value projects. Spending in this area is often driven by defense budgets, modernization requirements, and the lifecycle of naval vessels. Comparable spending benchmarks would typically involve other major naval ship overhaul and modernization contracts, which often run into hundreds of millions of dollars due to the scale and technical demands.

Small Business Impact

The data indicates this contract was not specifically set aside for small businesses (ss: false, sb: false). As a large-scale defense contract awarded to a major prime contractor, BAE Systems, the primary impact on small businesses would likely be through subcontracting opportunities. The prime contractor is responsible for managing the supply chain and may engage small businesses for specialized services or components. However, the extent of small business participation is not detailed in this award data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. The Inspector General for the Department of Defense would also have jurisdiction to investigate fraud, waste, and abuse. Transparency is facilitated through contract award databases like FPDS, where basic information is publicly available. The CPAF structure implies performance monitoring and evaluation to determine award fees, adding another layer of oversight.

Related Government Programs

Naval Ship Maintenance and Repair Contracts
Defense Shipbuilding and Conversion Contracts
Cruiser Modernization Programs
Department of Defense Shipyard Services
Naval Sea Systems Command (NAVSEA) Contracts

Risk Flags

Contract Type Risk (CPAF)
Long Duration Project
Potential for Scope Creep
Reliance on Prime Contractor Expertise

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $446.4 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. 200608!445660!1700!N00024!NAVAL SEA SYSTEMS COMMAND !N0002406C4415 !A!N! !N! ! !20060518!20110817!003175072!824825459!217304393!N!BAE SYSTEMS NORFOLK SHIP REPAI!750 W BERKLEY AVE !NORFOLK !VA!23523!57000!710!51!NORFOLK !NORFOLK (CITY) !VIRGINIA !+000027947320!N!N!000030611843!1902!CRUISERS !A3 !SHIPS !000 !NOT DISCERNABLE !561990!A!A!3! ! ! ! ! !999

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 $446.4 million.

What is the period of performance?

Start: 2006-05-18. End: 2016-07-11.

What is the historical spending trend for cruiser modernization and repair by the Department of the Navy?

Analyzing historical spending on cruiser modernization and repair by the Department of the Navy reveals a consistent, albeit fluctuating, investment pattern driven by the aging fleet and evolving strategic requirements. Prior to this $446 million award in 2006, the Navy likely engaged in similar, though potentially smaller or less comprehensive, modernization efforts for its cruiser class vessels. These efforts are typically multi-year endeavors, often awarded through competitive processes, and their total annual expenditure can vary based on the number of ships undergoing major overhauls and the specific technological upgrades being implemented. Factors such as budget allocations, geopolitical priorities, and the lifecycle of the naval platforms directly influence the scale and frequency of these investments. Examining spending data from preceding years would likely show a baseline level of maintenance and repair, punctuated by larger modernization contracts as specific ship classes reach key points in their service life requiring significant upgrades.

How does the performance of BAE Systems on similar naval contracts compare to industry benchmarks?

Assessing BAE Systems' performance on similar naval contracts requires a detailed review of their past project execution, including on-time delivery, budget adherence, and quality of work. As a major defense contractor, BAE Systems has a substantial portfolio of work with the Navy, including shipbuilding, repair, and modernization. Industry benchmarks for such contracts often focus on metrics like contract cost variances (actual cost vs. target cost), schedule slippage, and the number of contract modifications or claims. While specific performance data for BAE Systems on comparable cruiser contracts isn't provided here, their continued success in winning large, competitive contracts suggests a generally positive track record. However, like any large contractor, there may be instances of challenges or cost overruns on specific projects. A comprehensive comparison would involve analyzing publicly available contract performance reports, CPARS (Contractor Performance Assessment Reporting System) data if accessible, and comparing their success rates and financial outcomes against other major shipbuilders and repair firms operating in the naval sector.

What are the key risks associated with a Cost Plus Award Fee (CPAF) contract for ship modernization?

Cost Plus Award Fee (CPAF) contracts, like the one awarded to BAE Systems for cruiser modernization, present specific risks primarily related to cost control and defining objective performance metrics. A key risk is the potential for cost overruns, as the contractor is reimbursed for allowable costs plus a fee that includes a base fee and an award fee contingent on meeting performance targets. If these targets are poorly defined, too easily achievable, or if the government's oversight of costs is insufficient, the contractor may incur higher costs than anticipated while still earning a significant award fee. This can lead to a less favorable value for the government compared to fixed-price contracts. Another risk lies in the subjective nature of 'award' fees; disagreements can arise over whether performance targets were met, potentially leading to disputes. Ensuring robust government oversight, clear and measurable performance criteria, and diligent cost auditing are crucial to mitigating these risks in a CPAF arrangement.

What is the strategic importance of modernizing cruisers for the U.S. Navy?

Modernizing cruisers is strategically vital for the U.S. Navy as these platforms often serve as command and control centers, air defense assets, and multi-mission platforms within carrier strike groups and expeditionary strike groups. Cruisers are equipped with advanced radar, sonar, and weapons systems, making them critical for maintaining maritime superiority and projecting power. Modernization efforts aim to upgrade aging systems, incorporate new technologies (such as improved combat systems, C4ISR capabilities, and potentially new weapon systems), enhance survivability, and extend the operational lifespan of these valuable assets. Failure to modernize would result in a degraded capability, increased maintenance costs for older systems, and a reduced ability to counter emerging threats, thereby impacting the Navy's overall combat effectiveness and its capacity to fulfill its global mission requirements.

How does the geographic location of Norfolk, VA, influence the execution of this contract?

The geographic location of Norfolk, Virginia, significantly influences the execution of this cruiser modernization contract due to its status as a major U.S. Navy hub and the presence of extensive shipyard infrastructure. Norfolk Naval Station is one of the world's largest naval installations, hosting a substantial portion of the Atlantic Fleet, including numerous cruisers. This proximity allows for efficient transfer of ships to and from the shipyard, minimizing transit time and associated costs. Furthermore, the region boasts a highly skilled workforce experienced in naval maintenance, repair, and overhaul, supported by a robust ecosystem of defense contractors and suppliers. The concentration of naval assets and related industry in Norfolk provides BAE Systems with access to necessary facilities, specialized labor, and logistical support, which are critical for the successful and timely execution of a large-scale contract like this cruiser modernization project.

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: 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, 23523

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline