DoD's $317.7M ship maintenance contract awarded to BAE Systems Maritime Solutions shows fair value with 2 bidders

Contract Overview

Contract Amount: $317,710,977 ($317.7M)

Contractor: BAE Systems Maritime Solutions SAN Diego Inc.

Awarding Agency: Department of Defense

Start Date: 2007-03-21

End Date: 2011-09-30

Contract Duration: 1,654 days

Daily Burn Rate: $192.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: EXECUTION PLANNING AND SHIP MAINTENANCE, REPAIR AND ALTERATION.

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92170

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $317.7 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC. for work described as: EXECUTION PLANNING AND SHIP MAINTENANCE, REPAIR AND ALTERATION. Key points: 1. The contract's value appears reasonable given the scope of execution planning and ship maintenance, repair, and alteration services. 2. Competition was robust with two bidders, suggesting a healthy market for these specialized maritime services. 3. The cost-plus award fee structure allows for flexibility while incentivizing performance. 4. This contract falls within the broader shipbuilding and repairing sector, a critical component of national defense. 5. The duration of the contract (over 4 years) indicates a significant, long-term need for these services. 6. The award amount of $317.7 million represents a substantial investment in maintaining naval readiness.

Value Assessment

Rating: good

The contract's total value of $317.7 million over its period of performance suggests a significant investment in ship maintenance. While direct comparisons are difficult without more granular data on the specific services rendered, the presence of two bidders indicates a competitive environment that likely contributed to a fair price. The cost-plus award fee structure, common in complex defense contracts, allows for adjustments based on performance, aiming for value delivery.

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 fact that two bids were received suggests a reasonable level of competition for these specialized ship maintenance services. While more bidders could potentially drive prices lower, two offers generally provide a basis for price negotiation and evaluation.

Taxpayer Impact: The full and open competition with two bidders suggests that taxpayer funds were likely used efficiently, as the Navy had options and could negotiate terms. This level of competition helps prevent excessive pricing and ensures a reasonable value for the services provided.

Public Impact

Naval readiness and operational capability are directly enhanced through the maintenance and repair of critical vessels. The contract supports the U.S. Navy's fleet maintenance requirements, ensuring ships are seaworthy and mission-ready. The primary beneficiaries are the U.S. Navy and, by extension, national security. The contract has implications for the maritime industrial base in San Diego, California, supporting skilled labor and infrastructure.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The cost-plus award fee structure can sometimes lead to cost overruns if not managed diligently.
Long-term contracts for maintenance can be subject to scope creep if not clearly defined.
Reliance on a single contractor for such a critical function carries inherent risks if performance falters.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
The contractor, BAE Systems Maritime Solutions, is a significant player in the defense maritime sector, suggesting experience and capability.
The contract's duration implies a stable, long-term need that the contractor is positioned to meet.

Sector Analysis

The shipbuilding and repairing sector (NAICS 336611) is a vital part of the U.S. industrial base, particularly for national defense. This contract for ship maintenance, repair, and alteration fits squarely within this sector. Spending in this area is driven by the need to maintain a modern and operational naval fleet. Comparable spending benchmarks would typically involve other large-scale maintenance contracts for naval vessels, which can run into hundreds of millions of dollars depending on the complexity and scope of work.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. As a large prime contract awarded to a major defense contractor, the primary impact on the small business ecosystem would likely be indirect, through potential subcontracting opportunities that BAE Systems might offer to smaller specialized firms within the maritime repair and services industry.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Cost Plus Award Fee (CPAF) structure, which links a portion of the contractor's profit to performance metrics. Transparency is generally maintained through contract award databases and reporting requirements, though specific performance details may be sensitive. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations into potential fraud, waste, or abuse.

Related Government Programs

Naval Ship Maintenance Contracts
Shipbuilding and Repairing Services
Defense Readiness Contracts
Fleet Modernization Programs
Maritime Logistics Support

Risk Flags

Potential for cost overruns in CPAF contracts.
Long-term nature of the contract may lead to scope creep.
Dependence on a single contractor for critical maintenance.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $317.7 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC.. EXECUTION PLANNING AND SHIP MAINTENANCE, REPAIR AND ALTERATION.

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 $317.7 million.

What is the period of performance?

Start: 2007-03-21. End: 2011-09-30.

What is the historical spending trend for ship maintenance and repair by the Department of the Navy?

Historical spending by the Department of the Navy on ship maintenance and repair has been substantial and generally consistent, reflecting the ongoing need to maintain a large and aging fleet. Annual expenditures often run into the tens of billions of dollars across various contract types and service providers. Factors influencing these trends include the number of ships in the fleet, their age, operational tempo, and the availability of dry-dock facilities and skilled labor. Major maintenance availabilities (planned overhauls and repairs) represent significant portions of this spending. While specific year-over-year figures fluctuate based on budget allocations and fleet readiness requirements, the overall trend underscores a continuous and significant investment in preserving naval assets.

How does the performance of BAE Systems Maritime Solutions on similar contracts compare?

Assessing the specific performance of BAE Systems Maritime Solutions on similar contracts requires access to detailed performance evaluations and past performance reviews, which are often not publicly available. However, as a major defense contractor with extensive experience in shipbuilding and repair, BAE Systems is generally considered a capable provider of these services. Their track record typically involves large, complex projects for naval fleets. Publicly available contract databases show numerous awards to BAE Systems for ship maintenance, repair, and overhaul across different naval platforms. While specific metrics like on-time delivery, cost control, and quality adherence would need to be examined on a contract-by-contract basis, their continued success in winning significant contracts suggests a generally positive performance history in meeting the demanding requirements of the Department of the Navy.

What are the key performance indicators (KPIs) typically used in Cost Plus Award Fee (CPAF) contracts for ship maintenance?

Key Performance Indicators (KPIs) in CPAF contracts for ship maintenance are designed to measure the contractor's success in delivering services while managing costs and adhering to quality standards. Common KPIs include on-time completion of milestones and overall project delivery, adherence to budget targets (especially for cost control aspects), quality of workmanship (e.g., defect rates, rework required), safety performance (e.g., incident rates), and responsiveness to emergent issues or changes in scope. For award fees, the government typically evaluates the contractor's performance against these KPIs, assigning ratings that determine the 'award' portion of the fee. The specific KPIs are tailored to the contract's scope, such as the complexity of the repairs, the type of vessel, and the criticality of the maintenance schedule.

What is the typical profit margin for defense contractors on large ship maintenance contracts?

Profit margins for defense contractors on large ship maintenance contracts can vary significantly based on contract type, competition level, and the specific services rendered. For Cost Plus Award Fee (CPAF) contracts like this one, the base fee is typically lower than for fixed-price contracts, often in the range of 7-10% of estimated costs. The 'award fee' component allows for additional profit, potentially bringing the total fee higher, but this is contingent on meeting or exceeding performance targets. In highly competitive environments or for less complex services, profit margins might be tighter. Conversely, contracts involving highly specialized work, significant risk, or limited competition might allow for higher potential profit. Overall, while precise figures are proprietary, margins on large defense service contracts are generally considered reasonable within the industry, balancing risk and reward.

How does the geographic location of the contractor (San Diego, CA) impact the cost and efficiency of this contract?

The geographic location of BAE Systems Maritime Solutions in San Diego, California, is strategically significant for this contract. San Diego is a major homeport for the U.S. Navy's Pacific Fleet, meaning a substantial number of vessels requiring maintenance and repair are based there. Locating the contractor in close proximity to these assets can reduce costs associated with transporting ships or components, minimize transit time, and allow for more efficient scheduling of maintenance availabilities. This proximity also facilitates easier communication and collaboration between the Navy and the contractor. However, operating in a high-cost-of-living area like San Diego can also lead to higher labor costs compared to regions with lower overhead, which is a factor considered in the overall contract pricing.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002406R4401

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC

Address: 2205 E BELT ST, SAN DIEGO, CA, 92113

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $330,315,291

Exercised Options: $329,314,215

Current Obligation: $317,710,977

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline