DoD's $1.65B Joint High Speed Vessel contract awarded to Austal USA, spanning nearly 9 years

Contract Overview

Contract Amount: $1,650,327,235 ($1.7B)

Contractor: Austal USA, LLC

Awarding Agency: Department of Defense

Start Date: 2008-01-31

End Date: 2019-09-28

Contract Duration: 4,258 days

Daily Burn Rate: $387.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PHASE I: PRELIMINARY CONCEPT DESIGN FOR THE JOINT HIGH SPEED VESSEL.

Place of Performance

Location: MOBILE, MOBILE County, ALABAMA, 36610

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $1.65 billion to AUSTAL USA, LLC for work described as: PHASE I: PRELIMINARY CONCEPT DESIGN FOR THE JOINT HIGH SPEED VESSEL. Key points: 1. Contract value represents a significant investment in naval shipbuilding capabilities. 2. The long duration suggests a complex, multi-phase project with substantial execution requirements. 3. Fixed-price contract type aims to control costs, but requires careful monitoring for scope creep. 4. The award to a single entity implies specialized capabilities or a highly competitive initial bid. 5. Performance period extends over multiple fiscal years, requiring sustained budget allocation. 6. The vessel type indicates a focus on rapid deployment and logistical support for naval operations.

Value Assessment

Rating: fair

The total contract value of $1.65 billion for the Joint High Speed Vessel program is substantial. Benchmarking this against similar naval shipbuilding contracts is challenging due to the unique nature of high-speed vessels. However, the firm fixed-price structure suggests an attempt to cap costs. Without detailed cost breakdowns or comparisons to industry standards for similar vessel construction, a precise value-for-money assessment is difficult. The long duration and multiple modifications could indicate potential cost overruns or scope changes that warrant scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The fact that it resulted in a definitive contract awarded to Austal USA, LLC suggests a competitive process that identified a capable provider. The number of bids received (5) is a positive sign for competition, but the subsequent award to a single entity for the full scope of work warrants further investigation into the specific evaluation criteria and the nature of the competition.

Taxpayer Impact: A full and open competition generally benefits taxpayers by fostering a competitive environment that can drive down prices and encourage innovation. The presence of multiple bidders suggests that the government sought the best value, potentially leading to more cost-effective outcomes for this significant shipbuilding effort.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives advanced high-speed vessels for operational use. The contract supports the delivery of critical naval assets for troop and equipment transport, and potentially medical evacuation. The geographic impact is concentrated in Alabama, where Austal USA's shipbuilding facilities are located, supporting local and regional economies. The contract has significant workforce implications, creating and sustaining jobs in the shipbuilding and maritime industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 9 years) increases the risk of cost escalation and scope creep.
Firm fixed-price contracts can lead to disputes if unforeseen technical challenges arise.
Reliance on a single prime contractor for a complex vessel program can create single-point-of-failure risks.
The specific capabilities of the Joint High Speed Vessel may be niche, limiting broader application or future marketability.

Positive Signals

Awarded under full and open competition, suggesting a robust initial selection process.
Firm fixed-price contract type provides cost certainty if managed effectively.
The contract supports a critical national defense capability, aligning with strategic objectives.
The long performance period allows for phased development and integration of complex systems.

Sector Analysis

The shipbuilding and repair industry is a critical component of the defense industrial base. This contract falls within the broader maritime sector, specifically focusing on specialized vessel construction. The U.S. Navy is a major customer for large-scale shipbuilding, with significant annual spending allocated to fleet modernization and new vessel acquisition. Comparable spending benchmarks would involve other major naval ship construction programs, such as destroyers, carriers, or submarines, though the high-speed nature of this vessel differentiates it.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). While Austal USA, LLC is a large prime contractor, there are likely subcontracting opportunities for small businesses within the shipbuilding supply chain. The extent of small business participation would depend on Austal's subcontracting plan and adherence to federal small business utilization goals. Without specific subcontracting data, it's difficult to assess the direct impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily 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 potential fraud, waste, or abuse. Transparency would be facilitated through contract award databases and potentially through public reporting on program milestones, though detailed cost and performance data may be considered sensitive.

Related Government Programs

Littoral Combat Ship (LCS) Program
Expeditionary Fast Transport (EPF) Program
Naval Shipbuilding and Conversion, Navy

Risk Flags

Long contract duration increases risk of cost escalation.
Potential for scope creep in long-term fixed-price contracts.
Reliance on a single prime contractor for complex vessel construction.
Need for robust oversight to ensure value for money over the contract's life.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.65 billion to AUSTAL USA, LLC. PHASE I: PRELIMINARY CONCEPT DESIGN FOR THE JOINT HIGH SPEED VESSEL.

Who is the contractor on this award?

The obligated recipient is AUSTAL USA, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $1.65 billion.

What is the period of performance?

Start: 2008-01-31. End: 2019-09-28.

What is the track record of Austal USA, LLC in delivering complex naval shipbuilding contracts?

Austal USA, LLC has a significant track record in naval shipbuilding, particularly with vessels like the Littoral Combat Ship (LCS) and the Expeditionary Fast Transport (EPF) for the U.S. Navy. They have demonstrated capabilities in constructing large, complex vessels within established timelines and budgets, though like many large defense contractors, they have also faced scrutiny and challenges on specific programs. Their experience with high-speed aluminum construction is a key factor in their selection for projects like the Joint High Speed Vessel. The company's performance on previous contracts, including any cost overruns, schedule delays, or quality issues, provides context for their ability to execute this current award. Analyzing their past performance metrics and any corrective actions taken can offer insights into their reliability as a contractor for this substantial shipbuilding effort.

How does the cost per unit of the Joint High Speed Vessel compare to similar naval assets?

Directly comparing the cost per unit of the Joint High Speed Vessel (JHSV) to other naval assets is complex due to differing mission requirements, technologies, and vessel types. The JHSV, designed for rapid transport, may have a different cost structure than combatants like destroyers or submarines. The total contract value of $1.65 billion for multiple vessels (implied by the program nature) needs to be divided by the number of units delivered to establish a per-unit cost. For context, the Expeditionary Fast Transport (EPF) program, which shares some similarities in speed and transport role, has had per-unit costs that have varied but are generally in the hundreds of millions of dollars. Without knowing the exact number of JHSVs procured under this contract, a precise comparison is difficult. However, the investment reflects the specialized capabilities and advanced design required for high-speed naval operations.

What are the primary risks associated with the long duration and firm fixed-price nature of this contract?

The primary risks associated with the long duration (nearly 9 years) and firm fixed-price (FFP) nature of this contract are multifaceted. For the government, the FFP structure, while intended to control costs, can become a risk if unforeseen technical challenges or design changes necessitate costly modifications that the contractor is not obligated to absorb. This could lead to contract disputes or requests for equitable adjustments. For the contractor, the long duration increases the risk of material cost fluctuations, labor market changes, and technological obsolescence, all of which could erode profit margins if not adequately managed. Furthermore, extended program timelines can lead to a loss of institutional knowledge or key personnel, impacting quality and efficiency. Effective program management, robust change control processes, and proactive risk mitigation strategies are crucial to navigating these challenges.

How effective has the competition level been in ensuring value for taxpayers on this contract?

The contract was awarded under full and open competition with five bids received, which is a positive indicator for taxpayer value. This level of competition suggests that the government explored multiple options and likely secured a competitive price at the outset. However, the long-term effectiveness of this competition in ensuring ongoing value is contingent on how well the contract is managed throughout its lifecycle. While the initial competition may have driven a favorable price, the firm fixed-price nature combined with a long duration means that vigilance is required to prevent scope creep and ensure that the final delivered product meets specifications without excessive cost growth through change orders. The ultimate value for taxpayers will depend on the successful delivery of the vessels on time, within budget, and to the required performance standards.

What are the historical spending patterns for the Joint High Speed Vessel program or similar naval shipbuilding efforts?

Historical spending patterns for the Joint High Speed Vessel (JHSV) program, now known as the Expeditionary Fast Transport (EPF) program, show significant investment over multiple fiscal years. The initial contract award in 2008 for the JHSV program was part of a broader initiative to modernize naval transport capabilities. Spending on shipbuilding, in general, is characterized by large, multi-year appropriations due to the high cost and long lead times of vessel construction. The Navy's shipbuilding budget typically allocates substantial funds to various classes of ships, including combatants, auxiliaries, and specialized vessels. Analyzing past appropriations for the JHSV/EPF program and comparing them to the overall Navy shipbuilding account can reveal trends in investment priorities and the program's relative significance within the larger naval acquisition landscape. Fluctuations in spending can be influenced by strategic shifts, budget constraints, and program execution progress.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002407R2219

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Austal Limited

Address: 1 DUNLAP DR, MOBILE, AL, 36610

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $1,673,373,984

Exercised Options: $1,667,054,577

Current Obligation: $1,650,327,235

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline