Navy awards $491M contract for submarine design and engineering support to Electric Boat Corporation

Contract Overview

Contract Amount: $491,477,684 ($491.5M)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2008-10-01

End Date: 2011-03-31

Contract Duration: 911 days

Daily Burn Rate: $539.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: DESIGN, ENGINEERING AND TECHNICAL SUPPORT FOR ACTIVE NUCLEAR SUBMARINES.

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $491.5 million to ELECTRIC BOAT CORPORATION for work described as: DESIGN, ENGINEERING AND TECHNICAL SUPPORT FOR ACTIVE NUCLEAR SUBMARINES. Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Significant funding allocated for specialized technical support for active nuclear submarines. 3. Long-term contract duration suggests a sustained need for these services. 4. Focus on design and engineering indicates a critical role in maintaining naval capabilities. 5. Potential for cost overruns given the 'Cost Plus Fixed Fee' contract type. 6. Geographic concentration of award in Connecticut may have local economic implications.

Value Assessment

Rating: fair

The contract value of $491.5 million for design, engineering, and technical support for active nuclear submarines is substantial. Benchmarking this against similar specialized defense contracts is challenging due to the unique nature of submarine support. The 'Cost Plus Fixed Fee' (CPFF) contract type, while providing incentives for cost control, can also lead to costs exceeding initial estimates if not closely managed. The provided data does not offer enough detail to definitively assess value for money without further analysis of the scope of work and historical performance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when a single contractor possesses unique capabilities or when urgency dictates a rapid award. The lack of competition means that taxpayers did not benefit from potential price reductions that could arise from a competitive bidding process. It also limits the government's ability to explore alternative solutions or innovations from a broader market.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as there is no competitive pressure to drive down prices. This limits the government's leverage in negotiating favorable terms.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet, ensuring operational readiness and technical advancement. Services delivered include critical design, engineering, and technical support essential for maintaining complex nuclear submarine systems. The geographic impact is concentrated in Connecticut, where Electric Boat Corporation is headquartered and operates major facilities. Workforce implications include the employment of highly skilled engineers, technicians, and support staff in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost Plus Fixed Fee contract type carries inherent risk of cost overruns.
Lack of detailed performance metrics in the provided data makes assessing efficiency difficult.
Specialized nature of submarine support may create long-term contractor dependency.

Positive Signals

Contract supports critical national security assets (nuclear submarines).
Electric Boat Corporation has a long history and specialized expertise in submarine construction and support.
Contract aims to ensure the continued operational readiness of the submarine fleet.
Award supports a significant industrial base in Connecticut.

Sector Analysis

The shipbuilding and repairing sector (NAICS 336611) is a highly specialized and capital-intensive industry critical to national defense. This contract falls squarely within the submarine segment, a niche requiring extensive technical expertise, security clearances, and long-term government relationships. The market is dominated by a few key players, with Electric Boat Corporation and Huntington Ingalls Industries being the primary builders of U.S. Navy submarines. Spending in this sector is driven by defense budgets and strategic naval requirements, making it less susceptible to typical market fluctuations.

Small Business Impact

This contract was not set aside for small businesses, nor does the provided data indicate any specific subcontracting requirements for small businesses. Given the highly specialized nature of nuclear submarine design and engineering, it is likely that the prime contractor, Electric Boat Corporation, utilizes its own highly skilled workforce and potentially a limited number of specialized large subcontractors. The absence of small business set-asides means direct opportunities for small businesses within this specific contract are likely minimal, though they may participate indirectly through the supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to monitor expenditures against the fixed fee and ensure compliance with contract terms. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is generally limited for sole-source defense contracts due to national security considerations, but internal government oversight mechanisms are expected to be robust.

Related Government Programs

Strategic Sealift and Submarine Programs
Naval Ship Systems Engineering
Submarine Maintenance, Modernization, and Repair
Defense Industrial Base Programs

Risk Flags

Sole-source award
Cost-plus contract type
High dollar value
Critical defense system support

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $491.5 million to ELECTRIC BOAT CORPORATION. DESIGN, ENGINEERING AND TECHNICAL SUPPORT FOR ACTIVE NUCLEAR SUBMARINES.

Who is the contractor on this award?

The obligated recipient is ELECTRIC BOAT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $491.5 million.

What is the period of performance?

Start: 2008-10-01. End: 2011-03-31.

What is Electric Boat Corporation's track record with similar sole-source contracts for submarine support?

Electric Boat Corporation (EBC) has a long and established history as the primary designer and builder of U.S. Navy submarines, particularly nuclear-powered ones. Consequently, many of its contracts, especially those involving highly specialized design, engineering, and technical support for active fleets, are sole-source due to EBC's unique capabilities and the classified nature of the work. EBC has consistently received substantial funding for these services over decades. While specific details on past sole-source contract performance metrics are often classified or not publicly available, EBC's continued role as the sole provider for certain submarine classes indicates a level of trust and perceived capability by the Navy. Historical performance reviews, if accessible through government databases like the Contractor Performance Assessment Reporting System (CPARS), would provide more granular insights into their past performance regarding cost, schedule, and technical execution on similar sole-source agreements.

How does the 'Cost Plus Fixed Fee' (CPFF) structure compare to other contract types for this type of service?

The 'Cost Plus Fixed Fee' (CPFF) contract type is common for research and development, complex services, or situations where the scope of work is not precisely defined at the outset, such as advanced engineering and design for unique platforms like nuclear submarines. Under CPFF, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure aims to incentivize the contractor to control costs, as the fee remains constant regardless of the final cost. However, it differs from fixed-price contracts where the contractor bears more risk for cost overruns. Compared to 'Cost Plus Incentive Fee' (CPIF), CPFF offers less flexibility for the government to reward exceptional cost performance beyond the fixed fee. It also differs from 'Time and Materials' (T&M) contracts, which can be more susceptible to uncontrolled cost escalation if not tightly managed. For highly specialized, long-term technical support where innovation and adaptation are key, CPFF is often deemed appropriate, but it requires diligent government oversight to manage costs effectively.

What are the primary risks associated with a sole-source award for critical defense systems?

The primary risks associated with a sole-source award for critical defense systems like nuclear submarine support are multifaceted. Firstly, the lack of competition can lead to reduced price pressure, potentially resulting in higher costs for the government and taxpayers compared to a competitively bid contract. Secondly, it can foster complacency in the contractor, reducing the incentive to innovate or improve efficiency aggressively, as there is no direct competitor vying for the business. Thirdly, it creates a dependency on a single supplier, which can be a strategic vulnerability if the contractor faces financial difficulties, operational disruptions, or fails to meet performance expectations. The government has limited leverage to switch providers. Lastly, without competitive benchmarking, it can be more challenging for the government to objectively assess whether the pricing and services represent fair market value over the contract's lifecycle.

What is the historical spending trend for submarine design and engineering support by the Department of the Navy?

Historical spending trends for submarine design and engineering support by the Department of the Navy have generally shown a consistent and significant allocation of resources, reflecting the strategic importance and complexity of the U.S. submarine fleet. While specific figures fluctuate based on modernization programs, new construction starts, and sustainment needs, the overall investment in this area remains substantial. Contracts awarded to key shipbuilders like Electric Boat Corporation and Huntington Ingalls Industries for design, engineering, and technical services represent a major portion of the Navy's shipbuilding and conversion budget. Over the past decade, there has been a sustained focus on maintaining and modernizing the existing fleet (e.g., Virginia-class, Ohio-class replacement) and developing future platforms, necessitating continuous investment in advanced engineering and technical support. Annual spending can range from hundreds of millions to billions of dollars, depending on the phase of major programs.

How does the geographic concentration in Connecticut impact the broader defense industrial base?

The significant concentration of submarine design and engineering work, particularly with Electric Boat Corporation headquartered in Connecticut, has a profound impact on the broader defense industrial base. It establishes Connecticut as a critical hub for submarine technology and expertise, fostering a highly skilled workforce and specialized supply chains within the state and surrounding regions. This concentration can lead to efficiencies through established infrastructure and experienced personnel. However, it also presents risks; a major disruption in Connecticut could significantly impact the Navy's submarine programs. Furthermore, it may limit opportunities for other regions or companies to develop comparable capabilities, potentially concentrating risk and reducing geographic diversity within the defense industrial base for this specific, highly critical capability.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 75 EASTERN POINT RD, GROTON, CT, 02

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,797,409,182

Exercised Options: $615,885,542

Current Obligation: $491,477,684

Contract Characteristics

Cost or Pricing Data: YES

Timeline