DoD's $1.96B MLP System Design Contract Awarded to National Steel and Shipbuilding Company

Contract Overview

Contract Amount: $1,965,375,702 ($2.0B)

Contractor: National Steel and Shipbuilding Company

Awarding Agency: Department of Defense

Start Date: 2009-02-13

End Date: 2020-07-14

Contract Duration: 4,169 days

Daily Burn Rate: $471.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: MLP SYSTEM DESIGN PART 1 (SD1) WITH PRICED OPTION FOR SD2

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92113

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $1.97 billion to NATIONAL STEEL AND SHIPBUILDING COMPANY for work described as: MLP SYSTEM DESIGN PART 1 (SD1) WITH PRICED OPTION FOR SD2 Key points: 1. The contract value is substantial at $1.96 billion. 2. National Steel and Shipbuilding Company is the sole awardee. 3. The contract type is Fixed Price Incentive, indicating shared risk. 4. The sector is Ship Building and Repairing, a critical defense area.

Value Assessment

Rating: questionable

The contract was awarded under Full and Open Competition, but the long duration and fixed-price incentive structure warrant scrutiny for potential cost overruns. Benchmarking against similar shipbuilding contracts is difficult without more detailed cost breakdowns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, suggesting a competitive bidding process. However, the definitive contract award type and long duration may limit ongoing price discovery and competition.

Taxpayer Impact: The significant contract value represents a considerable taxpayer investment in naval shipbuilding capabilities.

Public Impact

Impacts naval shipbuilding capacity and technological advancement. Supports jobs in the shipbuilding and repair industry. Ensures the availability of critical naval assets. Potential for long-term sustainment costs beyond the initial design.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 11 years)
Fixed Price Incentive contract type
Sole awardee for a large contract
Lack of specific cost data for benchmarking

Positive Signals

Awarded under Full and Open Competition
Supports critical defense infrastructure
Addresses naval shipbuilding needs

Sector Analysis

This contract falls within the Ship Building and Repairing sector, which is a significant area of federal spending, particularly for the Department of Defense. Benchmarks for large-scale shipbuilding contracts are highly variable due to complexity and customization.

Small Business Impact

The data does not indicate any specific provisions or awards to small businesses within this contract. Large shipbuilding contracts often involve extensive subcontracting, which may offer opportunities for SMBs, but this is not explicitly stated.

Oversight & Accountability

The long duration and complexity of this definitive contract suggest a need for robust oversight from the Department of the Navy to ensure performance, cost control, and adherence to contract terms throughout its lifecycle.

Related Government Programs

Ship Building and Repairing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Long contract duration may lead to cost escalation.
Fixed Price Incentive contract requires careful monitoring of cost targets.
Sole awardee for a large contract could limit future competition.
Lack of detailed cost data makes independent benchmarking difficult.
Potential for scope creep over the contract's extended period.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.97 billion to NATIONAL STEEL AND SHIPBUILDING COMPANY. MLP SYSTEM DESIGN PART 1 (SD1) WITH PRICED OPTION FOR SD2

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 $1.97 billion.

What is the period of performance?

Start: 2009-02-13. End: 2020-07-14.

What was the rationale for awarding a single definitive contract for over 11 years instead of multiple smaller contracts or phased approaches?

The rationale likely stems from the complex, long-term nature of shipbuilding design and development, requiring a stable, committed partnership. A single definitive contract can streamline management and ensure continuity of effort, potentially reducing administrative overhead compared to multiple smaller awards. However, it also concentrates risk and reduces opportunities for competitive re-evaluation during the contract's life.

How does the Fixed Price Incentive (FPI) structure mitigate risks associated with long-term shipbuilding projects?

The FPI structure aims to incentivize both the contractor and the government to control costs. It establishes a target cost and target profit, with a ceiling price. If costs are below the target, both parties share in the savings. If costs exceed the target but remain below the ceiling, profits are reduced. This shared risk encourages efficiency while providing a cap on potential government expenditure, though it requires careful negotiation of the target cost and sharing ratios.

What are the potential long-term implications of this contract on future naval shipbuilding capabilities and competition?

This contract could solidify National Steel and Shipbuilding Company's position in naval shipbuilding, potentially enhancing their capabilities. However, awarding such a large, long-term contract to a single entity might limit future competition by creating barriers to entry for other shipyards. The government's long-term strategy for maintaining a competitive industrial base needs to consider the impact of such concentrated awards.

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: N0002408R2270

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

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

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $1,965,569,419

Exercised Options: $1,965,569,419

Current Obligation: $1,965,375,702

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline