Navy awards $705M ship repair contract to Metro Machine Corp. amid full and open competition

Contract Overview

Contract Amount: $705,096,106 ($705.1M)

Contractor: Metro Machine Corp.

Awarding Agency: Department of Defense

Start Date: 2009-08-03

End Date: 2015-11-27

Contract Duration: 2,307 days

Daily Burn Rate: $305.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: LSD 41/49 NORFOLK MSMO

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $705.1 million to METRO MACHINE CORP. for work described as: LSD 41/49 NORFOLK MSMO Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Award Fee, which incentivizes contractor performance. 3. The duration of the contract is substantial, spanning over 2300 days. 4. The contract was awarded by the Department of the Navy, a major defense spender. 5. The North American Industry Classification System (NAICS) code indicates a focus on shipbuilding and repairing. 6. The contract was awarded to a single contractor, Metro Machine Corp.

Value Assessment

Rating: fair

The total award amount of $705 million over approximately six years represents a significant investment in ship maintenance. Benchmarking this contract's value is challenging without specific details on the scope of work and the types of vessels repaired. However, the Cost Plus Award Fee structure suggests that the Navy aimed to achieve good value by incentivizing efficient performance and cost control. The number of bids received (2) is on the lower side for a contract of this magnitude, which could impact price competitiveness.

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 record shows two bids were received. While full and open competition is generally preferred for maximizing price discovery and achieving best value, a low number of bidders for a large contract can sometimes limit the competitive pressure on pricing.

Taxpayer Impact: The use of full and open competition is a positive signal for taxpayers, as it aims to ensure that the government receives competitive pricing. However, with only two bids, the potential for significant cost savings may have been constrained compared to a scenario with more robust competition.

Public Impact

The primary beneficiaries are the U.S. Navy's fleet, ensuring operational readiness and capability. Services delivered include ship building and repairing, crucial for maintaining naval assets. The geographic impact is centered in Norfolk, Virginia, a major naval hub. Workforce implications include employment opportunities for skilled labor in the shipbuilding and repair sector in Virginia.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition with only two bidders could potentially lead to higher costs than if more firms had participated.
The Cost Plus Award Fee structure, while incentivizing, can sometimes lead to cost overruns if not managed tightly.
The long duration of the contract increases the risk of scope creep or unforeseen cost increases over time.

Positive Signals

Awarded under full and open competition, which is a standard for ensuring fair access to government contracts.
The Cost Plus Award Fee contract type includes performance incentives, aiming for efficient execution.
The contractor, Metro Machine Corp., is based in Virginia, potentially supporting local economies and existing infrastructure.

Sector Analysis

The shipbuilding and repair industry is a critical component of the defense industrial base, supporting naval operations and national security. This sector is characterized by high capital investment, specialized labor, and stringent quality requirements. The NAICS code 336611 specifically covers establishments primarily engaged in building and repairing ships and boats. Spending in this sector is often driven by defense budgets and the need to maintain aging fleets.

Small Business Impact

The contract was not set aside for small businesses, and the 'sb' field is false, indicating no specific small business participation was mandated in the award. This suggests that larger, established firms were likely the primary bidders. Subcontracting opportunities for small businesses may exist but are not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Inspector General (IG) jurisdiction would apply to investigations of fraud, waste, or abuse. Transparency is generally maintained through contract award databases and public reporting requirements, though specific performance metrics and detailed cost breakdowns may be sensitive.

Related Government Programs

Naval Ship Maintenance Contracts
Shipbuilding and Repair Services
Defense Logistics and Maintenance
Fleet Readiness Programs

Risk Flags

Limited competition
Potential for cost overruns due to CPAF structure
Long contract duration increases risk exposure

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $705.1 million to METRO MACHINE CORP.. LSD 41/49 NORFOLK MSMO

Who is the contractor on this award?

The obligated recipient is METRO MACHINE CORP..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $705.1 million.

What is the period of performance?

Start: 2009-08-03. End: 2015-11-27.

What is the historical spending trend for ship building and repairing by the Department of the Navy?

The Department of the Navy consistently allocates significant funds to shipbuilding and repairing, reflecting the capital-intensive nature of maintaining a modern fleet. Historical data indicates multi-billion dollar annual expenditures in this category. Factors influencing these trends include fleet modernization programs, the age of existing vessels, geopolitical demands, and budget appropriations. For instance, periods of increased naval expansion or heightened global security concerns often correlate with surges in shipbuilding and repair spending. Analyzing trends over the past decade reveals a steady demand, with fluctuations tied to specific shipbuilding initiatives and maintenance cycles. The $705 million awarded to Metro Machine Corp. represents a substantial, but not unprecedented, portion of this ongoing investment.

How does the Cost Plus Award Fee (CPAF) structure typically impact contractor performance and cost control compared to other contract types?

The Cost Plus Award Fee (CPAF) contract type is designed to provide flexibility in scope while incentivizing contractor performance. Under CPAF, the contractor is reimbursed for allowable costs plus a fixed fee, with the potential for an additional award fee based on performance against pre-defined criteria. This structure aims to balance the government's need for adaptable project execution with the contractor's motivation to achieve high quality and efficiency. Compared to Cost Plus Fixed Fee (CPFF), CPAF offers stronger incentives for exceeding performance targets. Relative to Firm-Fixed-Price (FFP) contracts, CPAF is better suited for projects with uncertain requirements or where performance quality is paramount and difficult to define upfront. However, effective administration and clear performance metrics are crucial to prevent potential cost overruns and ensure the award fee truly reflects superior performance rather than just meeting minimum requirements.

What are the typical risks associated with long-duration defense contracts like this one?

Long-duration defense contracts, such as the over 2300-day award to Metro Machine Corp., carry several inherent risks. One primary risk is 'scope creep,' where the project's requirements expand beyond the original agreement, leading to increased costs and extended timelines. Economic volatility, including inflation and changes in material costs, poses another significant risk over extended periods, potentially eroding the value of the fixed fee or impacting the contractor's profitability if not adequately addressed through contract clauses. Technological obsolescence is also a concern, especially in rapidly evolving fields; the technology or methods used at the start of the contract might be outdated by its end. Furthermore, contractor performance can degrade over time due to personnel turnover or shifts in company priorities. Government funding uncertainties and potential changes in defense strategy or policy can also impact the contract's continuity and objectives. Robust contract management, clear change control processes, and regular performance reviews are essential to mitigate these risks.

What does the number of bidders (2) suggest about the competitiveness of this specific contract?

Receiving only two bids for a contract valued at $705 million suggests a potentially limited competitive landscape for this specific requirement. While full and open competition was utilized, the low number of bidders could indicate several factors. It might imply that only a few companies possess the specialized capabilities, facilities, and security clearances necessary to perform the work. Alternatively, the contract's terms, complexity, or perceived risk might have deterred other potential bidders. A limited number of bidders can reduce price pressure, potentially leading to higher costs for the government compared to a scenario with multiple competitive offers. It also increases the government's reliance on the few participating contractors, making negotiation and oversight critical to ensure fair value.

How does the NAICS code 336611 (Ship Building and Repairing) position this contract within the broader defense industrial base?

The NAICS code 336611 places this contract squarely within the critical shipbuilding and repairing sector, a cornerstone of the defense industrial base. Companies operating under this code are responsible for constructing, repairing, and converting naval vessels, directly supporting the operational readiness and strategic capabilities of the U.S. Navy. This sector is characterized by high barriers to entry, including significant capital investment in shipyards, specialized skilled labor (welders, engineers, pipefitters), and adherence to stringent quality and safety standards. Contracts like this one are vital for maintaining the infrastructure and workforce necessary for national defense. The health of this sector is closely monitored as it directly impacts the Navy's ability to project power and respond to global security challenges.

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

Solicitation ID: N0002407R4006

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 200 LIGON ST, NORFOLK, VA, 23523

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

Financial Breakdown

Contract Ceiling: $705,096,106

Exercised Options: $705,096,106

Current Obligation: $705,096,106

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline