DoD's $54M Ship Building Contract with BAE Systems Faces Scrutiny Over Cost and Competition
Contract Overview
Contract Amount: $54,267,140 ($54.3M)
Contractor: BAE Systems Maritime Solutions Norfolk Inc.
Awarding Agency: Department of Defense
Start Date: 2010-04-13
End Date: 2016-02-13
Contract Duration: 2,132 days
Daily Burn Rate: $25.5K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 4
Pricing Type: COST PLUS AWARD FEE
Sector: Defense
Official Description: LPD21 PSA & LPD25 FOA/PSA AND EMERGENT WORK
Place of Performance
Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $54.3 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: LPD21 PSA & LPD25 FOA/PSA AND EMERGENT WORK Key points: 1. The contract awarded to BAE Systems Maritime Solutions for ship building and repair is a significant expenditure. 2. Full and open competition was cited, but the contract type (Cost Plus Award Fee) warrants attention regarding cost control. 3. The duration and value suggest potential for cost overruns and impact on taxpayer funds. 4. The sector is critical for national defense, but efficiency in procurement is paramount.
Value Assessment
Rating: questionable
The Cost Plus Award Fee structure can incentivize cost escalation if not tightly managed. Benchmarking against similar ship building contracts is difficult without detailed cost breakdowns, but the award fee component suggests potential for higher-than-expected costs.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
While advertised as full and open competition, the Cost Plus Award Fee contract type can sometimes lead to less aggressive pricing from contractors compared to fixed-price contracts. The impact on price discovery is moderate, as the award fee mechanism allows for adjustments based on performance.
Taxpayer Impact: The significant value of this contract means that any inefficiencies or cost overruns directly impact taxpayer funds allocated for defense.
Public Impact
Taxpayers may be footing a higher bill than necessary due to the contract type. The long duration of the contract raises concerns about sustained oversight and potential for scope creep. The critical nature of naval shipbuilding means delays or cost overruns have national security implications.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost Plus Award Fee structure
- Long contract duration
- Lack of specific cost benchmarks
Positive Signals
- Full and open competition advertised
- Contract awarded to established entity
Sector Analysis
This contract falls within the Ship Building and Repair sector, a critical but often high-cost area for the Department of Defense. Spending benchmarks in this sector are highly variable due to the complexity and customization of naval vessels.
Small Business Impact
The data indicates this contract was not awarded to small businesses, which is common for large-scale defense shipbuilding projects. Opportunities for small businesses likely exist further down the supply chain.
Oversight & Accountability
The Cost Plus Award Fee structure requires robust oversight from the Department of the Navy to ensure performance targets are met and costs are controlled. Regular audits and performance reviews are essential for accountability.
Related Government Programs
- Ship Building and Repairing
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Potential for cost overruns due to Cost Plus Award Fee structure.
- Long contract duration may lead to scope creep and reduced oversight effectiveness.
- Lack of transparency on specific award fee criteria and performance metrics.
- Limited insight into the competitive landscape beyond the initial 'full and open' designation.
Tags
ship-building-and-repairing, department-of-defense, va, definitive-contract, 10m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $54.3 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. LPD21 PSA & LPD25 FOA/PSA AND EMERGENT WORK
Who is the contractor on this award?
The obligated recipient is BAE SYSTEMS MARITIME SOLUTIONS NORFOLK 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 $54.3 million.
What is the period of performance?
Start: 2010-04-13. End: 2016-02-13.
What specific performance metrics were used to determine the award fee, and how were they objectively measured to ensure fair compensation and prevent contractor complacency?
The effectiveness of the award fee hinges on clearly defined, measurable, and achievable performance metrics directly tied to project success. Objective measurement prevents subjective bias and ensures the contractor is rewarded for genuine value addition, not just meeting minimal requirements. Without transparency into these metrics, it's difficult to assess if the award fee truly incentivized superior performance or simply added to the overall cost.
How does the Cost Plus Award Fee structure compare to alternative contract types in terms of overall cost efficiency and risk mitigation for similar naval shipbuilding projects?
Cost Plus Award Fee contracts offer flexibility but can lead to higher costs if not managed stringently, as the contractor is reimbursed for costs plus an incentive fee. Alternative fixed-price contracts might offer better cost certainty but could be less suitable for projects with high technical uncertainty. A comparative analysis of historical data for similar projects would reveal whether this structure provided the best balance of cost, risk, and performance for the DoD.
What mechanisms are in place to ensure that the 'full and open competition' process effectively drove down costs and maximized value for the taxpayer, given the contract's significant value and durati
Effective 'full and open competition' relies on robust solicitation processes, clear evaluation criteria, and active market research to attract a wide range of qualified bidders. For a contract of this magnitude and duration, mechanisms like pre-bid conferences, detailed technical specifications, and a transparent evaluation process are crucial. Ensuring that the winning bid represented the best overall value, not just the lowest initial price, is key to taxpayer benefit.
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: N0002409R2204
Offers Received: 4
Pricing Type: COST PLUS AWARD FEE (R)
Evaluated Preference: NONE
Contractor Details
Parent Company: BAE Systems PLC (UEI: 217304393)
Address: 750 W BERKLEY AVE, NORFOLK, VA, 23523
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $108,478,885
Exercised Options: $80,685,200
Current Obligation: $54,267,140
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2010-04-13
Current End Date: 2016-02-13
Potential End Date: 2016-02-13 00:00:00
Last Modified: 2016-09-27
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