DoD's $1B Ship Repair Contract with BAE Systems Faces Scrutiny Over Cost and Competition
Contract Overview
Contract Amount: $1,022,574,619 ($1.0B)
Contractor: BAE Systems Maritime Solutions Norfolk Inc.
Awarding Agency: Department of Defense
Start Date: 2010-02-19
End Date: 2016-09-30
Contract Duration: 2,415 days
Daily Burn Rate: $423.4K/day
Competition Type: FULL AND OPEN COMPETITION
Number of Offers Received: 2
Pricing Type: COST PLUS INCENTIVE FEE
Sector: Defense
Official Description: DDG DOCKER NORFOLK MSMO
Place of Performance
Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $1.02 billion to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: DDG DOCKER NORFOLK MSMO Key points: 1. The contract awarded to BAE Systems Maritime Solutions for ship repair services represents a significant expenditure of over $1 billion. 2. While BAE Systems is a major player, the limited number of competitors in specialized shipbuilding and repair could impact pricing. 3. The 'Cost Plus Incentive Fee' structure introduces potential for cost overruns if not managed tightly. 4. The sector, Ship Building and Repairing, is critical for national defense but often involves complex, high-cost projects.
Value Assessment
Rating: questionable
The contract's total value of over $1 billion for ship repair is substantial. Benchmarking against similar complex naval repair contracts is difficult without more granular data, but the 'Cost Plus Incentive Fee' structure warrants close monitoring for potential cost escalation.
Cost Per Unit: N/A
Competition Analysis
Competition Level: full-and-open
The contract was awarded under full and open competition, which is positive for price discovery. However, the specialized nature of naval ship repair may limit the number of truly capable bidders, potentially influencing the final negotiated prices.
Taxpayer Impact: Taxpayer funds are being used for critical defense infrastructure. The effectiveness of the competition and contract management will determine the ultimate value for money.
Public Impact
Ensures readiness of naval assets through essential repair and maintenance. Supports a key segment of the defense industrial base. Potential for job creation within the shipbuilding and repair sector. Highlights the significant investment required for maintaining a modern navy.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Cost Plus Incentive Fee structure can lead to overruns.
- Limited competition in specialized defense sectors.
- Long contract duration increases risk exposure.
- Lack of specific unit cost data for benchmarking.
Positive Signals
- Awarded under full and open competition.
- BAE Systems is an established defense contractor.
- Contract supports critical naval readiness.
Sector Analysis
The Ship Building and Repairing sector (NAICS 336611) is a vital component of the defense industrial base, characterized by high capital investment, specialized labor, and long project cycles. Spending in this sector is heavily influenced by defense budgets and geopolitical factors.
Small Business Impact
The data indicates this contract was awarded to a large prime contractor, BAE Systems. There is no direct information provided on subcontracting opportunities for small businesses within this specific contract award, which is a common area for oversight.
Oversight & Accountability
The 'Definitive Contract' award type suggests a formal agreement. Oversight would focus on the performance metrics, cost tracking under the incentive fee structure, and adherence to the contract's terms and conditions by both the Department of the Navy and BAE Systems.
Related Government Programs
- Ship Building and Repairing
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Potential for cost overruns due to CPIF structure.
- Limited number of specialized competitors.
- Long contract duration (2415 days).
- Lack of detailed cost breakdown for benchmarking.
- No explicit mention of small business subcontracting goals.
Tags
ship-building-and-repairing, department-of-defense, va, definitive-contract, billion-dollar
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $1.02 billion to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. DDG DOCKER NORFOLK MSMO
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 $1.02 billion.
What is the period of performance?
Start: 2010-02-19. End: 2016-09-30.
What specific performance metrics are tied to the incentive fee structure, and how effectively are they being monitored to ensure optimal value?
The incentive fee structure likely ties bonuses to meeting or exceeding performance targets such as schedule adherence, quality standards, and potentially cost savings. Effective monitoring requires robust reporting mechanisms from the contractor and diligent oversight by the contracting officer to validate performance claims and ensure taxpayer funds are used efficiently and effectively.
Given the specialized nature of naval ship repair, what steps were taken to ensure robust competition beyond the initial 'full and open' designation?
While 'full and open' is the initial category, the agency likely conducted market research to identify all capable sources. Steps to ensure robust competition might include clear solicitation requirements, outreach to potential bidders, and potentially phased approaches if feasible. However, the inherent consolidation in defense manufacturing can limit the number of viable competitors for highly specialized contracts.
How does the 'Cost Plus Incentive Fee' structure compare to alternative contract types in managing risk and ensuring cost-effectiveness for long-term ship repair?
CPIF aims to incentivize efficiency by sharing cost savings or overruns between the government and contractor. Compared to fixed-price contracts, it offers flexibility for uncertain costs but risks higher spending if not managed. Compared to Cost Plus Fixed Fee, it provides stronger cost control incentives. Its effectiveness hinges on well-defined cost targets and realistic incentive formulas.
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: N0002409R4401
Offers Received: 2
Pricing Type: COST PLUS INCENTIVE FEE (V)
Evaluated Preference: NONE
Contractor Details
Parent Company: BAE Systems PLC
Address: 750 W BERKLEY AVE, NORFOLK, VA, 23523
Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Special Designations
Financial Breakdown
Contract Ceiling: $1,095,154,688
Exercised Options: $1,022,574,619
Current Obligation: $1,022,574,619
Actual Outlays: $-369
Contract Characteristics
Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2010-02-19
Current End Date: 2016-09-30
Potential End Date: 2016-09-30 00:00:00
Last Modified: 2023-05-31
More Contracts from BAE Systems Maritime Solutions Norfolk Inc.
- Execution Planning LHD 3 FY11 PMA — $848.6M (Department of Defense)
- Execution Planning CG 61 FY12 SRA — $625.0M (Department of Defense)
- Federal Contract — $584.3M (Department of Defense)
- 200608!445660!1700!n00024!naval SEA Systems Command !N0002406C4415 !A!N! !N! ! !20060518!20110817!003175072!824825459!217304393!n!bae Systems Norfolk Ship Repai!750 W Berkley AVE !norfolk !va!23523!57000!710!51!norfolk !norfolk (city) !virginia !+000027947320!n!n!000030611843!1902!cruisers !A3 !ships !000 !NOT Discernable !561990!A!A!3! ! ! ! ! !99990909!B! ! !A! !a!u!r!2!003!b! !A!Y!Z! ! !N!C!N! ! ! !a!a!a!a!000!a!c!n! ! ! !Y!1700!N00024!0001! ! — $446.4M (Department of Defense)
- USS Kearsarge(lhd 3) FY23 Docking Selected Restricted Availability (dsra) — $349.2M (Department of Defense)
View all BAE Systems Maritime Solutions Norfolk Inc. federal contracts →
Other Department of Defense Contracts
- Federal Contract — $51.3B (Humana Government Business Inc)
- Lrip LOT 12 Advance Acquisition Contract — $35.1B (Lockheed Martin Corporation)
- SSN 802 and 803 Long Lead Time Material — $34.7B (Electric Boat Corporation)
- 200204!008532!1700!AF600 !naval AIR Systems Command !N0001902C3002 !A!N! !N! !20011026!20120430!008016958!008016958!834951691!n!lockheed Martin Corporation !lockheed Blvd !fort Worth !tx!76108!27000!439!48!fort Worth !tarrant !texas !+000026000000!n!n!018981928201!ac15!rdte/Aircraft-Eng/Manuf Develop !a1a!airframes and Spares !2ama!jast/Jsf !336411!E! !3! ! ! ! ! !99990909!B! ! !A! !a!n!r!2!002!n!1a!a!n!z! ! !N!C!N! ! ! !a!a!a!a!000!a!c!n! ! ! !Y! !N00019!0001! — $34.2B (Lockheed Martin Corporation)
- KC-X Modernization Program — $32.0B (THE Boeing Company)