DoD's $264.5M LPD 17 Class MSMO Contract Awarded to BAE Systems Faces Scrutiny

Contract Overview

Contract Amount: $264,549,375 ($264.5M)

Contractor: BAE Systems Maritime Solutions SAN Diego Inc.

Awarding Agency: Department of Defense

Start Date: 2010-06-15

End Date: 2020-09-30

Contract Duration: 3,760 days

Daily Burn Rate: $70.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: LPD 17 CLASS MSMO

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92170

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $264.5 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC. for work described as: LPD 17 CLASS MSMO Key points: 1. The contract awarded to BAE Systems for LPD 17 Class MSMO is substantial at $264.5 million. 2. BAE Systems is a major defense contractor, indicating significant industry competition for such large awards. 3. The 'Cost Plus Award Fee' contract type carries inherent risk of cost overruns. 4. The 'Ship Building and Repairing' sector is critical for national defense but often complex and expensive.

Value Assessment

Rating: questionable

The Cost Plus Award Fee (CPAF) structure can incentivize contractor performance but also carries a risk of escalating costs if not tightly managed. Benchmarking against similar shipbuilding contracts is difficult without detailed cost breakdowns.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a competitive bidding process. However, the specific pricing outcomes and how effectively price discovery was achieved are not detailed.

Taxpayer Impact: Taxpayer funds are being utilized for a critical defense shipbuilding program. The effectiveness of the competition and contract type in controlling costs will determine the ultimate taxpayer impact.

Public Impact

Ensures continued development and maintenance of the LPD 17 class of ships, vital for naval operations. Supports jobs within the shipbuilding and repair industry, particularly in California. Represents a significant investment in national defense capabilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee (CPAF) contract type can lead to higher costs.
Lack of detailed cost performance data makes true value assessment difficult.
No indication of small business participation.

Positive Signals

Awarded under full and open competition.
Supports critical naval shipbuilding capabilities.
Contract aims to incentivize performance through award fees.

Sector Analysis

This contract falls within the Ship Building and Repairing sector, a high-cost, complex industry vital for national defense. Spending benchmarks in this sector are often in the hundreds of millions or billions for major platforms.

Small Business Impact

The data indicates that small businesses were not directly involved in this prime contract award (ss: false, sb: false). Opportunities for small business participation may exist further down in the subcontracting chain, but this is not evident from the provided information.

Oversight & Accountability

The contract's duration (3760 days) and cost suggest a need for robust oversight from the Department of the Navy to ensure performance, cost control, and adherence to contract terms. The award fee mechanism requires clear performance metrics.

Related Government Programs

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

Risk Flags

Cost Plus Award Fee (CPAF) contract type.
Long contract duration (3760 days).
No explicit mention of small business participation.
Limited transparency on specific performance metrics and cost controls.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $264.5 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC.. LPD 17 CLASS MSMO

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO 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 $264.5 million.

What is the period of performance?

Start: 2010-06-15. End: 2020-09-30.

What specific performance metrics are tied to the award fee structure, and how are they measured to ensure fair and effective incentive alignment?

The award fee structure is designed to incentivize BAE Systems to meet or exceed specific performance targets related to the LPD 17 class ships. These metrics likely encompass areas such as schedule adherence, quality of work, technical performance, and cost control. The Department of the Navy would establish clear, measurable criteria for each performance area, and a designated evaluation board would assess the contractor's performance against these criteria throughout the contract period to determine the amount of award fee earned.

Given the Cost Plus Award Fee structure, what mechanisms are in place to mitigate the risk of cost overruns and ensure the government receives the best possible value?

To mitigate cost overrun risks with a CPAF contract, the Department of the Navy employs several mechanisms. These include establishing a target cost, defining clear performance incentives tied to the award fee, and implementing rigorous oversight of contractor expenditures. Regular audits, progress reviews, and potentially cost-plus-fixed-fee (CPFF) components for certain aspects can also help control costs. The government's ability to withhold award fees for subpar performance is a key lever.

How does the competition for this contract compare to industry benchmarks, and what was the estimated cost savings achieved through the full and open competition process?

While the contract was awarded under 'full and open competition,' specific details on the number of bidders, the range of proposals received, and the estimated cost savings compared to a sole-source or limited competition are not provided. Industry benchmarks for shipbuilding contracts of this scale are highly variable. The true measure of success would be the final contract cost relative to the initial target cost and the government's independent cost estimate, which are not detailed here.

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: N0002409R4414

Offers Received: 3

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: 2205 E BELT ST, SAN DIEGO, CA, 92113

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

Financial Breakdown

Contract Ceiling: $275,825,243

Exercised Options: $264,552,148

Current Obligation: $264,549,375

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline