Navy awards $913M contract for shipbuilding and repair, with Electric Boat Corporation as the sole provider

Contract Overview

Contract Amount: $913,358,953 ($913.4M)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2010-10-01

End Date: 2026-05-31

Contract Duration: 5,721 days

Daily Burn Rate: $159.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY11

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $913.4 million to ELECTRIC BOAT CORPORATION for work described as: FY11 Key points: 1. This contract represents a significant investment in naval shipbuilding capabilities. 2. The sole-source nature of the award warrants scrutiny regarding price justification and potential for cost overruns. 3. Long-term duration of the contract suggests a strategic, ongoing need for these services. 4. The cost-plus-fixed-fee structure may incentivize cost escalation if not closely monitored. 5. Focus on a single contractor could limit opportunities for innovation and competitive pricing in the future. 6. The contract's value is substantial, indicating a critical role for the awarded services within the defense sector.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and specialized scope within naval shipbuilding. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex, long-term projects where costs are difficult to predict, carries inherent risks of cost escalation. Without competitive bids, it's difficult to ascertain if the fixed fee adequately compensates the contractor for the effort or if it represents a premium. Further analysis of historical CPFF contracts for similar shipbuilding endeavors would be necessary to establish a robust value-for-money assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple potential providers. This approach is typically employed when only one responsible source is available or when a compelling justification exists for excluding competition. The lack of competition means that price discovery through market forces was absent, potentially leading to higher costs for the government compared to a competitively awarded contract. The justification for this sole-source award would need to be thoroughly reviewed to ensure it aligns with federal procurement regulations.

Taxpayer Impact: The absence of competition means taxpayers may not be receiving the best possible price for these critical shipbuilding services. Without the pressure of competing bids, the contractor has less incentive to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, ensuring continued capability in shipbuilding and repair. This contract supports the maintenance and potential expansion of the U.S. submarine fleet. The contract's duration implies a long-term commitment to a specific shipbuilding capability. Workforce implications are significant, likely supporting a substantial number of skilled jobs in shipbuilding and related trades, particularly in Connecticut. The geographic impact is concentrated in areas where Electric Boat Corporation has its primary operations, notably Connecticut.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract structure can incentivize cost overruns if not rigorously managed.
Lack of transparency in pricing due to sole-source nature makes value assessment difficult.
Long contract duration increases exposure to potential changes in economic conditions or technological advancements.
Dependence on a single contractor creates a risk of supply chain disruption if that contractor faces issues.

Positive Signals

Award to a known, experienced contractor (Electric Boat Corporation) suggests a focus on reliability and expertise.
Long-term contract provides stability and predictability for critical defense shipbuilding needs.
The contract supports a vital national security capability, ensuring fleet readiness.
The fixed fee component of the CPFF contract provides some level of cost certainty compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the broader 'Ship Building and Repairing' sector, a critical component of the U.S. defense industrial base. This sector is characterized by high barriers to entry, significant capital investment, and specialized technical expertise. The market is often dominated by a few large, established players due to the scale and complexity of naval vessel construction and maintenance. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of naval platforms, but this contract's value is substantial within the context of defense procurement.

Small Business Impact

The data indicates that this contract was not set aside for small businesses, nor does it explicitly mention subcontracting goals for small businesses. Given the specialized nature of shipbuilding and repair, particularly for naval vessels, the prime contractor is likely a large, established entity. The extent to which small businesses will be involved would typically depend on the prime contractor's subcontracting plan, which is not detailed here. Without specific set-aside provisions or clear subcontracting targets, the direct impact on the small business ecosystem for this particular award may be limited, though indirect benefits through the supply chain are possible.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and the Department of Defense's contracting and program management offices. Given the sole-source nature and the CPFF structure, rigorous oversight of cost, schedule, and performance is crucial. Mechanisms likely include regular progress reviews, audits of contractor costs, and performance metrics tracking. The Inspector General for the Department of Defense would also have jurisdiction to investigate potential fraud, waste, or abuse related to this contract. Transparency may be limited due to the sole-source classification, but internal government oversight should be robust.

Related Government Programs

Naval Shipbuilding Programs
Submarine Construction and Maintenance
Defense Industrial Base Contracts
Department of Defense Procurement
Ship Building and Repair Services

Risk Flags

Sole-source award requires strong justification.
Cost-plus-fixed-fee contracts carry inherent risk of cost escalation.
Long contract duration increases exposure to market and technological changes.
Potential for limited competition impacting price discovery.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $913.4 million to ELECTRIC BOAT CORPORATION. FY11

Who is the contractor on this award?

The obligated recipient is ELECTRIC BOAT CORPORATION.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $913.4 million.

What is the period of performance?

Start: 2010-10-01. End: 2026-05-31.

What is the historical track record of Electric Boat Corporation with the Department of Defense, particularly regarding cost performance on similar contracts?

Electric Boat Corporation (EBC) has a long and established history as a primary builder of U.S. Navy submarines. Historically, EBC has been involved in major shipbuilding programs, including the Ohio-class and Virginia-class submarines. Performance data on cost can be complex; large, long-term defense contracts, especially those utilizing cost-plus structures, often experience cost growth due to evolving requirements, technical challenges, and inflation. While EBC is recognized for its technical expertise and delivery of critical platforms, specific cost performance metrics for past contracts would require detailed analysis of government contract databases and performance reports. The nature of submarine construction involves immense complexity, making cost overruns a common challenge across the industry, not unique to EBC, but necessitating diligent oversight.

How does the pricing structure (Cost Plus Fixed Fee) compare to other shipbuilding contracts awarded by the Navy?

The Cost Plus Fixed Fee (CPFF) pricing structure is frequently utilized by the Department of Defense, including the Navy, for complex, long-term projects where the scope of work is not fully defined at the outset or involves significant research and development. This structure allows the contractor to recover allowable costs plus a predetermined fixed fee representing profit. Compared to fixed-price contracts, CPFF offers more flexibility for the government when dealing with uncertainty but carries a higher risk of cost escalation. In the shipbuilding sector, especially for new designs or major overhauls, CPFF is common. However, the Navy also uses fixed-price incentive fee (FPIF) and other hybrid structures to balance risk and reward between the government and contractor. The appropriateness of CPFF for this specific contract depends heavily on the predictability of the work and the effectiveness of government oversight in controlling costs.

What are the primary risks associated with a sole-source award for a contract of this magnitude and duration?

The primary risks associated with a sole-source award for a contract of this magnitude and duration include a lack of competitive pressure, which can lead to inflated prices and reduced innovation. Without competing bids, the government has less leverage to negotiate the best possible price, potentially resulting in higher costs for taxpayers. Furthermore, sole-source awards can create a dependency on a single contractor, making the government vulnerable to disruptions if that contractor experiences financial difficulties, labor disputes, or performance issues. There's also a risk that the contractor may not feel the same urgency to improve efficiency or adopt new technologies as they might in a competitive environment. Ensuring robust justification for the sole-source determination and implementing stringent oversight are critical to mitigating these risks.

What are the potential implications for program effectiveness and long-term fleet readiness given this contract structure?

This contract's structure, particularly its sole-source nature and long duration, has significant implications for program effectiveness and long-term fleet readiness. On the positive side, awarding to a sole, experienced contractor like Electric Boat Corporation can ensure continuity and leverage specialized expertise crucial for complex naval platforms, thereby supporting consistent fleet readiness. However, the lack of competition might stifle innovation and efficiency improvements that could arise from a competitive environment, potentially impacting the long-term cost-effectiveness of maintaining and modernizing the fleet. The CPFF structure necessitates vigilant government oversight to ensure that cost controls are maintained and that the program remains on track to meet its objectives for fleet readiness without unnecessary expenditure.

How does this contract's value compare to historical spending on shipbuilding and repair by the Department of the Navy?

The $913 million award is substantial, reflecting the high costs associated with naval shipbuilding and repair. The Department of the Navy's annual shipbuilding and conversion budget typically runs into the tens of billions of dollars, encompassing a wide range of vessels from aircraft carriers and submarines to smaller combatants and support ships. Contracts for individual platforms, especially submarines, are inherently large due to their complexity, technological sophistication, and long construction periods. While $913 million is a significant sum for a single contract, it represents a portion of the Navy's overall shipbuilding and repair expenditure. To provide a precise comparison, one would need to analyze historical spending trends for similar classes of vessels or major repair/modernization efforts over multiple fiscal years.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002408R2101

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 75 EASTERN POINT RD, GROTON, CT, 06340

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

Financial Breakdown

Contract Ceiling: $1,345,660,290

Exercised Options: $1,345,660,290

Current Obligation: $913,358,953

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline