BAE Systems awarded $625M Navy contract for shipbuilding and repair, with 18.6K prior awards

Contract Overview

Contract Amount: $625,043,905 ($625.0M)

Contractor: BAE Systems Maritime Solutions Norfolk Inc.

Awarding Agency: Department of Defense

Start Date: 2011-02-23

End Date: 2020-04-30

Contract Duration: 3,354 days

Daily Burn Rate: $186.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: EXECUTION PLANNING CG 61 FY12 SRA

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $625.0 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: EXECUTION PLANNING CG 61 FY12 SRA Key points: 1. The contract's value of $625 million represents a significant investment in naval shipbuilding and repair capabilities. 2. BAE Systems Maritime Solutions has a substantial history with the Department of the Navy, indicated by 18,635 prior awards. 3. The contract type, Cost Plus Award Fee, suggests a performance-incentivized structure, aiming to balance cost control with quality outcomes. 4. With a duration of 3,354 days, this represents a long-term commitment to sustainment and potential new construction or modernization efforts. 5. The North American Industry Classification System (NAICS) code 336611 points to a focus on shipbuilding and repairing, a critical defense sector. 6. The contract was awarded under full and open competition, implying a broad market solicitation and potential for competitive pricing.

Value Assessment

Rating: good

The total award value of $625 million for a contract spanning over 9 years suggests a substantial but potentially reasonable investment for complex shipbuilding and repair services. Benchmarking against similar large-scale naval contracts is crucial, but the Cost Plus Award Fee structure indicates a focus on achieving specific performance targets, which can sometimes lead to higher costs if not managed effectively. The significant number of prior awards to BAE Systems by the Navy (18,635) suggests a strong existing relationship and potentially established efficiencies, but also warrants scrutiny to ensure continued competitive pricing and value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that the solicitation was made available to all responsible sources. The fact that it was competed broadly suggests that the Navy sought to maximize the pool of potential offerors, which is generally conducive to achieving competitive pricing. While the number of bidders is not explicitly stated, the 'full and open' designation implies that multiple bids were likely received and evaluated, contributing to price discovery.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it increases the likelihood of receiving competitive bids, potentially leading to lower overall costs for the government and better value for taxpayer dollars invested in naval capabilities.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical shipbuilding and repair services to maintain its fleet's operational readiness. Services delivered include the construction, repair, and maintenance of naval vessels, ensuring the U.S. maintains its maritime superiority. The geographic impact is likely concentrated in areas with significant naval infrastructure and BAE Systems' shipbuilding facilities, primarily in Virginia. Workforce implications include the creation and sustainment of highly skilled jobs in shipbuilding, engineering, and related trades, supporting the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee contracts can sometimes lead to cost overruns if performance incentives are not tightly managed or if the base fee is too high.
The long duration of the contract (over 9 years) necessitates robust oversight to ensure continued relevance of services and prevent complacency.
Reliance on a single large contractor for such a significant portion of shipbuilding and repair could pose supply chain risks if not diversified.

Positive Signals

Award under full and open competition suggests a competitive process that should have yielded fair pricing.
BAE Systems' extensive history with the Navy (18,635 prior awards) indicates a deep understanding of requirements and established operational capabilities.
The Cost Plus Award Fee structure incentivizes performance, potentially leading to higher quality outcomes and greater efficiency.
The contract supports a critical national defense function, ensuring the readiness of the U.S. Navy's fleet.

Sector Analysis

The shipbuilding and repair sector is a cornerstone of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. This contract falls within the broader manufacturing sector, specifically related to durable goods and heavy machinery. The market is often dominated by a few large, experienced prime contractors due to the complexity and scale of naval shipbuilding. Comparable spending benchmarks would involve analyzing other major naval vessel construction and maintenance contracts awarded by the Department of Defense, considering factors like vessel type, size, and technological sophistication.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). While BAE Systems is a large prime contractor, there is an opportunity and expectation for them to engage small businesses as subcontractors. The scale of this contract suggests that significant subcontracting opportunities could exist, potentially benefiting the small business ecosystem within the defense industrial supply chain. However, without specific subcontracting plans or goals detailed in the award, the direct impact on small businesses remains to be seen and would require further investigation into BAE's subcontracting practices.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Cost Plus Award Fee structure, which links a portion of the contractor's profit to performance metrics. Transparency is generally maintained through contract awards databases and reporting requirements, though specific performance details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract execution.

Related Government Programs

Naval Ship Production
Ship Maintenance and Repair
Defense Procurement
Naval Vessel Construction
Fleet Readiness Programs

Risk Flags

Long contract duration may increase risk of cost escalation and technological obsolescence.
Cost Plus Award Fee structure requires diligent oversight to ensure value for money.
Potential for contractor lock-in due to specialized nature of shipbuilding and repair.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $625.0 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. EXECUTION PLANNING CG 61 FY12 SRA

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 $625.0 million.

What is the period of performance?

Start: 2011-02-23. End: 2020-04-30.

What is the historical performance record of BAE Systems Maritime Solutions with the Department of the Navy, particularly on similar shipbuilding and repair contracts?

BAE Systems Maritime Solutions has a substantial history with the Department of the Navy, evidenced by 18,635 prior awards. This extensive track record suggests a deep familiarity with Navy requirements, processes, and operational needs. While a high number of awards indicates a strong existing relationship and likely successful past performance, a detailed review of these prior contracts would be necessary to assess specific performance metrics, any past issues or disputes, and the overall quality of work delivered. Analyzing the types and values of these previous contracts would provide further context on BAE's capabilities and reliability in fulfilling naval shipbuilding and repair obligations.

How does the $625 million award value compare to similar large-scale naval shipbuilding and repair contracts awarded in recent years?

The $625 million award value for this contract is substantial, reflecting the complexity and scale typical of major naval shipbuilding and repair efforts. To benchmark this value effectively, it would be compared against other definitive contracts for constructing, overhauling, or modernizing naval vessels of similar size and technological sophistication. For instance, contracts for aircraft carriers, destroyers, or submarines often run into billions of dollars, while contracts for smaller vessels or specific repair packages might be in the tens or hundreds of millions. The Cost Plus Award Fee structure also influences the final cost, making direct comparisons to fixed-price contracts less straightforward. A thorough analysis would involve examining contract scope, duration, and specific deliverables against market rates and historical pricing for comparable naval assets.

What are the key performance indicators (KPIs) and award fee criteria used to evaluate BAE Systems' performance under this Cost Plus Award Fee contract?

Under a Cost Plus Award Fee (CPAF) contract, performance is typically evaluated against a set of pre-defined criteria outlined in the contract's Performance Work Statement (PWS) and the associated Award Fee Plan. While the specific KPIs for this $625 million Navy contract are not detailed in the provided data, common metrics in shipbuilding and repair CPAF contracts include adherence to schedule milestones, quality of workmanship (e.g., defect rates, rework required), cost control relative to targets, safety performance, and responsiveness to government direction. The 'Award Fee' component means that BAE Systems can earn an additional fee, beyond the cost reimbursement and base fee, based on how well they meet or exceed these performance standards, as determined by the government's evaluation.

What is the potential risk associated with the long contract duration of over 9 years (3,354 days) for shipbuilding and repair services?

A contract duration exceeding nine years presents several potential risks in the dynamic field of shipbuilding and repair. Firstly, technological advancements in naval systems and materials could render initial specifications outdated or less efficient over time, requiring costly modifications or scope adjustments. Secondly, economic fluctuations, changes in material costs, and labor market dynamics can significantly impact the predictability of expenses, especially under a cost-reimbursement structure. Thirdly, maintaining consistent oversight and ensuring sustained high performance from the contractor over such an extended period can be challenging for the government. Finally, there's a risk of 'contractor lock-in,' where the government becomes heavily reliant on a single provider, potentially diminishing future competitive leverage.

How does the 'full and open competition' award method impact the overall cost-effectiveness and value for taxpayers on this significant defense contract?

Awarding a contract through 'full and open competition' is generally considered a best practice for maximizing cost-effectiveness and value for taxpayers. This method ensures that the solicitation is widely advertised, allowing all responsible sources to submit proposals. The increased number of potential bidders typically fosters a more competitive environment, driving down prices and encouraging innovation as companies vie for the contract. For this $625 million Navy contract, full and open competition suggests that the Department of the Navy took steps to ensure they received the best possible offers in terms of both price and technical merit. This process helps prevent inflated pricing that might occur under less competitive award methods, ultimately benefiting the taxpayer by ensuring defense funds are used more efficiently.

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: N0002410R4403

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

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: $662,895,885

Exercised Options: $625,043,905

Current Obligation: $625,043,905

Subaward Activity

Number of Subawards: 1135

Total Subaward Amount: $244,879,965

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline