DoD awards $1.99B for long-lead time materials for SSN 792, with Electric Boat Corp. as sole contractor

Contract Overview

Contract Amount: $19,888,283,376 ($19.9B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2012-04-13

End Date: 2025-12-23

Contract Duration: 5,002 days

Daily Burn Rate: $4.0M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: SSN 792 LONG LEAD TIME MATERIAL

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $19.89 billion to ELECTRIC BOAT CORPORATION for work described as: SSN 792 LONG LEAD TIME MATERIAL Key points: 1. Contract awarded to a single, established supplier, raising questions about price competitiveness. 2. Significant portion of contract value allocated to long-lead time materials, indicating critical supply chain dependencies. 3. Fixed Price Incentive contract type suggests shared risk between government and contractor for cost overruns. 4. Long contract duration (over 3 years) implies a sustained need for these specialized materials. 5. Contractor has a strong track record in submarine construction, suggesting technical capability. 6. No small business set-aside, indicating the primary contractor is not a small business.

Value Assessment

Rating: fair

The total award of $1.99 billion for long-lead time materials for the SSN 792 submarine is substantial. Benchmarking this specific award is challenging without detailed cost breakdowns and comparisons to similar long-lead procurements for other submarine classes. However, the fixed-price incentive structure suggests an expectation of cost control, though the ultimate price will depend on performance against targets. The lack of competition inherently limits the government's ability to secure the best possible price through market forces.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to Electric Boat Corporation. This approach is typically justified when only one responsible source is available or capable of meeting the government's needs, often due to specialized expertise, unique manufacturing capabilities, or existing infrastructure. The lack of competition means the government did not benefit from multiple bids, which could have driven down prices or offered alternative solutions.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as there is no competitive pressure to ensure the lowest possible price. This necessitates robust government oversight to ensure fair pricing and value.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet modernization efforts, ensuring the continued production of Virginia-class submarines. Services delivered include the procurement of critical, long-lead time materials essential for submarine construction. Geographic impact is concentrated in Connecticut, where Electric Boat Corporation is located and operates its facilities. Workforce implications include sustained employment for skilled labor at Electric Boat and its supply chain partners.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Reliance on a single contractor for critical long-lead materials creates supply chain risk.
Fixed-price incentive contracts can still result in cost overruns if targets are not met.
Lack of transparency in sole-source justifications requires careful review.
Long contract duration may not reflect current market conditions for materials.

Positive Signals

Award ensures timely delivery of essential components for a critical defense asset.
Electric Boat Corporation has a proven track record in submarine construction.
Fixed-price incentive contract aligns contractor and government interests in cost control.
Contract supports a vital segment of the U.S. defense industrial base.
Long-lead time material procurement is necessary for complex defense systems.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the U.S. defense industrial base. The market for advanced naval vessels and their specialized components is highly concentrated, with a limited number of prime contractors possessing the necessary expertise and facilities. Spending in this sector is driven by national security requirements and long-term fleet modernization plans. Comparable spending benchmarks would typically involve other major shipbuilding contracts for naval assets.

Small Business Impact

This contract does not appear to include a small business set-aside, as indicated by 'sb: false'. The prime contractor, Electric Boat Corporation, is a large defense contractor. While the prime may engage small businesses as subcontractors, the primary award mechanism does not prioritize small business participation. This means the direct economic benefit to the small business ecosystem from this specific award is likely limited to subcontracting opportunities, rather than direct prime contracting.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are built into the Fixed Price Incentive (FPI) contract type, which links contractor profit to performance against cost targets. Transparency may be limited due to the sole-source nature of the award, but contract modifications, performance reports, and payment data are typically subject to review by government auditors and potentially the Inspector General, especially concerning cost and schedule adherence.

Related Government Programs

Virginia-class Submarine Program
Naval Shipbuilding Contracts
Long Lead Time Material Procurements
Department of Defense Major Weapon Systems

Risk Flags

Sole Source Justification
Long Lead Time Material Dependency
Potential for Cost Overruns
Limited Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $19.89 billion to ELECTRIC BOAT CORPORATION. SSN 792 LONG LEAD TIME MATERIAL

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 $19.89 billion.

What is the period of performance?

Start: 2012-04-13. End: 2025-12-23.

What is the historical spending pattern for long-lead time materials for the SSN 792 program and similar submarine classes?

Historical spending on long-lead time materials for the SSN 792 program and similar Virginia-class submarines is substantial and represents a significant portion of the overall submarine construction cost. These materials, such as specialized alloys, propulsion components, and electronic systems, require extensive manufacturing lead times. For instance, previous Virginia-class submarines have seen multi-billion dollar awards for these critical components spread across multiple fiscal years. Comparing this $1.99 billion award to previous procurements for earlier ships in the class (e.g., SSN 790, SSN 791) or even comparable submarine programs from other nations (though direct comparisons are difficult due to differing specifications and market conditions) would reveal trends in cost escalation, material availability, and the government's ability to secure favorable pricing over time. The consistent need for these long-lead items underscores the importance of stable, predictable funding and robust supply chain management.

How does the Fixed Price Incentive (FPI) contract type typically perform in terms of cost control for complex defense systems like submarines?

The Fixed Price Incentive (FPI) contract type aims to balance cost control with performance by establishing target costs, target profits, and sharing arrangements for costs that deviate from the target. In theory, it incentivizes the contractor to control costs to maximize profit, while the government benefits from a ceiling price. However, the effectiveness of FPI contracts in controlling costs for complex defense systems like submarines can vary significantly. Factors such as the accuracy of initial cost estimates, the complexity of the system, unforeseen technical challenges, and the contractor's management capabilities all play a crucial role. While FPI can be more cost-effective than cost-plus contracts, it still carries the risk of cost overruns if targets are not realistically set or if significant issues arise during production. Robust government oversight and negotiation are critical to ensure the FPI structure yields genuine value for taxpayers.

What are the specific risks associated with a sole-source award for long-lead time materials in submarine construction?

A sole-source award for long-lead time materials in submarine construction presents several key risks. Firstly, the absence of competition can lead to inflated prices, as the contractor faces no market pressure to offer the most cost-effective solution. This lack of competitive bidding means the government may pay more than it would in a competed scenario. Secondly, it can reduce innovation, as there's less incentive for the sole provider to explore alternative materials or more efficient production methods. Thirdly, it creates a significant dependency on a single supplier, making the program vulnerable to disruptions if that supplier experiences production issues, financial instability, or changes in its business strategy. Finally, it limits the government's leverage in negotiations, potentially impacting terms related to delivery schedules, quality control, and intellectual property.

What is Electric Boat Corporation's track record with the U.S. Navy, particularly regarding submarine construction and contract performance?

Electric Boat Corporation (EB) has a long and extensive track record as a primary builder of U.S. Navy submarines, particularly nuclear-powered attack and ballistic missile submarines. For decades, EB, along with its partner General Dynamics Electric Boat, has been instrumental in delivering critical submarine platforms. Their performance history includes the construction of numerous classes of submarines, from early designs to the current Virginia-class attack submarines. While EB generally possesses a strong reputation for technical expertise and capability in complex submarine construction, like any major defense contractor, they have faced challenges related to cost, schedule, and performance on specific contracts over the years. Government contract databases and performance reviews would provide detailed insights into their historical performance metrics, including on-time delivery rates, cost variances, and quality assessments for past submarine programs.

How does the procurement of long-lead time materials impact the overall cost and schedule of submarine construction?

The procurement of long-lead time materials is a critical factor that significantly influences both the cost and schedule of submarine construction. These materials, which include specialized components like nuclear reactor components, advanced sonar systems, hull sections, and complex piping, require lengthy manufacturing and delivery timelines, often spanning years. By ordering these items early in the process, the government aims to prevent delays in the later stages of assembly and integration. However, the substantial upfront investment in these materials represents a large portion of the total program cost. Any fluctuations in material prices, supply chain disruptions, or production delays for these long-lead items can have a cascading effect, potentially leading to significant cost overruns and schedule slippages for the entire submarine program. Effective management of these procurements is therefore paramount to maintaining program stability.

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

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $19,908,022,596

Exercised Options: $19,907,068,754

Current Obligation: $19,888,283,376

Actual Outlays: $107,066

Subaward Activity

Number of Subawards: 1622

Total Subaward Amount: $233,668,058

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline