Navy awards $363.6M contract for San Diego ship maintenance, BAE Systems secures majority

Contract Overview

Contract Amount: $363,614,577 ($363.6M)

Contractor: BAE Systems Maritime Solutions SAN Diego Inc.

Awarding Agency: Department of Defense

Start Date: 2012-06-29

End Date: 2018-04-19

Contract Duration: 2,120 days

Daily Burn Rate: $171.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: SAN DIEGO LPD 4&LSD 41/49 NON-DOCKING MSMO

Place of Performance

Location: SAN DIEGO, SAN DIEGO County, CALIFORNIA, 92113

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $363.6 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC. for work described as: SAN DIEGO LPD 4&LSD 41/49 NON-DOCKING MSMO Key points: 1. Contract value represents significant investment in naval readiness and maintenance capabilities. 2. BAE Systems' long-standing relationship with the Navy suggests established performance and trust. 3. The contract's duration and cost-plus award fee structure indicate potential for cost overruns if not managed closely. 4. Competition was robust, suggesting a healthy market for these specialized maritime services. 5. This award aligns with broader defense spending trends focused on maintaining existing fleet capabilities. 6. Geographic concentration in San Diego highlights the importance of this region for naval operations.

Value Assessment

Rating: good

The total award amount of $363.6 million over approximately 5.8 years (2120 days) for ship maintenance services appears reasonable given the complexity and specialized nature of naval vessel upkeep. While specific per-unit cost benchmarks for LPD and LSD class ship maintenance are not readily available, the contract's cost-plus award fee structure allows for performance incentives. Comparing this to similar large-scale fleet maintenance contracts, the pricing seems to be within expected ranges, though close monitoring of award fees will be crucial to ensure value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of three bidders suggests a competitive environment for these specialized naval maintenance services. A competitive process generally leads to better price discovery and potentially more favorable terms for the government, as contractors vie for the award.

Taxpayer Impact: The full and open competition ensures that taxpayer dollars are being used efficiently by leveraging market forces to obtain the best possible pricing and service for essential naval maintenance.

Public Impact

The primary beneficiaries are the U.S. Navy's Pacific Fleet, ensuring operational readiness of critical amphibious assault vessels. Services delivered include maintenance, repair, and modernization for San Diego-based LPD 4 and LSD 41/49 class ships. The geographic impact is concentrated in San Diego, California, a major hub for naval operations and shipbuilding/repair. Workforce implications include job creation and retention for skilled tradespeople in the maritime repair sector in Southern California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee contracts can incentivize contractors to incur costs, requiring diligent oversight to manage the 'cost' component effectively.
The long duration of the contract (2120 days) necessitates sustained performance monitoring to ensure consistent quality and adherence to schedules.
Reliance on a single primary contractor for a significant portion of fleet maintenance in a key region could pose risks if performance falters.

Positive Signals

Full and open competition indicates a healthy market and potential for competitive pricing.
BAE Systems' established presence and experience in naval shipbuilding and repair suggest a high likelihood of successful execution.
The award fee structure, if managed properly, can incentivize superior performance and efficiency beyond basic contract requirements.

Sector Analysis

This contract falls within the broader shipbuilding and repair sector, a critical component of the U.S. defense industrial base. The market is characterized by high barriers to entry due to specialized facilities, skilled labor, and stringent regulatory requirements. Spending in this sector is often driven by defense appropriations and the need to maintain aging naval fleets. Comparable spending benchmarks would involve analyzing other large fleet maintenance contracts awarded by the Navy or other maritime agencies.

Small Business Impact

While this contract was awarded under full and open competition and does not appear to have specific small business set-aside provisions, large prime contractors like BAE Systems are often required to meet small business subcontracting goals. The extent to which BAE Systems utilizes small businesses for specialized repair, maintenance, or supply chain needs will impact the small business ecosystem in the San Diego region. Further analysis of subcontracting plans would clarify the direct impact on small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Accountability measures are built into the Cost Plus Award Fee (CPAF) structure, where performance against defined metrics influences the fee awarded. Transparency is generally maintained through contract award announcements and reporting requirements, though specific performance details may be sensitive. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Maintenance Contracts
Amphibious Assault Ship Sustainment
Fleet Readiness and Maintenance
Shipbuilding and Repair Services
Department of Defense Shipyard Services

Risk Flags

Potential for cost overruns in Cost Plus Award Fee contracts.
Sustained performance monitoring required due to long contract duration.
Dependency on a single contractor for critical regional maintenance.
Complexity of ship maintenance can lead to unforeseen technical challenges.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $363.6 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC.. SAN DIEGO LPD 4&LSD 41/49 NON-DOCKING 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 $363.6 million.

What is the period of performance?

Start: 2012-06-29. End: 2018-04-19.

What is the historical performance record of BAE Systems Maritime Solutions San Diego Inc. with the Department of the Navy, particularly on similar vessel classes?

BAE Systems Maritime Solutions has a significant and generally positive track record with the Department of the Navy, including extensive experience with various naval vessel classes. They are a major shipbuilder and repairer, often handling complex maintenance, modernization, and overhaul projects. For LPD (Landing Platform Dock) and LSD (Landing Ship Dock) classes specifically, BAE Systems has been involved in numerous maintenance availabilities and upgrades. While specific contract performance metrics (e.g., past performance ratings, award fee scores) are often considered source selection sensitive information, the company's continued success in winning large, competitive contracts with the Navy suggests a consistent ability to meet or exceed performance expectations. However, like any large contractor, there may have been instances of minor delays or cost variances on specific projects, which are typical in complex, long-term maintenance efforts.

How does the awarded amount compare to the estimated cost or budget for this specific maintenance requirement?

The awarded amount of $363,614,577.22 represents the total value obligated under the contract, encompassing base costs and potential award fees over its duration. Without access to the government's independent government cost estimate (IGCE) or the specific details of the proposals submitted, a direct comparison of the awarded amount to the budget is challenging. However, the fact that the contract was awarded under full and open competition with three bidders suggests that the awarded price was deemed fair and reasonable by the Navy's contracting officers. The Cost Plus Award Fee (CPAF) structure implies that the final cost could vary based on performance, meaning the actual expenditure might differ from the total obligated amount. Typically, contracting officers aim to award contracts that are within or close to the government's estimated budget, adjusted for competitive market realities.

What are the key performance indicators (KPIs) used to determine the 'award fee' component of this contract?

For a Cost Plus Award Fee (CPAF) contract like this one, the award fee is typically determined by the contractor's performance against a set of pre-defined criteria outlined in the contract's Performance Work Statement (PWS) and the associated Award Fee Plan. These KPIs are designed to incentivize exceptional performance beyond minimum requirements. Common metrics for ship maintenance contracts include on-time project completion, adherence to quality standards (e.g., minimizing rework), effective cost management within the 'cost' portion of CPAF, responsiveness to government requests, safety performance, and successful execution of technical requirements. The government's evaluation board assesses the contractor's performance against these criteria periodically (e.g., monthly or quarterly) and assigns a rating, which then translates into a corresponding award fee percentage of the allowable costs incurred during that period.

What is the potential risk associated with the 'Ship Building and Repairing' North American Industry Classification System (NAICS) code, and how does this contract mitigate those risks?

The 'Ship Building and Repairing' (NAICS 336611) sector carries inherent risks related to complex project management, long lead times, specialized labor requirements, potential for unforeseen technical challenges during maintenance or repair, and fluctuating material costs. Large-scale naval maintenance contracts, like this one, can be particularly susceptible to schedule delays and cost overruns. This contract attempts to mitigate these risks through several mechanisms. Firstly, the full and open competition process helps ensure that experienced contractors with proven capabilities are selected. Secondly, the Cost Plus Award Fee (CPAF) structure incentivizes BAE Systems to perform efficiently and effectively, with bonuses tied to meeting or exceeding performance targets. Thirdly, the contract likely includes detailed specifications and milestones within the Performance Work Statement (PWS) that allow for close government monitoring and proactive identification of potential issues. Finally, the Navy's program management and quality assurance personnel provide ongoing oversight throughout the contract's duration.

How does this contract fit into the broader context of U.S. Navy fleet readiness and modernization spending?

This $363.6 million contract for maintenance of LPD 4 and LSD 41/49 class ships is a crucial component of the U.S. Navy's overall strategy for maintaining fleet readiness. These amphibious assault ships are vital for power projection, humanitarian assistance, and disaster relief operations. The Navy operates a large and aging fleet, necessitating significant and consistent investment in maintenance, repair, and modernization to ensure vessels remain operational and capable. Spending on sustainment contracts like this one is a substantial part of the Navy's budget, often rivaling or exceeding spending on new vessel construction. This particular award reflects the ongoing need to support legacy platforms while the Navy also invests in future capabilities and new ship classes. It underscores the importance of the industrial base that supports these sustainment efforts.

What is the typical duration and value range for similar contracts supporting amphibious assault ship maintenance?

Contracts for the maintenance and repair of major naval vessels, such as LPD and LSD classes, are typically long-term and high-value due to the complexity and scope of work involved. Durations often range from one to five years, sometimes with options for extension. The total value can vary significantly based on the specific class of ship, the scope of work (e.g., routine maintenance vs. major overhaul/modernization), and the number of vessels covered. Values in the tens to hundreds of millions of dollars are common for individual contracts supporting multiple ships or comprehensive availabilities. For instance, a multi-year availability contract for an LHD (Landing Helicopter Dock) or a group of LSDs could easily reach several hundred million dollars. This $363.6 million award for BAE Systems aligns with the expected scale and investment required for maintaining these critical amphibious assets over its nearly six-year period.

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: N0002411R4404

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: $386,681,316

Exercised Options: $363,665,827

Current Obligation: $363,614,577

Subaward Activity

Number of Subawards: 1166

Total Subaward Amount: $173,150,288

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline