Navy awards $3.14B to Electric Boat for Submarine RDT&E, a sole-source engineering services contract

Contract Overview

Contract Amount: $3,145,999,614 ($3.1B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2012-12-21

End Date: 2022-01-11

Contract Duration: 3,308 days

Daily Burn Rate: $951.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUBMARINE RDT&E

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $3.15 billion to ELECTRIC BOAT CORPORATION for work described as: SUBMARINE RDT&E Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Long duration of over 3300 days suggests a sustained need for engineering services. 3. Cost-plus-fixed-fee structure may incentivize cost overruns. 4. Focus on Research, Development, Test, and Evaluation (RDT&E) indicates foundational work for future platforms. 5. High dollar value signifies a significant investment in naval capabilities. 6. Engineering services are critical for complex defense systems like submarines.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source RDT&E contract is challenging due to its unique nature and lack of direct competition. The cost-plus-fixed-fee (CPFF) pricing structure, while common for R&D, carries inherent risks of cost escalation. Without comparable sole-source RDT&E contracts for submarine development, assessing whether the fixed fee is reasonable is difficult. The total award value of over $3.14 billion over a decade suggests substantial investment, but the value-for-money proposition is obscured by the absence of competitive pressure and the inherent uncertainties of research and development.

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. This typically occurs when only one responsible source is available or authorized by statute. The lack of competition means that the Navy did not benefit from the price discovery and innovation that typically arises from a competitive bidding process. This approach may be justified by the specialized nature of submarine RDT&E and the unique capabilities of Electric Boat Corporation.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government's ability to negotiate the best possible price is diminished in a sole-source scenario.

Public Impact

The primary beneficiaries are the U.S. Navy and its submarine fleet modernization efforts. Services delivered include critical research, development, testing, and evaluation for submarine platforms. Geographic impact is concentrated around Electric Boat's facilities in Connecticut, supporting the local economy. Workforce implications include sustained employment for highly skilled engineers and technical personnel in the defense sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost efficiency.
Cost-plus-fixed-fee contract type can incentivize higher costs if not closely managed.
Long contract duration increases exposure to potential scope creep and cost overruns.
Lack of transparency in sole-source negotiations makes value assessment difficult.

Positive Signals

Electric Boat Corporation is a highly specialized and experienced contractor for submarine RDT&E.
Sustained investment in RDT&E is crucial for maintaining technological superiority in naval warfare.
The contract supports critical national defense objectives and long-term strategic goals.
The fixed fee component provides some level of cost certainty compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industry's complex RDT&E requirements for naval platforms. The submarine market is highly specialized, dominated by a few key players with extensive expertise and government relationships. Comparable spending in this niche involves significant, long-term investments in advanced military technology. The market size is directly tied to defense budgets and strategic priorities, making it a critical but non-consumer-facing sector.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded directly to Electric Boat Corporation. There is no explicit information regarding subcontracting plans for small businesses within this specific award notice. The focus on specialized RDT&E for submarines may limit opportunities for broad small business participation, though specialized suppliers could be engaged.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded within the contract terms, including performance metrics and reporting requirements. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Submarine Procurement
Naval Shipyard Operations
Defense Research and Development
Advanced Weapons Systems
Shipbuilding and Repair

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Long contract duration
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.15 billion to ELECTRIC BOAT CORPORATION. SUBMARINE RDT&E

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 $3.15 billion.

What is the period of performance?

Start: 2012-12-21. End: 2022-01-11.

What is Electric Boat Corporation's track record with sole-source RDT&E contracts for the Navy?

Electric Boat Corporation has a long-standing and exclusive relationship with the U.S. Navy for the design, construction, and RDT&E of nuclear-powered submarines. Historically, major RDT&E and procurement contracts for submarines have been awarded sole-source to Electric Boat due to its unique capabilities, infrastructure, and the highly specialized nature of nuclear submarine technology. This includes extensive experience in research, development, testing, and evaluation phases, often involving classified technologies and long lead times. While specific dollar amounts for past sole-source RDT&E efforts are often bundled within larger procurement figures, the pattern of sole-source awards underscores the government's reliance on their specialized expertise for these critical national security assets.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for RDT&E, and what are the implications for value?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common for Research, Development, Test, and Evaluation (RDT&E) efforts where the scope and costs are uncertain. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of costs, and cost-reimbursement contracts without a fixed fee. For RDT&E, CPFF offers flexibility to adapt to evolving research needs. However, it carries a risk of cost overruns, as the contractor is incentivized to incur costs to maximize reimbursement, although the fixed fee provides some ceiling on profit. Value for money under CPFF is highly dependent on robust government oversight, clear performance metrics, and effective negotiation of the fixed fee itself. Without strong oversight, the potential for costs to exceed initial estimates is significant.

What are the primary risks associated with a sole-source, long-duration RDT&E contract like this one?

The primary risks associated with this sole-source, long-duration RDT&E contract include a lack of competitive pressure, which can lead to reduced cost efficiency and potentially higher prices for taxpayers. The absence of multiple bidders means the government cannot leverage market forces to secure the best possible terms. Furthermore, the long duration (over 3300 days) increases the risk of scope creep, where project requirements may expand beyond the original intent, leading to cost overruns and schedule delays. Contractor performance complacency is also a risk, as there is less external pressure to innovate or optimize processes. Finally, the sole-source nature inherently limits transparency in pricing and negotiation, making it harder to independently verify the fairness of the awarded amount.

How does this contract fit into the broader context of U.S. Navy submarine modernization programs?

This contract for Submarine Research, Development, Test, and Evaluation (RDT&E) is a foundational element of the U.S. Navy's long-term submarine modernization strategy. It likely supports the development of next-generation submarine platforms, upgrades to existing fleets, and the integration of new technologies such as advanced sonar, weapons systems, and stealth capabilities. Submarine modernization is a continuous process driven by evolving geopolitical threats and the need to maintain technological superiority. Contracts like this represent the initial, high-risk, high-reward phases of bringing new capabilities from concept to reality, ensuring the Navy's submarine force remains capable and relevant for decades to come.

What historical spending patterns exist for submarine RDT&E, and how does this award compare?

Historical spending on submarine RDT&E by the U.S. Navy has consistently been substantial, reflecting the complexity and strategic importance of these platforms. Annual RDT&E budgets for submarines can range from hundreds of millions to over a billion dollars, depending on the program phase and specific technological advancements being pursued. This $3.14 billion award, spread over approximately nine years, represents a significant, sustained investment. While direct comparisons are difficult due to the unique nature of RDT&E and the sole-source awards, this contract's value aligns with major, long-term development efforts for new submarine classes or significant technological overhauls. It indicates a commitment to ongoing innovation in submarine capabilities.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002411R2128

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: $3,191,698,162

Exercised Options: $3,191,198,162

Current Obligation: $3,145,999,614

Actual Outlays: $891,651

Subaward Activity

Number of Subawards: 608

Total Subaward Amount: $273,477,164

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline