Over $606M for Hawaii Shipyard Repairs: BAE Systems Awarded Major Naval Contract

Contract Overview

Contract Amount: $606,407,524 ($606.4M)

Contractor: BAE Systems Hawaii Shipyards Inc.

Awarding Agency: Department of Defense

Start Date: 2014-04-03

End Date: 2019-04-02

Contract Duration: 1,825 days

Daily Burn Rate: $332.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: IGF::CT::IGF THIS CONTRACT IS FOR SHIPYARD REPAIRS OF SURFACE SHIPS IN HAWAII. USS HALSEY (DDG 97)

Place of Performance

Location: HONOLULU, HONOLULU County, HAWAII, 96819

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $606.4 million to BAE SYSTEMS HAWAII SHIPYARDS INC. for work described as: IGF::CT::IGF THIS CONTRACT IS FOR SHIPYARD REPAIRS OF SURFACE SHIPS IN HAWAII. USS HALSEY (DDG 97) Key points: 1. Significant investment in naval readiness and infrastructure maintenance in the Pacific. 2. Long-term contract indicates sustained need for specialized shipyard services. 3. Potential for cost overruns given the Cost Plus Award Fee structure. 4. Sole contractor for this specific scope may limit competitive pricing pressures. 5. Geographic concentration of services in Hawaii could impact response times for other regions. 6. Performance metrics and award fees will be critical to ensuring value for taxpayer dollars.

Value Assessment

Rating: fair

The contract's total value of over $606 million over five years represents a substantial investment in maintaining naval assets. Benchmarking this against similar large-scale shipyard repair contracts is challenging due to the unique operational environment and specific vessel types. The Cost Plus Award Fee (CPAF) structure introduces variability, where the final cost can exceed the initial estimate based on performance. While CPAF can incentivize efficiency, it also carries a risk of higher-than-expected expenditures if not managed rigorously.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to submit proposals. However, the data does not specify the number of bids received. The nature of specialized shipyard services, particularly in a geographically constrained area like Hawaii, can sometimes limit the pool of qualified competitors, potentially impacting the intensity of price competition.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best value through a competitive bidding process. However, the specific number of bidders and the complexity of the services required will ultimately determine the extent of cost savings realized.

Public Impact

Naval surface fleet operating out of or visiting Hawaii receives essential maintenance and repair services. Ensures the operational readiness of critical naval assets stationed in the Indo-Pacific region. Supports the local economy in Hawaii through employment and business opportunities within the shipyard. Contributes to the U.S. Navy's strategic presence and power projection capabilities in the Pacific theater.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Award Fee structure can lead to costs exceeding initial estimates.
Limited competition for highly specialized services in a specific geographic location.
Dependence on a single contractor for critical repairs could create vulnerabilities.
Potential for scope creep if repair requirements are not tightly defined and managed.

Positive Signals

Awarded through full and open competition, indicating a competitive process.
Long-term contract suggests a stable and reliable provider for essential services.
Focus on maintaining critical naval assets enhances national security.
Contract aims to ensure the operational readiness of the fleet.

Sector Analysis

This contract falls within the broader shipbuilding and repair sector, a critical component of the defense industrial base. The market for naval ship repair is specialized, often dominated by a few large firms with the necessary infrastructure, expertise, and security clearances. Spending in this sector is directly tied to naval fleet size, operational tempo, and modernization efforts. Comparable spending benchmarks would typically involve analyzing other large-scale fleet maintenance contracts awarded by the Navy or other maritime services.

Small Business Impact

The data indicates that small business participation (sb) is false and that there was no small business set-aside (ss). This suggests that the contract was not specifically targeted towards small businesses. While BAE Systems is a large prime contractor, there may be opportunities for small businesses to participate as subcontractors, depending on the specific repair needs and BAE Systems' subcontracting strategy. Further analysis would be needed to determine the extent of small business involvement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Cost Plus Award Fee structure necessitates robust performance monitoring to ensure that award fees are justified and that costs remain within reasonable bounds. The Inspector General of the Department of Defense may also conduct audits or investigations into contract performance and financial management to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

Naval Ship Repair and Maintenance
Shipbuilding and Repairing
Defense Logistics and Support
Fleet Readiness

Risk Flags

Potential for cost overruns due to CPAF structure.
Limited competition due to specialized services and geographic location.
Logistical challenges and higher costs associated with operating in Hawaii.
Dependence on a single contractor for critical repairs.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $606.4 million to BAE SYSTEMS HAWAII SHIPYARDS INC.. IGF::CT::IGF THIS CONTRACT IS FOR SHIPYARD REPAIRS OF SURFACE SHIPS IN HAWAII. USS HALSEY (DDG 97)

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS HAWAII SHIPYARDS 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 $606.4 million.

What is the period of performance?

Start: 2014-04-03. End: 2019-04-02.

What is the historical spending pattern for shipyard repairs in Hawaii for the U.S. Navy?

Analyzing historical spending patterns for shipyard repairs in Hawaii requires access to detailed contract databases and budget allocations over several fiscal years. Generally, naval repair spending in strategic locations like Hawaii is substantial and consistent, driven by the presence of a significant fleet and the geopolitical importance of the region. Factors influencing historical spending include the age and condition of the fleet, the types of vessels homeported or visiting, and the availability of dry-dock facilities. Without specific historical data for this contract or similar ones in Hawaii, it's difficult to provide precise figures. However, it's reasonable to assume that multi-million dollar contracts for major repairs are recurring necessities to maintain operational readiness, reflecting ongoing investments in naval infrastructure and asset upkeep.

How does the Cost Plus Award Fee (CPAF) structure typically impact final contract costs compared to fixed-price contracts for similar services?

The Cost Plus Award Fee (CPAF) structure allows the contractor to recover all allowable costs plus a base fee, with an additional award fee determined by the government based on performance against specific criteria. This contrasts with fixed-price contracts, where the price is set upfront, and the contractor bears more risk for cost overruns. CPAF contracts can lead to final costs that are higher than initially estimated because the government reimburses costs incurred, and the award fee incentivizes performance, potentially driving up spending if not carefully managed. However, CPAF can also be beneficial when the scope of work is uncertain or difficult to define precisely at the outset, as it allows for flexibility and encourages the contractor to meet or exceed performance targets. For shipyard repairs, where unforeseen issues can arise, CPAF might offer more adaptability than a rigid fixed-price contract, but it requires diligent government oversight to control costs and ensure value.

What are the key performance indicators (KPIs) likely used to determine the award fee for BAE Systems Hawaii Shipyards Inc. under this contract?

For a contract involving shipyard repairs of surface ships, key performance indicators (KPIs) for determining award fees would likely focus on several critical areas. These typically include on-time completion of milestones and the overall project, adherence to quality standards and specifications, effectiveness of cost management (even within a cost-reimbursable structure), safety performance on-site, and the successful resolution of any emergent issues during repairs. Additionally, the Navy might assess the contractor's responsiveness to inquiries, the quality of technical documentation provided, and the overall customer satisfaction. The specific KPIs would be detailed in the contract's Performance Work Statement (PWS) and the Award Fee Plan, outlining measurable targets that, if met or exceeded, would result in higher award fees.

What is the typical track record of BAE Systems in managing large, complex naval repair contracts for the U.S. Navy?

BAE Systems is a major global defense contractor with a significant presence in naval shipbuilding and repair. They have a long history of managing large, complex contracts for the U.S. Navy and other navies worldwide. Their track record generally includes successful delivery of major maintenance, modernization, and repair services for a wide range of naval vessels, including aircraft carriers, destroyers, and submarines. However, like any large contractor managing extensive portfolios, they have also faced challenges, including cost overruns and schedule delays on certain projects, which are not uncommon in the complex and demanding field of naval repair. The Navy's contracting process typically involves evaluating a bidder's past performance, so BAE Systems' ability to secure this substantial Hawaii contract suggests a generally favorable assessment of their capabilities and reliability by the Department of the Navy.

How does the geographic location in Hawaii potentially influence the cost and efficiency of these shipyard repair services?

The geographic location in Hawaii introduces several factors that can influence the cost and efficiency of shipyard repair services. Firstly, logistics costs for materials, specialized equipment, and potentially skilled labor that need to be transported to the islands are likely higher than on the U.S. mainland. Secondly, the availability of a local skilled workforce specialized in complex naval repairs might be more limited, potentially requiring contractors to bring in personnel or invest more heavily in training, both of which can increase costs. Furthermore, the isolation of Hawaii can impact supply chain reliability and lead times for parts and components. Despite these challenges, the strategic importance of Hawaii as a major U.S. naval base in the Pacific necessitates these services, and contracts are structured to account for these operational realities, often including provisions for higher logistical costs.

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: N0002414R4412

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 3049 UALENA ST STE 915, HONOLULU, HI, 96819

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: $722,229,298

Exercised Options: $606,411,013

Current Obligation: $606,407,524

Actual Outlays: $-16,133,105

Subaward Activity

Number of Subawards: 1246

Total Subaward Amount: $190,720,660

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline