Navy awards $45M contract for shipbuilding and repair services to BAE Systems Maritime Solutions

Contract Overview

Contract Amount: $45,006,592 ($45.0M)

Contractor: BAE Systems Maritime Solutions SAN Diego Inc.

Awarding Agency: Department of Defense

Start Date: 2014-09-10

End Date: 2020-10-29

Contract Duration: 2,241 days

Daily Burn Rate: $20.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: IGF::OT::IGF MCM CLASS MSMO

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $45.0 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC. for work described as: IGF::OT::IGF MCM CLASS MSMO Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract type is Cost Plus Incentive Fee (CPIF), which can incentivize cost control but also carries inherent risk. 3. The duration of the contract (2241 days) indicates a long-term commitment for significant services. 4. The award was made by the Department of the Navy, a major defense spender. 5. The North American Industry Classification System (NAICS) code 336611 points to shipbuilding and repair, a critical industrial capability.

Value Assessment

Rating: fair

The contract value of $45 million over approximately 6 years represents a significant investment. Without specific benchmarks for similar shipbuilding and repair contracts, it's difficult to definitively assess value for money. The CPIF contract type means the final cost could deviate from the initial estimate based on performance and cost targets, introducing variability. Further analysis would require comparing this contract's pricing structure and outcomes to other Navy shipbuilding contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'full and open competition,' indicating that all responsible sources were permitted to submit bids. The presence of two bids suggests a moderate level of competition for this specific award. While competition is generally positive, the number of bidders can influence price discovery and the ultimate value achieved. A higher number of bidders typically leads to more competitive pricing.

Taxpayer Impact: A competitive bidding process for this contract is beneficial for taxpayers as it likely resulted in a more favorable price compared to a sole-source award. However, with only two bidders, the full potential for cost savings might not have been realized.

Public Impact

The primary beneficiary is the Department of the Navy, receiving essential shipbuilding and repair services. This contract supports the maintenance and readiness of naval vessels. The services are likely concentrated in California, where BAE Systems Maritime Solutions is located. The contract has implications for the skilled workforce in the shipbuilding and repair sector in San Diego.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Incentive Fee (CPIF) contracts can lead to cost overruns if not managed tightly.
Limited competition (2 bidders) may have restricted the potential for achieving the lowest possible price.
The long contract duration increases the risk of scope creep or unforeseen cost increases over time.

Positive Signals

Awarded through full and open competition, indicating a structured procurement process.
BAE Systems is a major defense contractor with established experience in maritime solutions.
The contract supports critical naval readiness and infrastructure.

Sector Analysis

The shipbuilding and repair industry is a vital component of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. The NAICS code 336611 covers establishments primarily engaged in building and repairing ships. This contract fits within the broader defense sector spending, specifically focusing on naval vessel sustainment and potentially new construction or modernization efforts. Comparable spending benchmarks would typically be found within the Department of Defense's shipbuilding and conversion accounts.

Small Business Impact

The data indicates that small business participation was not a specific set-aside for this contract (ss: false, sb: false). Therefore, the primary focus was likely on large prime contractors. While BAE Systems is a large entity, there may be subcontracting opportunities for small businesses within the scope of this award, though this is not explicitly detailed in the provided data. The impact on the small business ecosystem would depend on the extent of any subcontracting requirements or voluntary participation.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Inspector General (IG) jurisdiction would apply for investigations into fraud, waste, or abuse. Transparency is generally facilitated through contract award databases like FPDS, where basic information is publicly available. Specific performance metrics and oversight mechanisms would be detailed within the contract's terms and conditions.

Related Government Programs

Naval Ship Systems
Shipbuilding and Repair Contracts
Defense Procurement
Maritime Defense Industrial Base
Naval Vessel Maintenance

Risk Flags

Cost Plus Incentive Fee (CPIF) contract type requires careful monitoring to ensure cost control.
Long contract duration increases exposure to market volatility and potential scope creep.
Limited number of bidders (2) may indicate potential barriers to entry or a niche market.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.0 million to BAE SYSTEMS MARITIME SOLUTIONS SAN DIEGO INC.. IGF::OT::IGF MCM CLASS 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 $45.0 million.

What is the period of performance?

Start: 2014-09-10. End: 2020-10-29.

What is BAE Systems Maritime Solutions' track record with the Department of the Navy for similar shipbuilding and repair contracts?

BAE Systems Maritime Solutions, as a subsidiary of BAE Systems, has a significant history of contracting with the U.S. Navy. They are a major player in naval shipbuilding and sustainment, involved in constructing and overhauling various classes of vessels, including aircraft carriers, amphibious assault ships, and destroyers. Their track record typically involves large, complex contracts with long durations. Performance can vary, with some contracts meeting expectations and others facing delays or cost challenges, which is common in this highly specialized and demanding sector. A detailed review of their past performance ratings and any contract disputes or modifications would provide a clearer picture of their reliability for this specific award.

How does the $45 million contract value compare to typical Navy shipbuilding and repair expenditures?

The $45 million contract value is moderate within the context of major naval shipbuilding and repair programs. The Navy's shipbuilding budget alone often runs into tens of billions of dollars annually, encompassing the construction of new capital ships like carriers and submarines, which can cost billions each. Repair and maintenance contracts, like this one, can range from millions to hundreds of millions of dollars depending on the scope, vessel class, and complexity of the work. This $45 million award likely represents a significant but not colossal expenditure, possibly for a specific class of ships, a particular repair availability, or a component of a larger program. Benchmarking requires comparing it against similar scope contracts for comparable vessel types.

What are the primary risks associated with a Cost Plus Incentive Fee (CPIF) contract for shipbuilding?

A Cost Plus Incentive Fee (CPIF) contract, like the one awarded here, shares cost risks between the government and the contractor. The contractor is reimbursed for allowable costs and receives a target fee, but this fee is adjusted based on performance against target cost and schedule objectives. Key risks include: 1) Cost Overruns: If the contractor exceeds target costs, the government pays more, though the contractor's fee is reduced. Conversely, if costs are significantly below target, the contractor earns a higher fee. 2) Incentive Gaming: Contractors might focus excessively on meeting the incentive targets, potentially compromising quality or safety if not carefully monitored. 3) Complexity in Administration: CPIF contracts require robust government oversight to verify costs, assess performance, and ensure the incentive structure is fair and effective. For shipbuilding, where costs can be highly variable due to material fluctuations, labor issues, and technical challenges, managing these risks requires diligent oversight.

What is the significance of the NAICS code 336611 (Ship Building and Repairing) in relation to this contract?

The NAICS code 336611 specifically identifies the industry sector for establishments primarily engaged in building and repairing ships and boats. This classification is crucial as it defines the core business activity of the contractor and the nature of the services being procured. For the Department of the Navy, this code signifies a contract directly supporting the acquisition, maintenance, and modernization of its fleet. It indicates that the awarded funds are directed towards a critical segment of the defense industrial base, requiring specialized facilities, skilled labor (welders, pipefitters, electricians, engineers), and adherence to stringent quality and safety standards inherent in naval shipbuilding and repair.

How does the contract duration of 2241 days (approx. 6 years) impact the overall value and risk?

A contract duration of 2241 days (approximately six years) signifies a long-term commitment for substantial shipbuilding or repair services. This extended period allows for economies of scale and potentially more stable planning for both the contractor and the Navy. However, it also introduces significant risks. Inflationary pressures on labor and materials over six years can increase costs beyond initial projections. Technological advancements might render certain aspects of the work or the vessels themselves less relevant by the contract's end. Furthermore, the longer the duration, the greater the potential for unforeseen issues, scope changes, or performance degradation that require careful management and oversight to maintain value and control costs.

What does the 'DEFINITIVE CONTRACT' award type imply for this procurement?

The 'DEFINITIVE CONTRACT' award type signifies a standard, legally binding agreement that outlines the terms, conditions, scope of work, price, and delivery schedule for the services. Unlike basic ordering agreements or other preliminary contract vehicles, a definitive contract represents the final agreement between the parties. For a contract valued at $45 million with a duration of over six years, it implies that the scope of work, while potentially subject to modifications, was sufficiently defined at the time of award to establish a firm commitment. This type of contract is common for significant procurements where the government intends to secure specific goods or services over an extended 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: N0002413R4401

Offers Received: 2

Pricing Type: COST PLUS INCENTIVE FEE (V)

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: $91,357,661

Exercised Options: $45,006,592

Current Obligation: $45,006,592

Actual Outlays: $3,030,908

Subaward Activity

Number of Subawards: 179

Total Subaward Amount: $17,048,408

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline