DoD's $347M Joint High Speed Vessel Contract Awarded to Austal USA Raises Concerns Over Competition and Value

Contract Overview

Contract Amount: $347,366,588 ($347.4M)

Contractor: Austal USA, LLC

Awarding Agency: Department of Defense

Start Date: 2015-10-23

End Date: 2020-03-30

Contract Duration: 1,620 days

Daily Burn Rate: $214.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: JOINT HIGH SPEED VESSEL 11 LONG LEAD TIME MATERIAL UCA

Place of Performance

Location: MOBILE, MOBILE County, ALABAMA, 36610

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $347.4 million to AUSTAL USA, LLC for work described as: JOINT HIGH SPEED VESSEL 11 LONG LEAD TIME MATERIAL UCA Key points: 1. Significant investment in shipbuilding for naval capabilities. 2. Sole reliance on Austal USA limits competitive pricing and innovation. 3. Long lead time material procurement suggests potential for cost overruns. 4. Focus on a specific vessel type may indicate niche market dynamics.

Value Assessment

Rating: questionable

The contract value of $347M for long lead time material for a high-speed vessel is substantial. Without competitive benchmarking or detailed cost breakdowns, assessing its value against similar shipbuilding contracts is difficult. The fixed-price incentive structure aims to control costs, but the lack of competition is a primary concern.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This approach bypasses the competitive process, potentially leading to higher prices and reduced pressure on the contractor to innovate or optimize costs. Price discovery is likely limited without alternative bids.

Taxpayer Impact: The lack of competition in awarding this significant contract raises concerns about taxpayer value. Without a competitive bidding process, it's possible that taxpayers are not receiving the best possible price for the long lead time material procured.

Public Impact

Taxpayers may be overpaying due to the absence of a competitive bidding process. The long lead time material procurement could impact future shipbuilding schedules and costs. Dependence on a single supplier for critical components poses a supply chain risk. The specific nature of the vessel might limit its broader applicability or future resale value.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Sole-source award
Potential for cost overruns on long lead time material
Limited transparency on pricing

Positive Signals

Supports critical naval capabilities
Fixed-price incentive contract aims for cost control

Sector Analysis

The shipbuilding and repair sector is capital-intensive and often involves complex, long-term contracts. Government spending in this area is crucial for national defense and infrastructure. Benchmarks for similar large-scale vessel construction can vary widely based on complexity and materials.

Small Business Impact

The data indicates this contract was awarded to Austal USA, LLC, a large business. There is no indication that small businesses were involved in this specific procurement, suggesting a missed opportunity for small business participation.

Oversight & Accountability

The award of a sole-source contract for a significant amount warrants close oversight to ensure fair pricing and effective execution. Accountability mechanisms should be in place to track costs and performance against the fixed-price incentive goals.

Related Government Programs

Ship Building and Repairing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Sole-source award lacks competitive pressure
Potential for inflated pricing without competition
Risk of cost overruns on long lead time material
Limited transparency on cost justification
No apparent small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $347.4 million to AUSTAL USA, LLC. JOINT HIGH SPEED VESSEL 11 LONG LEAD TIME MATERIAL UCA

Who is the contractor on this award?

The obligated recipient is AUSTAL USA, LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $347.4 million.

What is the period of performance?

Start: 2015-10-23. End: 2020-03-30.

What is the justification for awarding this contract on a sole-source basis, and what steps were taken to ensure fair and reasonable pricing?

The justification for a sole-source award typically involves unique capabilities, urgent needs, or lack of viable alternatives. Without further details, it's difficult to assess the specific rationale. To ensure fair and reasonable pricing, the government should have conducted a thorough price analysis, potentially using historical data, cost estimates, or comparisons to similar commercial items, even without competing bids.

What are the specific risks associated with procuring long lead time material on a sole-source basis, and how are these risks being mitigated?

Procuring long lead time material sole-source carries risks of inflated costs, potential quality issues if the supplier is not adequately incentivized, and supply chain disruptions if the sole supplier faces problems. Mitigation strategies could include stringent contract clauses, independent cost verification, performance monitoring, and establishing contingency plans for alternative sourcing or expedited production if necessary.

How does the fixed-price incentive structure effectively ensure value for money given the lack of competition for this substantial contract?

A fixed-price incentive (FPI) contract aims to share cost savings or overruns between the government and contractor, incentivizing efficiency. However, its effectiveness in ensuring value for money is diminished when there is no competition. While the FPI structure provides some cost control, the absence of competitive pressure means the baseline target price might not be as aggressive, potentially leading to a less optimal outcome for taxpayers compared to a competed contract.

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

Solicitation ID: N0002415R2217

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Austal Limited

Address: 1 DUNLAP DR, MOBILE, AL, 36610

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $350,366,588

Exercised Options: $350,366,588

Current Obligation: $347,366,588

Actual Outlays: $39,424,356

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline