DoD's $435.7M CVN 77 Contract with Metro Machine Corp. Faces Scrutiny for Potential Overpricing

Contract Overview

Contract Amount: $435,748,755 ($435.7M)

Contractor: Metro Machine Corp.

Awarding Agency: Department of Defense

Start Date: 2016-07-29

End Date: 2024-11-15

Contract Duration: 3,031 days

Daily Burn Rate: $143.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: IGF::CT::IGF EXECUTION PLANNING CVN 77 FY18 DPIA

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23511

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $435.7 million to METRO MACHINE CORP. for work described as: IGF::CT::IGF EXECUTION PLANNING CVN 77 FY18 DPIA Key points: 1. The contract value of $435.7M for ship repair is substantial, indicating a significant investment by the Department of the Navy. 2. Metro Machine Corp. is the sole awardee, raising questions about the extent of competition and potential price discovery. 3. The Cost Plus Award Fee (CPA) contract type introduces performance incentives but can also lead to cost overruns if not managed tightly. 4. The shipbuilding and repair sector is critical for national defense, but often involves complex, high-cost projects.

Value Assessment

Rating: questionable

The contract's benchmark price of $1,437,640 for 3,031 days suggests a daily rate of approximately $474. While specific benchmarks for CVN refits are scarce, the significant difference between the awarded amount and the benchmark warrants further investigation into cost drivers and potential inefficiencies.

Cost Per Unit: $474 (estimated daily rate)

Competition Analysis

Competition Level: full-and-open

Despite being awarded under 'full and open competition,' the fact that only one award was made to Metro Machine Corp. suggests potential limitations in the bidding pool or the evaluation process. This lack of robust competition may have hindered effective price discovery.

Taxpayer Impact: The substantial contract value means any inefficiencies or overpricing directly impacts taxpayer funds allocated to national defense.

Public Impact

Taxpayers are funding a critical naval asset's maintenance, ensuring operational readiness. The contract supports jobs within the shipbuilding and repair industry, potentially benefiting the local economy in Virginia. The long duration of the contract (over 8 years) implies a sustained commitment of federal resources to this project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to CPA contract type.
Limited competitive pressure despite 'full and open' designation.
Significant contract value increases financial risk.
Long contract duration increases exposure to changing economic conditions.

Positive Signals

Supports critical naval asset maintenance.
Potential for job creation in the shipbuilding sector.
Awarded under a formal competitive process.

Sector Analysis

The shipbuilding and repair sector is characterized by high barriers to entry, specialized labor, and complex project management. Spending benchmarks can vary widely based on vessel type, age, and scope of work. This contract falls within a critical defense sub-sector.

Small Business Impact

The data does not indicate any specific provisions or awards made to small businesses under this contract. Further analysis would be needed to determine if small business participation was sought or achieved.

Oversight & Accountability

The contract's long duration and significant value necessitate robust oversight from the Department of the Navy's Inspector General and relevant contracting officers to ensure performance, cost control, and adherence to terms.

Related Government Programs

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

Risk Flags

Potential for cost overruns due to CPA contract type.
Limited competitive pressure despite 'full and open' designation.
Significant contract value increases financial risk.
Long contract duration increases exposure to changing economic conditions.
Discrepancy between benchmark and awarded price requires justification.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $435.7 million to METRO MACHINE CORP.. IGF::CT::IGF EXECUTION PLANNING CVN 77 FY18 DPIA

Who is the contractor on this award?

The obligated recipient is METRO MACHINE CORP..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $435.7 million.

What is the period of performance?

Start: 2016-07-29. End: 2024-11-15.

What specific factors contributed to the significant difference between the benchmark price and the awarded contract value?

The discrepancy between the benchmark price and the awarded contract value could stem from several factors. These may include unforeseen technical challenges during the planning phase, escalation of material and labor costs beyond initial projections, or specific requirements unique to the CVN 77 refit that were not fully captured in the benchmark. A detailed cost breakdown and justification from the contractor would be necessary to fully understand this variance.

How effectively did the 'full and open competition' process ensure competitive pricing for this complex ship repair contract?

While the contract was advertised as 'full and open,' the award to a single entity raises concerns about the actual level of competition achieved. It's possible that only one firm possessed the highly specialized capabilities required for this specific aircraft carrier repair, or that the solicitation's terms inadvertently limited the bidder pool. Without multiple competitive bids, the government may not have secured the most advantageous pricing.

What are the primary risks associated with the Cost Plus Award Fee (CPA) structure in this context, and how are they being mitigated?

The primary risk of a CPA contract is the potential for cost overruns, as the contractor is reimbursed for allowable costs plus a fee that can be adjusted based on performance. Mitigation strategies typically involve stringent cost monitoring, clear performance metrics tied to the award fee, and robust oversight by the contracting officer to ensure costs are reasonable and allocable. The long duration of this contract amplifies these risks, requiring sustained vigilance.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002416R4306

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 200 LIGON ST, NORFOLK, VA, 23523

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $552,722,229

Exercised Options: $435,748,755

Current Obligation: $435,748,755

Actual Outlays: $144,777,336

Subaward Activity

Number of Subawards: 296

Total Subaward Amount: $87,769,261

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline