Navy awards $2.45B contract to Electric Boat for Columbia Class submarine design completion

Contract Overview

Contract Amount: $24,463,811,834 ($24.5B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2017-09-21

End Date: 2031-12-31

Contract Duration: 5,214 days

Daily Burn Rate: $4.7M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: COLUMBIA CLASS DESIGN COMPLETION

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $24.46 billion to ELECTRIC BOAT CORPORATION for work described as: COLUMBIA CLASS DESIGN COMPLETION Key points: 1. Contract awarded to a single, highly specialized provider, raising questions about competitive pricing. 2. Long-term contract duration suggests significant future investment and potential for cost overruns. 3. Cost-plus incentive fee structure may incentivize cost control but requires careful oversight. 4. Sole-source nature limits opportunities for market-driven innovation and cost efficiencies. 5. Focus on design completion indicates a critical, early-stage phase of a major defense program. 6. Significant investment in a strategic national asset, highlighting defense priorities.

Value Assessment

Rating: questionable

The contract's value of $2.45 billion for design completion is substantial. As a sole-source award, direct comparison to similar design contracts is difficult. However, the cost-plus incentive fee (CPIF) structure, while common in complex defense projects, can lead to higher final costs if not managed rigorously. Benchmarking the per-design-element cost against industry standards would be necessary for a more precise value assessment, but such data is not readily available for this unique submarine class.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to Electric Boat Corporation, indicating that the Navy determined only this contractor possessed the necessary specialized knowledge, facilities, and experience to perform the design completion for the Columbia Class submarines. The lack of competition means there was no opportunity for price discovery through a bidding process, potentially leading to a higher price than if multiple firms had competed.

Taxpayer Impact: Taxpayers are likely paying a premium due to the absence of competitive pressure. The sole-source nature means the government cannot leverage market forces to secure the most cost-effective design services.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, ensuring the development of a critical strategic asset. Services delivered include advanced engineering and design work for the next generation of ballistic missile submarines. Geographic impact is concentrated in Connecticut, where Electric Boat's facilities are located, supporting the regional economy. Workforce implications include the employment of highly skilled engineers, designers, and technical staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (over 10 years) increases risk of cost escalation and scope creep.
Cost-plus incentive fee contracts require robust government oversight to ensure cost control.
Dependence on a single contractor for critical design work poses a strategic risk if performance falters.

Positive Signals

Award to a contractor with established expertise in submarine design ensures continuity and specialized knowledge.
Focus on design completion is a necessary step for a complex, high-priority defense program.
Incentive fee structure aims to align contractor performance with government objectives.
Long-term commitment provides stability for the contractor to invest in necessary resources and personnel.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industry's shipbuilding and design segment. The market for designing and building advanced submarines is highly concentrated, with few companies possessing the requisite technical expertise and security clearances. The total value reflects the complexity and strategic importance of the Columbia Class program, which represents a significant modernization effort for the U.S. nuclear deterrent.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of submarine design, it is unlikely that small businesses would be primary contractors. However, Electric Boat Corporation may engage small businesses as subcontractors for specific components or services, though the extent of this is not detailed in the provided data.

Oversight & Accountability

Oversight will be managed by the Department of the Navy, likely through program executive offices and contracting officers. Accountability measures are embedded in the Cost Plus Incentive Fee (CPIF) structure, which ties contractor profit to performance metrics. Transparency may be limited due to the classified nature of submarine design, but contract milestones and expenditures should be subject to standard government reporting and auditing processes, potentially including Inspector General reviews.

Related Government Programs

Ohio-Class Submarine Program
Virginia-Class Submarine Program
Future Submarine Development Programs
Naval Ship Design and Engineering Contracts

Risk Flags

Sole-source award
Long-term contract duration
Cost-plus contract type
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $24.46 billion to ELECTRIC BOAT CORPORATION. COLUMBIA CLASS DESIGN COMPLETION

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 $24.46 billion.

What is the period of performance?

Start: 2017-09-21. End: 2031-12-31.

What is Electric Boat Corporation's track record with large, sole-source defense design contracts?

Electric Boat Corporation (EBC) has a long and established history of designing and building submarines for the U.S. Navy, including the preceding Ohio-class and the current Virginia-class attack submarines. Their track record with large, sole-source contracts is extensive, as they are one of only two shipyards capable of building nuclear-powered submarines in the United States. While this specialization often necessitates sole-source awards for critical programs like the Columbia Class, it also means EBC has significant experience navigating the complexities of such agreements, including managing large budgets, long timelines, and stringent performance requirements. Historical performance on similar programs indicates a capacity to deliver complex vessels, though like many large defense projects, timelines and costs have sometimes faced challenges requiring adjustments and oversight.

How does the Cost Plus Incentive Fee (CPIF) structure compare to other contract types for this stage of a program?

The Cost Plus Incentive Fee (CPIF) structure is common for complex, high-risk defense programs where the final costs are difficult to estimate precisely at the outset, such as advanced design and development. Unlike fixed-price contracts, CPIF allows the contractor to recover allowable costs plus a fee that is adjusted based on performance against pre-determined targets (e.g., cost, schedule, technical performance). Compared to Cost Plus Fixed Fee (CPFF), CPIF offers greater incentive for the contractor to control costs, as a lower final cost can result in a higher fee within a defined range. However, it requires robust government oversight to establish realistic targets and monitor performance effectively. For a design completion phase, where innovation and problem-solving are key, CPIF can be more appropriate than fixed-price contracts, which might stifle creativity or lead to contractor requests for change orders if unforeseen issues arise.

What are the primary risks associated with a sole-source award for a program of this magnitude?

The primary risks associated with a sole-source award for the Columbia Class design completion are centered around cost and innovation. Without competitive bidding, there is a reduced incentive for the contractor, Electric Boat Corporation, to minimize costs, potentially leading to higher prices for the government and taxpayers. Price discovery is limited, making it harder for the Navy to ascertain if they are receiving the best possible value. Furthermore, the lack of competition can stifle innovation, as there are fewer external pressures to adopt novel or more efficient design approaches. There's also a risk of contractor complacency or 'lock-in,' where the government becomes overly dependent on the sole provider, potentially facing difficulties if performance issues arise or if future needs require different solutions.

What historical spending patterns exist for submarine design and development contracts within the Department of Defense?

Historical spending patterns for submarine design and development contracts within the Department of Defense reveal consistently high costs due to the extreme complexity, technological sophistication, and long development cycles involved. Programs like the Ohio-class replacement (which the Columbia Class succeeds) and the Virginia-class attack submarines have historically required multi-billion dollar investments spanning decades. These programs often involve sole-source or limited-competition awards due to the specialized nature of the work and the limited industrial base capable of undertaking such projects. Cost overruns and schedule delays have been common themes across major naval shipbuilding programs, underscoring the challenges in accurately estimating and controlling expenses for these cutting-edge platforms. The significant investment in the Columbia Class design completion aligns with these historical trends of substantial, long-term funding for strategic naval assets.

How does the $2.45 billion value compare to the total estimated cost of the Columbia Class program?

The $2.45 billion awarded for the Columbia Class design completion represents a significant portion of the program's early-stage investment, but it is a fraction of the total estimated cost for the entire fleet. While the exact total program cost is subject to change and detailed projections, estimates for the Columbia Class submarines have ranged widely, often cited in the tens of billions of dollars per submarine, with the total fleet cost potentially exceeding $100 billion. This $2.45 billion contract specifically covers the detailed design, engineering, and associated activities necessary to finalize the blueprints and specifications before full-scale construction begins. Therefore, it is a crucial but initial investment phase, setting the foundation for the much larger subsequent procurement and construction costs.

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: N0002416R2117

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 75 EASTERN POINT RD, GROTON, CT, 06340

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

Financial Breakdown

Contract Ceiling: $26,700,371,554

Exercised Options: $26,700,371,554

Current Obligation: $24,463,811,834

Actual Outlays: $43,723,357

Subaward Activity

Number of Subawards: 5208

Total Subaward Amount: $7,748,855,135

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline