Navy awards $155M contract for ship maintenance, highlighting shipbuilding sector activity

Contract Overview

Contract Amount: $154,791,783 ($154.8M)

Contractor: National Steel and Shipbuilding Company

Awarding Agency: Department of Defense

Start Date: 2017-06-06

End Date: 2020-01-10

Contract Duration: 948 days

Daily Burn Rate: $163.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: IGF::OT::IGF USS MAKIN ISLAND FY17 DPMA

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $154.8 million to NATIONAL STEEL AND SHIPBUILDING COMPANY for work described as: IGF::OT::IGF USS MAKIN ISLAND FY17 DPMA Key points: 1. Contract value represents significant investment in naval readiness and sustainment. 2. Competition dynamics suggest a healthy market for specialized shipbuilding and repair services. 3. Contract duration indicates a long-term need for maintenance and modernization. 4. Fixed-price contract structure aims to control costs and manage financial risk. 5. Geographic concentration in California points to regional economic impact. 6. This award aligns with broader defense spending trends in maritime capabilities.

Value Assessment

Rating: good

The contract value of $155 million for ship maintenance appears reasonable given the scope of work for a major naval vessel. Benchmarking against similar large-scale repair and maintenance contracts for naval assets suggests this award falls within expected cost ranges. The firm fixed-price structure provides cost certainty, though the ultimate value-for-money depends on the execution and quality of the services rendered. Further analysis would require detailed cost breakdowns and comparison to specific repair tasks.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. This competitive process is designed to foster price discovery and ensure the government receives the best value. The presence of two bidders, as indicated, suggests a degree of competition, though the specific number of proposals received and the range of bids would provide a clearer picture of the competitive intensity.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down prices through market forces, leading to more efficient use of public funds for essential services like naval vessel maintenance.

Public Impact

The U.S. Navy benefits from enhanced readiness and operational capability of the USS Makin Island. The contract supports critical shipbuilding and repair services, ensuring the longevity of naval assets. The award has a significant economic impact on the shipbuilding and repair industry in California. It sustains jobs within the specialized maritime workforce in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen repair issues arise beyond the scope of the fixed-price contract.
Dependence on a single contractor for critical maintenance could pose supply chain or performance risks.
Ensuring timely completion within the contract period is crucial for naval operational schedules.

Positive Signals

Firm fixed-price contract provides cost certainty and limits the government's exposure to cost increases.
Full and open competition suggests a robust market and potential for competitive pricing.
The contract duration indicates a stable, long-term requirement, allowing for workforce planning and investment by the contractor.

Sector Analysis

The shipbuilding and repair sector is a critical component of the U.S. industrial base, particularly for national defense. This contract falls within the broader category of industrial services supporting naval operations. Spending in this sector is often driven by defense appropriations and the need to maintain a modern and capable fleet. Comparable spending benchmarks would include other major repair and overhaul contracts for naval vessels, which can range from tens to hundreds of millions of dollars depending on the ship class and scope of work.

Small Business Impact

This contract was awarded to NATIONAL STEEL AND SHIPBUILDING COMPANY and does not indicate a specific small business set-aside. While the prime contractor is a large entity, there may be opportunities for small businesses to participate as subcontractors, particularly in specialized areas of repair or component supply. The extent of small business subcontracting would need to be assessed through contract compliance reports.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring delivery of specified services within agreed-upon timelines and quality standards. Transparency is facilitated through contract award databases, though detailed performance metrics and inspection reports may not be publicly available. The Inspector General's office for the Department of Defense would have jurisdiction over any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Naval Ship Maintenance Contracts
Shipbuilding and Repair Services
Defense Readiness Contracts
Department of the Navy Procurement

Risk Flags

Potential for scope creep if unforeseen issues require additional work beyond the initial fixed-price agreement.
Risk of delays impacting naval operational schedules if contractor performance falters.
Dependence on specialized workforce availability for critical repair tasks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $154.8 million to NATIONAL STEEL AND SHIPBUILDING COMPANY. IGF::OT::IGF USS MAKIN ISLAND FY17 DPMA

Who is the contractor on this award?

The obligated recipient is NATIONAL STEEL AND SHIPBUILDING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $154.8 million.

What is the period of performance?

Start: 2017-06-06. End: 2020-01-10.

What is the historical spending pattern for ship maintenance and repair for the Department of the Navy, and how does this award compare?

The Department of the Navy consistently allocates significant funds towards ship maintenance and repair to ensure fleet readiness. Annual spending in this category typically runs into billions of dollars, encompassing a wide range of services from routine upkeep to major overhauls. This $155 million award for the USS Makin Island represents a substantial, but not extraordinary, investment for a single vessel's maintenance cycle. It aligns with the Navy's ongoing need to sustain its diverse fleet, which includes numerous classes of ships requiring specialized and costly upkeep. Historical data shows that major maintenance contracts for large naval vessels often fall within this multi-million dollar range, reflecting the complexity and scale of the work involved.

What specific types of maintenance and repair services are typically included in a contract of this magnitude for a naval vessel?

A contract of this magnitude for a naval vessel like the USS Makin Island typically encompasses a comprehensive suite of maintenance and repair services. This often includes hull maintenance and repair, propulsion system servicing, auxiliary machinery upkeep, electrical system repairs, and habitability improvements. It may also involve scheduled overhauls, modernization upgrades, and the replacement of aging components. The scope is usually defined by the vessel's class, age, and operational tempo, aiming to restore or enhance its operational readiness and extend its service life. Specific tasks are detailed in the contract's Statement of Work (SOW).

How does the firm fixed-price contract type influence the risk and potential for cost savings for the government in this context?

The firm fixed-price (FFP) contract type is generally favored for services with well-defined scopes, like ship maintenance, as it shifts the majority of cost risk to the contractor. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides the government with significant cost certainty and predictability, making budgeting easier. While it limits the government's exposure to cost overruns, it can also mean that the initial price might be higher to account for the contractor's risk premium. However, it incentivizes the contractor to be efficient and control their own costs to maximize profit.

What are the implications of awarding this contract to a company based in California for the broader defense industrial base?

Awarding this significant ship maintenance contract to a company based in California has several implications for the defense industrial base. It reinforces the importance of established shipbuilding and repair hubs, such as those on the West Coast, which possess the specialized infrastructure, skilled workforce, and experience necessary for complex naval projects. This concentration of expertise can lead to greater efficiency and innovation within the sector. Furthermore, it supports the regional economy and sustains critical capabilities that are vital for national security. The presence of such contractors ensures the Navy has reliable partners for maintaining its fleet, contributing to overall defense readiness.

Given the contract's duration and value, what are the potential long-term performance expectations for the contractor?

With a contract value of approximately $155 million and a duration of nearly three years (948 days), the long-term performance expectations for NATIONAL STEEL AND SHIPBUILDING COMPANY are substantial. The Navy will expect consistent delivery of high-quality maintenance and repair services, meeting all technical specifications and performance standards outlined in the contract. Timely completion of work is critical to avoid impacting the USS Makin Island's operational schedule. Furthermore, the contractor is expected to manage their resources effectively, maintain a skilled workforce, and adhere to safety and environmental regulations throughout the contract period. Positive performance could lead to future contract opportunities.

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: N0002417R4426

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 2798 HARBOR DR, SAN DIEGO, CA, 92113

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

Financial Breakdown

Contract Ceiling: $154,891,357

Exercised Options: $154,791,783

Current Obligation: $154,791,783

Actual Outlays: $-751,282

Subaward Activity

Number of Subawards: 189

Total Subaward Amount: $17,448,550

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline