Navy awards $2B contract for Polar Security Cutter, with fixed-price incentive structure and long-term delivery

Contract Overview

Contract Amount: $2,012,244,218 ($2.0B)

Contractor: Bollinger Mississippi Shipbuilding, LLC

Awarding Agency: Department of Defense

Start Date: 2019-04-23

End Date: 2030-05-01

Contract Duration: 4,026 days

Daily Burn Rate: $499.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: POLAR SECURITY CUTTER #1 (FORMERLY HPIB) DETAIL DESIGN AND CONSTRUCTION

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39581

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $2.01 billion to BOLLINGER MISSISSIPPI SHIPBUILDING, LLC for work described as: POLAR SECURITY CUTTER #1 (FORMERLY HPIB) DETAIL DESIGN AND CONSTRUCTION Key points: 1. The contract's fixed-price incentive (FPI) structure aims to balance cost control with contractor performance, though potential for cost overruns exists if targets are missed. 2. Awarded under full and open competition, this contract suggests a competitive environment for specialized shipbuilding, potentially leading to better pricing. 3. The long duration (through 2030) and significant value indicate a high-stakes program with substantial performance and delivery risks. 4. The contract is for a single, highly specialized asset, placing it in a unique niche within the defense shipbuilding sector. 5. The fixed-price incentive type suggests the government is willing to pay more if the contractor meets certain performance targets, but also caps potential overruns. 6. The relatively low number of bids (3) for such a complex project might indicate limited qualified suppliers in this specialized market.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to the unique nature of polar security cutters. The total obligated amount of over $2 billion for a single vessel, even one as complex as a polar security cutter, represents a significant investment. The fixed-price incentive (FPI) contract type suggests an effort to control costs while incentivizing performance. However, without detailed cost breakdowns or comparisons to similar, highly specialized naval construction projects, a definitive value-for-money assessment is difficult. The price per unit is inherently high given the advanced capabilities and limited production runs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple capable shipbuilders were solicited. The record shows three bids were received, suggesting a degree of competition, though perhaps limited by the highly specialized nature of polar security cutter construction. The full and open process is generally favorable for price discovery and ensuring the government receives competitive offers.

Taxpayer Impact: The competitive bidding process for this specialized vessel aims to secure the best possible price for taxpayers, although the unique requirements may limit the number of viable bidders and thus the extent of price reduction.

Public Impact

The primary beneficiaries are the U.S. Navy and the nation, gaining a critical asset for operating in Arctic and Antarctic regions. The contract delivers a state-of-the-art Polar Security Cutter, essential for national security, scientific research, and law enforcement in polar environments. The geographic impact is global, focusing on the strategic Arctic and Antarctic regions, enabling sustained U.S. presence and influence. Workforce implications include job creation and skill development within the shipbuilding industry, particularly in Mississippi where the contractor is located.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in fixed-price incentive contracts if performance targets are not met.
Long contract duration increases risk exposure to changing technological requirements or geopolitical landscapes.
Limited competition (3 bidders) may indicate a tight market, potentially impacting future pricing for similar assets.
The specialized nature of the vessel means any delays or technical issues could have significant cascading effects on operational readiness.

Positive Signals

Awarded under full and open competition, suggesting a robust process to solicit offers.
Fixed-price incentive structure provides a framework for cost control and performance motivation.
The contract supports a critical national security capability, aligning with strategic defense priorities.
The contractor, Bollinger Mississippi Shipbuilding, has a history in shipbuilding, providing some level of established capability.

Sector Analysis

The shipbuilding and repair industry (NAICS 336611) is a capital-intensive sector characterized by large, complex projects, often with significant government contracts. The market for specialized naval vessels, such as ice-capable polar security cutters, is particularly niche, with a limited number of domestic shipyards possessing the necessary expertise and infrastructure. This contract represents a substantial investment in a critical capability for the U.S. Navy, addressing a growing strategic need in polar regions. Comparable spending benchmarks are difficult to establish due to the unique design and mission requirements of these cutters.

Small Business Impact

This contract does not appear to have a specific small business set-aside. Given the scale and specialized nature of building a Polar Security Cutter, it is unlikely that small businesses would be the prime contractors. However, opportunities may exist for small businesses to participate as subcontractors, supplying components, materials, or specialized services to Bollinger Mississippi Shipbuilding. The extent of small business subcontracting will depend on the prime contractor's strategy and the availability of qualified small business suppliers.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting and program management offices. The fixed-price incentive structure includes defined cost and performance targets, which will be monitored throughout the contract's duration. Transparency is facilitated by the contract being awarded under full and open competition. While specific Inspector General (IG) jurisdiction details are not provided, the Department of Defense IG typically has oversight over major defense contracts to investigate fraud, waste, and abuse.

Related Government Programs

U.S. Coast Guard Polar Security Cutters
Naval shipbuilding programs
Arctic strategy and defense initiatives
Major defense acquisition programs

Risk Flags

Long contract duration increases risk of obsolescence or scope creep.
Fixed-price incentive contracts carry inherent risk of cost overruns if targets are missed.
Limited competition may reduce price discovery and increase future procurement costs.
Highly specialized nature of the asset increases technical and performance risks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.01 billion to BOLLINGER MISSISSIPPI SHIPBUILDING, LLC. POLAR SECURITY CUTTER #1 (FORMERLY HPIB) DETAIL DESIGN AND CONSTRUCTION

Who is the contractor on this award?

The obligated recipient is BOLLINGER MISSISSIPPI SHIPBUILDING, 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 $2.01 billion.

What is the period of performance?

Start: 2019-04-23. End: 2030-05-01.

What is the historical spending trend for Polar Security Cutters?

The data provided focuses on a single contract for one Polar Security Cutter (Hull #1). Historically, the U.S. Coast Guard has operated older icebreakers, and the need for new, capable Polar Security Cutters has been a long-standing requirement. The program has faced delays and cost challenges in the past. This specific contract, awarded in 2019 with an estimated completion in 2030, represents a significant step in acquiring these new assets. Prior to this, funding was allocated for design and long-lead components, but a full construction contract of this magnitude is a more recent development. The total program is intended to include multiple cutters, suggesting future spending will continue, though specific award dates and values for subsequent vessels are not detailed here.

How does the fixed-price incentive (FPI) structure compare to other contract types for naval shipbuilding?

Naval shipbuilding contracts can utilize various structures, including Fixed-Price Incentive (FPI), Cost Plus Incentive Fee (CPIF), and Firm-Fixed-Price (FFP). An FPI contract, like this one, establishes a target cost, target profit, and a price ceiling. If the final cost is below the target, both the government and contractor share in the savings based on a pre-negotiated formula. If the final cost exceeds the target but remains below the ceiling, the profit is reduced, and the government pays the final cost plus the adjusted profit. If the cost exceeds the ceiling, the contractor absorbs the excess. This structure aims to incentivize cost control while allowing for flexibility in complex projects where exact costs are hard to predict. It differs from FFP, which places more cost risk on the contractor, and CPIF, which shares costs and profits more broadly and often involves a higher government risk.

What are the key performance metrics and risks associated with this Polar Security Cutter contract?

Key performance metrics likely revolve around the cutter's ability to operate in heavy ice conditions (e.g., ice class certification, sustained speed in ice), operational availability, payload capacity (including scientific equipment and personnel), endurance, and compliance with stringent environmental and safety regulations. The primary risks include technical challenges in designing and building a vessel capable of sustained operations in extreme polar environments, potential cost overruns due to the complexity and novelty of the design, schedule delays impacting the Navy's operational readiness, and the contractor's ability to meet performance specifications. The FPI structure attempts to mitigate cost risk by setting a ceiling, but significant performance failures could still lead to contract disputes or reduced capability.

What is Bollinger Mississippi Shipbuilding's track record with large naval contracts?

Bollinger Mississippi Shipbuilding, LLC, is part of Bollinger Shipyards, a company with a long history in shipbuilding and repair, primarily serving commercial and offshore industries, as well as smaller naval and government contracts. While Bollinger has experience building various vessels, including patrol boats and auxiliaries for the U.S. Navy and Coast Guard, the Polar Security Cutter represents one of their most significant and complex naval construction projects to date. Their track record includes successful delivery of numerous vessels, demonstrating production capability. However, the scale, technological sophistication, and extreme operating environment requirements of the Polar Security Cutter are a step up from many of their previous naval projects, making this a critical test of their capacity for large-scale, high-specification defense shipbuilding.

How does the $2B+ cost compare to other major naval shipbuilding programs?

A cost exceeding $2 billion for a single, highly specialized vessel like a Polar Security Cutter is substantial, but must be viewed in the context of other major naval shipbuilding programs. For instance, the Ford-class aircraft carriers cost upwards of $13 billion each, and destroyers (like the Arleigh Burke-class) typically range from $1.5 billion to over $2 billion per ship, depending on the specific variant and configuration. Submarine programs, such as the Columbia-class ballistic missile submarine, are also in the multi-billion dollar range per unit. While the Polar Security Cutter is not as complex or large as an aircraft carrier or a ballistic missile submarine, its unique ice-breaking capabilities and specialized mission equipment contribute to its high cost. Compared to standard surface combatants, it is in a similar cost bracket, reflecting the advanced engineering and materials required for polar operations.

What are the implications of the contract duration extending to May 2030?

The extended duration, running through May 2030, signifies a long-term commitment to delivering a highly complex asset. This extended timeline allows for the phased construction, testing, and delivery of the Polar Security Cutter, accommodating the intricate design and manufacturing processes. However, it also introduces several risks. Market conditions, technological advancements, and geopolitical priorities can shift significantly over nearly a decade, potentially rendering aspects of the design or capabilities less relevant or requiring costly modifications. Furthermore, maintaining workforce stability and managing supply chains over such an extended period presents logistical challenges. For taxpayers, it means a prolonged period of expenditure and the need for sustained oversight to ensure the program remains on track and delivers value.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002418R2210

Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 900 BAYOU CASOTTE PKWY, PASCAGOULA, MS, 39581

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

Financial Breakdown

Contract Ceiling: $2,720,798,970

Exercised Options: $2,630,789,301

Current Obligation: $2,012,244,218

Actual Outlays: $56,913,961

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline