Navy awards $1.87B for Expeditionary Sea Base (ESB) Hull 6, a sole-source shipbuilding contract

Contract Overview

Contract Amount: $1,868,085,652 ($1.9B)

Contractor: National Steel and Shipbuilding Company

Awarding Agency: Department of Defense

Start Date: 2018-10-16

End Date: 2026-03-24

Contract Duration: 2,716 days

Daily Burn Rate: $687.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: EXPEDITIONARY SEA BASE (ESB) HULL 6 LLTM UCA

Place of Performance

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

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $1.87 billion to NATIONAL STEEL AND SHIPBUILDING COMPANY for work described as: EXPEDITIONARY SEA BASE (ESB) HULL 6 LLTM UCA Key points: 1. The contract value of $1.87 billion represents a significant investment in naval shipbuilding capabilities. 2. Awarded to National Steel and Shipbuilding Company, this contract highlights a concentration of shipbuilding expertise. 3. The fixed-price incentive contract type suggests a shared risk between the government and contractor for cost control. 4. The duration of 2716 days indicates a long-term commitment to this specific vessel's construction and delivery. 5. The absence of small business set-asides suggests the primary contractor is a large entity, with potential subcontracting opportunities. 6. The contract's focus on a specific hull number (Hull 6) implies a phased approach to building the ESB class.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without detailed cost breakdowns and comparisons to similar, recently awarded ESB hulls. The fixed-price incentive structure aims to control costs, but the total obligated amount of $1.87 billion is substantial. Further analysis would require comparing the per-unit cost of this ESB hull to previous ESB constructions and to the costs of comparable naval vessels to assess overall value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, National Steel and Shipbuilding Company, was solicited. This approach is typically used when a unique capability or specialized expertise is required, or in situations where prior development or investment by a specific contractor makes competition impractical. The lack of competition means price discovery through a bidding process was bypassed.

Taxpayer Impact: Sole-source awards can potentially lead to higher prices for taxpayers as the government does not benefit from competitive bidding to drive down costs. It also limits opportunities for other capable firms to secure government contracts.

Public Impact

The primary beneficiaries are the U.S. Navy, which will receive a critical asset for expeditionary operations. The contract supports the delivery of a key component of naval power projection and logistics. The shipbuilding work will likely occur in California, supporting the regional economy and maritime industrial base. This contract sustains jobs within the shipbuilding and maritime defense sector, contributing to the skilled workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potential cost savings for taxpayers.
Long contract duration increases exposure to potential cost overruns or scope creep if not managed tightly.
Lack of small business set-aside may limit opportunities for smaller firms to participate directly in this large contract.

Positive Signals

Fixed-price incentive contract type aligns contractor and government interests in cost control.
Award to an established shipyard like National Steel and Shipbuilding Company suggests a focus on proven capabilities.
The contract supports a critical naval platform, enhancing national security capabilities.

Sector Analysis

The shipbuilding and repair industry is a cornerstone of the defense sector, characterized by high capital investment, specialized labor, and long production cycles. This contract for an Expeditionary Sea Base (ESB) fits within the broader category of naval vessel construction and repair. The market is dominated by a few large, experienced shipbuilders capable of undertaking such complex and expensive projects. Spending in this sector is often driven by strategic defense needs and fleet modernization programs.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no explicit small business subcontracting goals were mandated. This suggests that the primary contractor, National Steel and Shipbuilding Company, is expected to perform the majority of the work. While this may limit direct opportunities for small businesses on this specific contract, large prime contractors often engage small businesses for specialized services or components, though the extent of this subcontracting is not detailed here.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the fixed-price incentive contract structure, which includes provisions for performance and cost targets. Transparency may be limited due to the sole-source nature of the award, but contract modifications and performance reports are typically subject to internal review and potentially oversight by the Government Accountability Office (GAO) or the Department of Defense's Inspector General if specific concerns arise.

Related Government Programs

Expeditionary Sea Base (ESB) Program
Naval Shipbuilding Contracts
Department of the Navy Ship Construction
Large Maritime Vessel Construction

Risk Flags

Sole-source award
Potential for cost overruns
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.87 billion to NATIONAL STEEL AND SHIPBUILDING COMPANY. EXPEDITIONARY SEA BASE (ESB) HULL 6 LLTM UCA

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 $1.87 billion.

What is the period of performance?

Start: 2018-10-16. End: 2026-03-24.

What is the historical spending trend for Expeditionary Sea Base (ESB) vessels?

The Expeditionary Sea Base (ESB) program is a relatively new class of naval vessels designed to support a variety of missions, including special operations, humanitarian aid, and disaster relief. The U.S. Navy has procured several ESB hulls, with costs varying based on design iterations, construction complexities, and the specific shipyard. For instance, earlier ESB hulls (like ESB-3 and ESB-4) were awarded under different contract vehicles and potentially at different price points. Analyzing historical spending requires examining the total contract values for each ESB hull awarded, including any modifications and associated costs. This data suggests a significant investment per hull, reflecting the specialized nature and capabilities of these platforms. Understanding the cost evolution across the ESB program provides context for the current award of $1.87 billion for Hull 6, allowing for an assessment of whether costs are increasing, decreasing, or remaining stable relative to previous constructions.

How does the cost per unit for this ESB compare to previous ESB constructions?

Directly comparing the cost per unit for ESB Hull 6 ($1.87 billion) to previous ESB constructions requires access to the total contract values and specifications for those earlier hulls. The provided data for Hull 6 is a total contract value, not necessarily the final cost or a per-unit cost if multiple units were included. However, assuming this $1.87 billion represents the cost for a single hull, it would need to be benchmarked against the contract awards for ESB-1 through ESB-5. Factors such as inflation, design changes, shipyard labor rates, and material costs can cause significant variations. Without specific comparative data on prior ESB hull awards, it's difficult to definitively state if this $1.87 billion represents a cost increase, decrease, or is in line with historical spending. A thorough analysis would involve obtaining and comparing the total obligated amounts for each ESB hull awarded to National Steel and Shipbuilding Company or other relevant shipyards.

What are the specific risks associated with a sole-source award for a major shipbuilding contract?

Sole-source awards for major shipbuilding contracts, such as this $1.87 billion award for ESB Hull 6, carry inherent risks. The primary risk is the potential for inflated pricing, as the absence of competition removes the downward pressure that multiple bids typically exert on cost. The government may end up paying more than it would in a competitive environment. Another risk is reduced innovation; without competitive pressure, the sole-source contractor may have less incentive to explore cost-saving efficiencies or innovative construction methods. Furthermore, sole-source awards can create a dependency on a single supplier, potentially limiting future flexibility and leverage for the government. Ensuring robust oversight, detailed cost analysis, and strong contract management becomes even more critical to mitigate these risks and ensure the best value is achieved for the taxpayer.

What is the track record of National Steel and Shipbuilding Company with large naval contracts?

National Steel and Shipbuilding Company (NASSCO) has a long and established history of constructing large naval vessels for the U.S. Navy. They have been a key player in building various classes of ships, including tankers, auxiliary ships, and amphibious assault vessels. NASSCO has experience with complex shipbuilding projects and has demonstrated the capacity to deliver large, sophisticated platforms. Their track record includes the construction of previous Expeditionary Sea Base (ESB) vessels, indicating familiarity with the specific requirements and challenges of this program. While specific performance metrics like on-time delivery and budget adherence for all past contracts would require detailed review, NASSCO's continued selection for significant naval shipbuilding contracts suggests a generally positive performance history and a strong capability within the U.S. industrial base.

What are the implications of the 'Fixed Price Incentive' (FPI) contract type for this project?

The 'Fixed Price Incentive' (FPI) contract type for the $1.87 billion ESB Hull 6 award signifies a shared risk approach between the government and National Steel and Shipbuilding Company. Under an FPI contract, there is a target cost, a target profit, and a price ceiling. If the contractor completes the work below the target cost, both parties share in the savings according to a predetermined formula. Conversely, if the final cost exceeds the target cost but remains below the price ceiling, the profit is reduced, and the government pays the final cost plus the reduced profit. If the cost exceeds the price ceiling, the contractor absorbs the loss. This structure incentivizes the contractor to control costs and meet performance objectives efficiently, while also providing the government with a degree of cost certainty up to the established ceiling. It aims to balance the government's need for cost control with the contractor's need for protection against unforeseen cost increases.

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: N0002418R2235

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

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: $1,868,766,897

Exercised Options: $1,868,766,897

Current Obligation: $1,868,085,652

Actual Outlays: $85,114,565

Subaward Activity

Number of Subawards: 1495

Total Subaward Amount: $1,068,150,868

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline