Navy awards $778.6M for shipbuilding and repair, with Bath Iron Works as sole source

Contract Overview

Contract Amount: $778,608,223 ($778.6M)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2019-01-30

End Date: 2024-09-30

Contract Duration: 2,070 days

Daily Burn Rate: $376.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: PROVISIONED ITEMS ORDERS (PIO)

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $778.6 million to BATH IRON WORKS CORPORATION for work described as: PROVISIONED ITEMS ORDERS (PIO) Key points: 1. Contract awarded on a cost-plus-award-fee basis, allowing for flexibility but requiring close oversight of costs. 2. Sole-source award indicates limited competition, potentially impacting price negotiation and value for money. 3. Long contract duration of 2070 days suggests a significant, ongoing need for these services. 4. The contract is for shipbuilding and repair, a critical but complex sector with high barriers to entry. 5. No small business set-aside or subcontracting noted, suggesting limited direct benefit to small businesses. 6. Awarded by the Department of the Navy, indicating a focus on defense-related procurement.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and cost-plus award fee structure. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or represents a fair value. The cost-plus nature means the final cost is not fixed upfront, and the award fee component incentivizes performance but can also lead to higher overall expenditures. Comparisons to similar sole-source shipbuilding contracts would be necessary for a more robust assessment, but these are often unique and highly specialized.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Bath Iron Works Corporation, was solicited. This typically occurs when a specific capability or unique product is required, or when there is insufficient time to conduct a full competition. The lack of competition means there was no opportunity for price discovery through bidding, which can lead to higher costs for the government compared to a competed contract.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive pressure to drive down prices. The government's negotiating position is weakened without alternative offers.

Public Impact

The primary beneficiary is the Department of the Navy, which receives essential shipbuilding and repair services. The contract supports the maintenance and potentially the expansion of the U.S. naval fleet. The geographic impact is concentrated in Maine, where Bath Iron Works Corporation is located, supporting local jobs and the regional economy. Workforce implications include the employment of skilled laborers, engineers, and support staff at the contractor's facility.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Cost-plus award fee structure can lead to cost overruns if not managed diligently.
Lack of small business participation may limit opportunities for smaller firms in the supply chain.
Long contract duration requires sustained oversight to ensure performance and cost control.

Positive Signals

Award to an established shipyard (Bath Iron Works) suggests a focus on proven capability for critical defense assets.
Cost-plus award fee structure incentivizes contractor performance, potentially leading to higher quality outcomes.
Long-term contract provides stability for the contractor and ensures continued support for naval assets.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive and highly specialized sector, dominated by a few large, established players due to significant barriers to entry, including technical expertise, infrastructure, and regulatory compliance. This contract falls within the defense industrial base, specifically supporting naval shipbuilding. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of naval vessels and the sole-source awards often seen in this segment. The overall market for naval shipbuilding is characterized by long-term government contracts and substantial R&D investments.

Small Business Impact

This contract does not appear to include a small business set-aside, nor is there explicit mention of subcontracting goals for small businesses. This suggests that the primary contractor, Bath Iron Works Corporation, will likely perform the majority of the work in-house. Consequently, the direct economic impact on the small business ecosystem from this specific contract may be limited, unless Bath Iron Works voluntarily engages small businesses as subcontractors for specific components or services.

Oversight & Accountability

Oversight for this cost-plus award fee contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures will be tied to the performance metrics defined within the contract and the award fee structure. Transparency may be limited due to the sole-source nature and the proprietary information inherent in shipbuilding. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Shipbuilding Contracts
Defense Procurement
Ship Repair and Maintenance
Major Defense Acquisition Programs

Risk Flags

Sole-source award
Cost-plus contract type
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $778.6 million to BATH IRON WORKS CORPORATION. PROVISIONED ITEMS ORDERS (PIO)

Who is the contractor on this award?

The obligated recipient is BATH IRON WORKS 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 $778.6 million.

What is the period of performance?

Start: 2019-01-30. End: 2024-09-30.

What is the historical spending pattern for Bath Iron Works Corporation with the Department of the Navy?

Analyzing historical spending patterns for Bath Iron Works Corporation with the Department of the Navy is crucial for understanding the contractor's track record and the government's reliance on this sole provider. While specific historical dollar amounts are not provided in this data snippet, the fact that this is a sole-source award for a significant amount ($778.6M) suggests a long-standing relationship. Typically, major shipbuilders like Bath Iron Works are awarded multi-year, high-value contracts for constructing and maintaining naval vessels. Examining past contracts would reveal trends in contract types (e.g., fixed-price vs. cost-plus), performance history, and any cost overruns or disputes. This context helps assess whether the current award represents a continuation of a consistent, albeit non-competitive, relationship or a deviation from previous procurement strategies. A review of historical data would also indicate the frequency and scale of previous awards, providing a baseline for evaluating the current contract's significance.

How does the cost-plus award fee structure compare to other contract types for shipbuilding?

The cost-plus award fee (CPAF) contract type used here allows the contractor to recover all allowable costs incurred, plus a fixed fee that is adjusted based on performance against pre-determined criteria. For shipbuilding, this structure is often employed for complex, long-term projects where the final scope or costs are difficult to predict precisely at the outset, such as research and development or the construction of novel vessels. Compared to fixed-price contracts, CPAF offers greater flexibility for the government to adapt to changing requirements but carries a higher risk of cost overruns if performance incentives are not carefully structured or if costs are not rigorously managed. Fixed-price contracts provide greater cost certainty for the government but are less adaptable and may require more detailed upfront specifications, potentially leading to disputes if unforeseen issues arise. Other types, like cost-plus-incentive-fee (CPIF), also share costs and profits/losses with the contractor but have different incentive mechanisms. The choice of CPAF here suggests the Navy prioritized flexibility and performance incentives over strict cost certainty, likely due to the specialized and evolving nature of naval shipbuilding.

What are the primary risks associated with a sole-source award for critical defense assets like naval vessels?

The primary risks associated with a sole-source award for critical defense assets like naval vessels are significant. Foremost is the lack of price competition, which can lead to inflated costs for taxpayers as the contractor faces no pressure to offer the lowest possible price. This can result in reduced value for money. Secondly, sole-source awards can foster complacency in the contractor, potentially leading to reduced innovation or efficiency over time, as there is no competitive threat to drive improvements. Furthermore, it creates a dependency on a single supplier, making the government vulnerable to disruptions in the contractor's operations (e.g., labor disputes, financial instability, or production issues) which could severely impact national security readiness. Finally, the absence of multiple bidders limits the government's ability to explore alternative solutions or technologies that might be offered by other capable firms.

What is the typical performance benchmark for shipbuilding contracts awarded by the Department of the Navy?

Performance benchmarks for shipbuilding contracts awarded by the Department of the Navy are typically rigorous and multifaceted, focusing on schedule adherence, quality of construction, technical specifications, and cost control. For a Cost-Plus Award Fee (CPAF) contract like this one, specific performance criteria are established upfront, and the contractor's achievement against these metrics directly influences the 'award fee' portion of their compensation. These criteria often include meeting key milestones for design, hull construction, systems integration, and sea trials. Quality is assessed through inspections, testing, and adherence to naval standards, with penalties or reduced fees for defects. Schedule is critical, as delays in naval vessel delivery can have significant operational impacts. While specific benchmarks are contract-dependent and often sensitive, they are designed to ensure the delivered vessel meets all operational requirements, is built to high standards, and is completed within a reasonable timeframe relative to the estimated costs.

How does the industrial base for shipbuilding influence competition and contract awards?

The industrial base for shipbuilding, particularly for naval vessels, is characterized by high barriers to entry, significant capital investment requirements, specialized labor, and long production cycles. This inherently limits the number of capable domestic firms. Consequently, the market often consolidates, leading to a situation where only a few companies possess the necessary infrastructure, expertise, and security clearances to undertake large naval contracts. This limited competition often results in sole-source or limited-source awards, as seen with Bath Iron Works. While this ensures the government can procure necessary assets from established, experienced providers, it also means that competitive pressures to drive down costs and foster innovation are reduced. Government policies, such as the Jones Act (requiring domestic ships for domestic trade) and defense industrial base strategies, also shape this landscape, aiming to maintain domestic capabilities but sometimes reinforcing the limited competitive environment.

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: N0002418R4452

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Wico Limited

Address: 700 WASHINGTON ST, BATH, ME, 04530

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: $832,068,490

Exercised Options: $832,068,490

Current Obligation: $778,608,223

Actual Outlays: $35,375,130

Subaward Activity

Number of Subawards: 152

Total Subaward Amount: $28,550,346

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline