Navy awards $32.3M for gas turbine procurement, a sole-source contract to Rolls-Royce

Contract Overview

Contract Amount: $32,339,753 ($32.3M)

Contractor: Rolls-Royce Marine North America Inc.

Awarding Agency: Department of Defense

Start Date: 2019-03-22

End Date: 2021-08-31

Contract Duration: 893 days

Daily Burn Rate: $36.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: FY18 MT30 GAS TURBINE PROCUREMENT

Place of Performance

Location: WALPOLE, NORFOLK County, MASSACHUSETTS, 02081

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $32.3 million to ROLLS-ROYCE MARINE NORTH AMERICA INC. for work described as: FY18 MT30 GAS TURBINE PROCUREMENT Key points: 1. The contract value of $32.3 million for gas turbines represents a significant investment in naval propulsion systems. 2. Sole-source procurement raises concerns about potential overpricing and lack of competitive pressure. 3. The duration of the contract (893 days) suggests a substantial project with long-term implications for fleet readiness. 4. The absence of competition indicates a potential reliance on a single supplier, posing supply chain risks. 5. This procurement is critical for maintaining and upgrading the Navy's operational capabilities. 6. The fixed-price contract type aims to control costs, but the sole-source nature may limit savings.

Value Assessment

Rating: questionable

Benchmarking the value of this sole-source contract is challenging without comparable bids. However, the absence of competition typically leads to higher prices than a fully competed procurement. The $32.3 million award for gas turbines needs further scrutiny to ensure it aligns with market rates for similar specialized equipment, especially given the lack of price discovery through bidding.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Rolls-Royce Marine North America Inc., was solicited. This approach bypasses the standard competitive bidding process. While sole-source awards can be justified for unique capabilities or urgent needs, they limit the government's ability to secure the best possible price and terms.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competition, as the government did not benefit from multiple offers driving down costs.

Public Impact

The primary beneficiaries are the U.S. Navy, ensuring operational readiness and capability of its vessels. The services delivered include the procurement of essential gas turbine engines for ship propulsion. The geographic impact is primarily within the United States, supporting naval bases and maintenance facilities. Workforce implications include potential employment for engineers, technicians, and support staff involved in the manufacturing and integration of these turbines.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Lack of competition raises concerns about long-term supplier dependency and potential supply chain vulnerabilities.
Limited transparency in pricing due to the absence of multiple bids.
Potential for cost overruns if not rigorously managed, despite fixed-price contract.
Need for robust government oversight to ensure performance and value in a non-competitive environment.

Positive Signals

Rolls-Royce is a known and established supplier of marine gas turbines, suggesting a degree of reliability.
Fixed-price contract type provides cost certainty for the government, assuming the price is fair.
The procurement addresses a clear operational need for the Navy's fleet.
The contract duration indicates a planned and structured approach to fulfilling the requirement.

Sector Analysis

The procurement of gas turbines falls within the broader defense industrial base, specifically the shipbuilding and repairing sector. This sector is characterized by high-value, complex systems requiring specialized manufacturing capabilities. The market for large marine gas turbines is concentrated, with a few key global players. This contract represents a significant portion of spending within this niche, supporting the Navy's strategic asset modernization efforts.

Small Business Impact

This contract does not appear to involve small business set-asides, as it was awarded directly to Rolls-Royce Marine North America Inc. There is no explicit information regarding subcontracting opportunities for small businesses within this award. The focus is on a large, specialized component likely manufactured by the prime contractor or its direct, large-scale suppliers.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the fixed-price contract terms, requiring delivery of specified goods. Transparency is limited due to the sole-source nature, but contract award details are publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems
Marine Propulsion Systems
Defense Procurement
Gas Turbine Engines
Fleet Modernization Programs

Risk Flags

Sole-source procurement
Lack of competition
Potential for price inflation
Supplier dependency risk

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.3 million to ROLLS-ROYCE MARINE NORTH AMERICA INC.. FY18 MT30 GAS TURBINE PROCUREMENT

Who is the contractor on this award?

The obligated recipient is ROLLS-ROYCE MARINE NORTH AMERICA INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $32.3 million.

What is the period of performance?

Start: 2019-03-22. End: 2021-08-31.

What is the historical spending pattern for Rolls-Royce Marine North America Inc. with the Department of Defense, specifically for gas turbine procurements?

Analyzing historical spending with Rolls-Royce Marine North America Inc. for gas turbines by the Department of Defense is crucial for context. While specific data for this exact contract is $32.3 million, understanding past awards, their values, and the competitive nature (or lack thereof) of those procurements provides insight into pricing trends and the government's reliance on this supplier. A review of historical contracts would reveal if this $32.3 million award is an outlier, a consistent investment, or an escalation from previous procurements. It would also highlight if similar sole-source awards have been common for this type of equipment, suggesting a systemic approach or a specific justification for non-competitive actions.

How does the per-unit cost of these gas turbines compare to similar procurements by other naval forces or commercial entities?

Benchmarking the per-unit cost of these gas turbines against similar procurements is essential for assessing value for money. Since this is a sole-source award, direct comparison with competitive bids is impossible. However, data from international naval forces acquiring comparable propulsion systems, or even high-end commercial marine applications, can serve as a proxy. If Rolls-Royce supplied similar turbines to other entities recently, or if competitors like GE Marine or Siemens Energy have supplied comparable units, their pricing structures could offer a reference point. A significant deviation from these benchmarks, especially when adjusted for specific technical requirements and contract terms, would raise concerns about the fairness of the $32.3 million award.

What are the specific technical specifications and performance requirements for these gas turbines, and how do they justify a sole-source award?

The specific technical specifications and performance requirements for the MT30 gas turbines are critical to understanding the justification for a sole-source award. The MT30 is a high-power, advanced marine gas turbine derived from the Trent aero engine, known for its power density and efficiency, making it suitable for large naval vessels like destroyers and aircraft carriers. If these specific performance metrics (e.g., power output, fuel efficiency, reliability, size, weight, integration complexity with existing ship systems) are unique or require specialized manufacturing processes only available from Rolls-Royce, it could justify a sole-source procurement. The Navy would need to document that no other supplier could meet these stringent requirements within the required timeframe, thereby necessitating the award to Rolls-Royce.

What is the assessed risk level associated with this contract, considering it's a sole-source award for critical propulsion components?

The assessed risk level for this sole-source contract is likely moderate to high, primarily due to the lack of competition and the critical nature of the components. Key risks include price escalation beyond market rates, potential supply chain disruptions if Rolls-Royce faces production issues, and limited leverage for the Navy in negotiating future support or upgrades. While the fixed-price nature mitigates some cost overrun risks, the government's dependency on a single supplier for essential propulsion systems creates strategic vulnerabilities. Effective risk mitigation would require robust contract management, close monitoring of supplier performance, proactive supply chain analysis, and potentially exploring alternative solutions or long-term support agreements to ensure sustained operational capability.

What is the expected operational lifespan and maintenance cost associated with these gas turbines, and how were these factored into the $32.3 million award?

The expected operational lifespan and associated maintenance costs for the MT30 gas turbines are crucial factors that should have been considered in the $32.3 million award, even if not explicitly detailed in the award data. These turbines are designed for long service lives, typically measured in tens of thousands of operating hours, but require significant periodic maintenance. The initial procurement cost is only one part of the total ownership cost. The Navy likely evaluated lifecycle costs, including projected maintenance, spare parts, and overhaul expenses, when determining the overall value and necessity of this acquisition. Understanding these long-term cost implications is vital for a comprehensive assessment of the contract's financial prudence, especially given the sole-source nature of the purchase.

Industry Classification

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

Product/Service Code: ENGINES AND TURBINES AND COMPONENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Rolls-Royce Holdings PLC (UEI: 217127290)

Address: 110 NORFOLK ST, WALPOLE, MA, 02081

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

Financial Breakdown

Contract Ceiling: $32,339,753

Exercised Options: $32,339,753

Current Obligation: $32,339,753

Subaward Activity

Number of Subawards: 61

Total Subaward Amount: $10,664,871

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002419G4108

IDV Type: BOA

Timeline