Naval Reactors contract to Electric Boat Corporation for $205M over 8 years for engineering services

Contract Overview

Contract Amount: $205,067,364 ($205.1M)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2020-09-30

End Date: 2028-09-30

Contract Duration: 2,922 days

Daily Burn Rate: $70.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NAVAL REACTORS

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $205.1 million to ELECTRIC BOAT CORPORATION for work described as: NAVAL REACTORS Key points: 1. Contract awarded to a single, established provider of naval engineering services. 2. Long-term award suggests a stable, ongoing need for specialized technical expertise. 3. Cost-plus-fixed-fee structure may incentivize cost control while ensuring contractor availability. 4. Limited competition indicates potential for higher pricing compared to a more open market. 5. The contract's duration aligns with long-term naval shipbuilding and maintenance cycles. 6. Focus on engineering services points to critical design, development, and technical support functions.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specialized nature and the limited public data available for comparable sole-source engineering services for naval reactors. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex projects, can lead to less predictable final costs compared to fixed-price contracts. Without detailed cost breakdowns or comparisons to similar sole-source awards, assessing the precise value-for-money is difficult. However, the long duration and the critical nature of the services suggest a strategic investment in maintaining essential naval capabilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple potential bidders. This approach is typically used when only one contractor possesses the unique capabilities, facilities, or security clearances required for the work, or when urgent and compelling circumstances prevent competition. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs for the government than if multiple bids had been solicited.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding. The government relies on negotiation and oversight to ensure fair pricing in sole-source situations.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, ensuring the continued operation and development of naval nuclear propulsion systems. Services delivered include critical engineering support, design, and technical expertise essential for maintaining and advancing submarine and aircraft carrier technology. The geographic impact is concentrated in Connecticut, where Electric Boat Corporation is headquartered and operates its facilities. Workforce implications include the continued employment and utilization of highly skilled engineers, technicians, and support staff within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost efficiency.
Long-term nature of the contract could lead to complacency if not actively managed.
Reliance on a single contractor for critical naval reactor engineering raises concerns about supply chain resilience.

Positive Signals

Award to Electric Boat Corporation leverages extensive, specialized experience in naval nuclear engineering.
Long-term contract provides stability for critical R&D and sustainment activities.
The CPFF structure, while having risks, allows for flexibility in addressing complex, evolving technical challenges.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industry's unique requirements for naval nuclear propulsion. The market for such specialized services is highly concentrated, with few companies possessing the necessary expertise, security clearances, and infrastructure. Comparable spending benchmarks are difficult to establish due to the proprietary and classified nature of naval reactor technology. However, the scale of the award reflects the significant investment required for maintaining and advancing the nation's submarine and carrier fleet.

Small Business Impact

This contract does not appear to involve a small business set-aside. Given the specialized nature of naval reactor engineering, it is unlikely that small businesses would be primary awardees for such a comprehensive sole-source contract. Subcontracting opportunities for small businesses may exist for specific components or support services, but the primary awardee is a large, established defense contractor.

Oversight & Accountability

Oversight for this contract is likely managed by the Department of the Navy's acquisition and program management offices, with potential involvement from the Naval Reactors program office itself. Accountability measures would include performance reviews, milestone tracking, and financial audits inherent in the CPFF structure. Transparency may be limited due to the classified nature of naval nuclear technology, but internal government oversight mechanisms are expected to be robust.

Related Government Programs

Naval Nuclear Propulsion Program
Submarine Construction and Maintenance
Aircraft Carrier Procurement and Modernization
Defense Engineering Services
Strategic Weapons Systems Support

Risk Flags

Sole-source award
Cost-plus pricing structure
Long contract duration
Critical national security component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $205.1 million to ELECTRIC BOAT CORPORATION. NAVAL REACTORS

Who is the contractor on this award?

The obligated recipient is ELECTRIC BOAT 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 $205.1 million.

What is the period of performance?

Start: 2020-09-30. End: 2028-09-30.

What is the historical spending trend for engineering services related to naval reactors awarded to Electric Boat Corporation?

Analyzing historical spending trends for naval reactor engineering services awarded to Electric Boat Corporation requires access to detailed contract databases and potentially classified information. However, general trends in defense spending and naval shipbuilding indicate a consistent and significant investment in maintaining and modernizing the U.S. submarine and aircraft carrier fleets. Electric Boat Corporation, as a primary builder of these vessels, has historically received substantial contracts for design, engineering, and construction. The duration and value of this current contract suggest a continuation of this long-term investment, reflecting the ongoing need for specialized engineering expertise in this critical defense sector. Without specific historical data, it's difficult to quantify precise year-over-year changes, but the strategic importance of naval reactors implies sustained, high-value contract awards.

How does the pricing structure (Cost Plus Fixed Fee) compare to other contract types for similar specialized engineering services?

The Cost Plus Fixed Fee (CPFF) pricing structure is common for complex, high-risk, or research-and-development-intensive projects where the final costs are difficult to estimate accurately upfront. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of actual costs, offering greater cost certainty to the buyer but potentially higher risk for the contractor. For specialized engineering services like those for naval reactors, where innovation and problem-solving are key and the scope may evolve, CPFF allows for flexibility. However, it can lead to higher overall costs for the government compared to fixed-price contracts if cost controls are not rigorously managed, as the contractor has less incentive to minimize expenses beyond what is necessary to achieve the fixed fee.

What are the key performance indicators (KPIs) used to measure the success of this contract?

Key Performance Indicators (KPIs) for a contract like this, focused on specialized engineering services for naval reactors, would likely revolve around technical performance, schedule adherence, cost control, and safety. Specific KPIs might include: successful completion of design milestones, timely delivery of engineering documentation, adherence to budget projections (within the CPFF framework), successful resolution of technical challenges, compliance with stringent safety and security protocols related to nuclear materials, and the overall effectiveness of the engineering solutions provided. Performance would be assessed through regular reviews, technical evaluations, and potentially independent verification processes managed by the Naval Reactors program office. The ultimate measure of success is the reliable and safe operation and advancement of the naval nuclear fleet.

What is the potential impact of this contract on the broader defense industrial base, particularly in terms of innovation and workforce development?

This contract significantly impacts the defense industrial base by sustaining critical capabilities within Electric Boat Corporation and its supply chain. It ensures the continued employment and development of a highly specialized engineering workforce essential for national security. The long-term nature of the award fosters stability, allowing for investment in advanced technologies and processes related to naval nuclear propulsion. Furthermore, it supports innovation by providing a platform for addressing complex design and engineering challenges inherent in next-generation submarines and carriers. The contract's focus on engineering services can drive advancements in areas such as materials science, reactor design, and operational efficiency, contributing to the overall technological edge of the U.S. Navy.

Given the sole-source nature, what mechanisms are in place to ensure fair pricing and prevent cost overruns?

To ensure fair pricing and prevent cost overruns in a sole-source contract, the government employs several mechanisms. These include rigorous negotiation of the fixed fee and cost ceilings, detailed cost analysis of the contractor's proposed budget, and ongoing surveillance of contractor performance and expenditures. The government's technical representatives (COTRs) closely monitor progress and validate incurred costs. Audits by agencies like the Defense Contract Audit Agency (DCAA) are crucial for verifying the allowability, allocability, and reasonableness of costs. Furthermore, contract clauses often include incentives for cost savings or penalties for exceeding agreed-upon targets, even within a CPFF structure. The Naval Reactors program office, known for its stringent oversight, likely implements robust internal controls and performance metrics.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: FURNACE/STEAM/DRYING; NUCL REACTOR

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002420R2114

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 75 EASTERN POINT RD, GROTON, CT, 06340

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

Financial Breakdown

Contract Ceiling: $297,319,041

Exercised Options: $206,895,667

Current Obligation: $205,067,364

Subaward Activity

Number of Subawards: 39

Total Subaward Amount: $5,114,457

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline