Navy awards $4.2B contract for lead yard support to Electric Boat Corporation, extending through 2028

Contract Overview

Contract Amount: $4,206,289,237 ($4.2B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2019-10-13

End Date: 2028-06-30

Contract Duration: 3,183 days

Daily Burn Rate: $1.3M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: LEAD YARD SUPPORT

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $4.21 billion to ELECTRIC BOAT CORPORATION for work described as: LEAD YARD SUPPORT Key points: 1. Contract awarded to a single, established provider, raising questions about competitive pricing. 2. Long-term nature of the contract suggests a strategic, ongoing need for specialized support. 3. Cost-plus fixed fee structure may incentivize cost increases, requiring robust oversight. 4. Sole-source award indicates potential barriers to entry or unique capabilities required. 5. Significant investment highlights the critical role of this support in naval operations. 6. Focus on shipbuilding and repair suggests a complex, high-value industrial base requirement.

Value Assessment

Rating: questionable

The contract's value of over $4.2 billion over nearly nine years is substantial. Without comparable sole-source contracts for similar lead yard support services, it is difficult to benchmark the pricing effectively. The cost-plus fixed fee (CPFF) pricing structure, while common for complex, evolving projects, carries inherent risks of cost overruns. The government must ensure rigorous oversight and cost controls to achieve value for money, as the contractor has less incentive to minimize costs compared to fixed-price contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder was solicited. This typically occurs when a specific contractor possesses unique capabilities, intellectual property, or is the only responsible source capable of meeting the government's needs. The lack of competition means the government did not benefit from price discovery through a bidding process, potentially leading to higher costs than if multiple firms had competed.

Taxpayer Impact: The absence of competition for this significant contract means taxpayers may not be receiving the most cost-effective solution. Without competitive pressure, there is a risk that the awarded price is higher than it would be in a more open market.

Public Impact

The primary beneficiary is the Department of the Navy, ensuring continued support for its shipbuilding and repair programs. Services delivered include essential lead yard support, crucial for the maintenance, modernization, and construction of naval vessels. The contract's impact is primarily concentrated in Connecticut, where Electric Boat Corporation is located, supporting the regional economy and specialized workforce. This contract sustains highly skilled jobs in naval architecture, engineering, and shipbuilding, bolstering the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus fixed fee structure may lead to higher overall costs if not managed tightly.
Sole-source award limits price competition, potentially increasing the financial burden on taxpayers.
Long contract duration increases exposure to potential cost escalations and scope creep.
Dependence on a single contractor for critical support creates a single point of failure risk.

Positive Signals

Award to an experienced contractor (Electric Boat) suggests a high likelihood of successful execution.
Long-term nature indicates a stable, predictable need and commitment from the Navy.
Focus on specialized shipbuilding and repair aligns with critical national defense requirements.
Contract duration allows for long-term planning and workforce development within the contractor's organization.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base, characterized by high barriers to entry, specialized labor, and significant capital investment. This contract falls within the broader industrial manufacturing and defense services sector. Comparable spending benchmarks are difficult to establish due to the unique nature of lead yard support, which often involves proprietary knowledge and long-standing relationships. The overall defense shipbuilding market is substantial, with billions allocated annually to naval vessel construction and maintenance.

Small Business Impact

This contract does not appear to include specific small business set-asides, as indicated by 'sb': false. Given the sole-source nature and the specialized requirements of lead yard support for naval shipbuilding, it is unlikely that small businesses would be primary contractors. However, Electric Boat Corporation may engage small businesses as subcontractors, contributing to the broader small business ecosystem within the defense supply chain. The extent of subcontracting to small businesses would need further investigation.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy's contracting and program management offices. Given the CPFF structure and significant value, robust oversight mechanisms, including regular audits, performance reviews, and cost monitoring, are essential. Transparency may be limited due to the sole-source nature and the proprietary aspects of lead yard support. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Shipbuilding Contracts
Submarine Construction and Maintenance
Defense Industrial Base Support
Ship Repair and Overhaul Services
Strategic Weapon System Support

Risk Flags

Sole-source award lacks competitive pricing.
Cost-plus contract type carries risk of cost overruns.
Long-term duration increases exposure to economic fluctuations.
High contract value requires robust oversight.
Dependence on single contractor for critical services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.21 billion to ELECTRIC BOAT CORPORATION. LEAD YARD SUPPORT

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 $4.21 billion.

What is the period of performance?

Start: 2019-10-13. End: 2028-06-30.

What is Electric Boat Corporation's track record with the Department of Defense, particularly on similar shipbuilding and repair contracts?

Electric Boat Corporation (EBC) has a long and established history as a prime contractor for the U.S. Navy, particularly in the design, construction, and maintenance of submarines. They are the sole builder of nuclear-powered submarines for the U.S. Navy. Their track record includes major programs like the Ohio-class ballistic missile submarines and the Virginia-class attack submarines. EBC has consistently been awarded large, complex, and often sole-source contracts due to their specialized expertise and facilities. While specific performance metrics on past contracts are often not publicly detailed, their continued selection for critical submarine programs indicates a generally satisfactory performance history from the Navy's perspective, despite the inherent complexities and costs associated with such endeavors.

How does the cost-plus fixed fee (CPFF) structure compare to other contract types for this type of service, and what are the implications for value?

The Cost-Plus Fixed Fee (CPFF) contract type is often used for research and development or complex, uncertain 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 contrasts with fixed-price contracts, where the price is set regardless of the final cost, incentivizing the contractor to control expenses. For lead yard support, which can involve evolving technical challenges and long durations, CPFF can provide flexibility. However, it shifts more cost risk to the government and requires stringent oversight to prevent cost overruns and ensure the fixed fee remains a reasonable profit margin, rather than an incentive for inefficiency.

What are the primary risks associated with a sole-source award for critical naval support services?

The primary risks associated with a sole-source award for critical naval support services like lead yard support are threefold. Firstly, the lack of competition can lead to inflated pricing, as the government does not benefit from the price discovery mechanisms inherent in a competitive bidding process. Secondly, it can reduce the incentive for the sole-source contractor to innovate or improve efficiency, as there is no direct competitive pressure to do so. Thirdly, it creates a significant dependency on a single entity; any disruption to the contractor's operations, such as labor disputes, financial instability, or unforeseen technical issues, could have severe consequences for naval readiness and program timelines, with limited alternative options available.

What is the historical spending pattern for lead yard support services by the Department of the Navy, and how does this contract compare?

Historical spending on lead yard support services by the Department of the Navy is often embedded within larger shipbuilding and program contracts, making it difficult to isolate precisely. However, given the critical nature of submarine construction and maintenance, significant and consistent funding has historically been allocated to these functions. Contracts for lead yard support, particularly for major platforms like the Virginia-class submarines, are typically multi-billion dollar, long-term agreements. This $4.2 billion contract, spanning nearly nine years, aligns with the scale and duration of previous major shipbuilding support efforts. The trend has been towards consolidating support functions with prime contractors like Electric Boat to ensure integrated program management and technical expertise.

What are the potential implications of this contract for the future of submarine construction and maintenance in the U.S.?

This contract solidifies Electric Boat Corporation's role as the primary lead yard for the foreseeable future, reinforcing its position in the U.S. submarine industrial base. It signals continued investment in and reliance upon the existing submarine construction and maintenance infrastructure. The long-term nature of the award provides stability for EBC's workforce and facilities, potentially enabling further investment in advanced manufacturing techniques and workforce development. It also suggests that the Navy's strategy for submarine lifecycle support remains centered on integrated support from the original builder, emphasizing continuity and specialized knowledge over potentially fragmented, competitively sourced maintenance solutions.

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: N0002419R2113

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: $4,787,848,895

Exercised Options: $4,787,848,895

Current Obligation: $4,206,289,237

Subaward Activity

Number of Subawards: 670

Total Subaward Amount: $1,018,006,544

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline