DoD's $81.9M contract for Unmanned Undersea Vehicle production shows limited competition and potential value concerns

Contract Overview

Contract Amount: $81,896,181 ($81.9M)

Contractor: General Dynamics Mission Systems, Inc.

Awarding Agency: Department of Defense

Start Date: 2021-05-07

End Date: 2024-09-30

Contract Duration: 1,242 days

Daily Burn Rate: $65.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: KNIFEFISH PROGRAM - UNMANNED UNDERSEA VEHICLE (UUV) BLOCK 1 LOW RATE INITIAL PRODUCTION (LRIP) RETROFITTED FROM BLOCK 0 LRIP (DESIGN, INTEGRATION, PRODUCTION, AND ENGINEERING SUPPORT SERVICES)

Place of Performance

Location: QUINCY, NORFOLK County, MASSACHUSETTS, 02169

State: Massachusetts Government Spending

Plain-Language Summary

Department of Defense obligated $81.9 million to GENERAL DYNAMICS MISSION SYSTEMS, INC. for work described as: KNIFEFISH PROGRAM - UNMANNED UNDERSEA VEHICLE (UUV) BLOCK 1 LOW RATE INITIAL PRODUCTION (LRIP) RETROFITTED FROM BLOCK 0 LRIP (DESIGN, INTEGRATION, PRODUCTION, AND ENGINEERING SUPPORT SERVICES) Key points: 1. The contract's cost-plus-incentive-fee structure aims to control expenses but requires careful monitoring of performance against targets. 2. Sole-source procurement limits price discovery and may result in higher costs compared to a competitive environment. 3. The retrofitting nature of the work suggests a need for robust technical oversight to ensure successful integration and performance. 4. While specific performance metrics are not detailed, the success of Block 0 LRIP provides some context for Block 1 expectations. 5. The contract falls within the advanced manufacturing and defense technology sector, characterized by high R&D investment and specialized capabilities. 6. The absence of small business set-asides indicates a focus on large, established defense contractors for this specialized acquisition.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive bids. The cost-plus-incentive-fee (CPIF) pricing structure allows for cost overruns up to a certain point, with incentives for cost savings. However, the total obligated amount of $81.9 million for the specified period needs to be evaluated against the delivered capabilities and performance of the Unmanned Undersea Vehicle (UUV) Block 1. Without comparable contract data or detailed performance metrics, assessing the true value-for-money is difficult, but the lack of competition raises a flag for potential overpricing.

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 vendors. This approach is typically used when only one responsible source can provide the required supplies or services. The lack of competition means that the Department of the Navy did not benefit from the price discovery and innovation that typically arises from a competitive bidding process. This can lead to higher prices and potentially less favorable terms for the government.

Taxpayer Impact: Taxpayers may be paying a premium for this UUV production due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in a sole-source scenario.

Public Impact

The primary beneficiaries are the Department of the Navy, which receives advanced unmanned undersea vehicle capabilities essential for maritime operations. The contract delivers production, integration, and engineering support services for the KNIFEFISH UUV Block 1, enhancing underwater surveillance and mine countermeasures. The geographic impact is primarily within the United States, supporting defense industrial base activities and potentially naval bases where these UUVs will be deployed. Workforce implications include employment for engineers, technicians, and manufacturing personnel at General Dynamics Mission Systems and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus-incentive-fee contracts require diligent oversight to ensure cost control and performance.
Retrofitting from a previous block may introduce integration complexities and risks.
Lack of publicly available performance metrics makes independent value assessment difficult.

Positive Signals

General Dynamics Mission Systems is an established defense contractor with experience in complex systems.
The CPIF contract structure includes incentives for cost efficiency, aligning contractor and government interests.
The UUV technology addresses critical naval operational needs, indicating strategic importance.
The contract duration suggests a sustained effort towards capability development and production.

Sector Analysis

This contract falls within the defense industrial base, specifically the manufacturing of advanced maritime systems. The market for Unmanned Undersea Vehicles (UUVs) is a specialized and growing segment of the defense sector, driven by increasing demand for autonomous capabilities in surveillance, mine countermeasures, and intelligence gathering. Comparable spending benchmarks are difficult to establish due to the proprietary nature of defense contracts and the unique specifications of UUVs. However, the overall defense spending on unmanned systems continues to rise globally.

Small Business Impact

This contract does not appear to include specific small business set-asides. The award to General Dynamics Mission Systems, a large defense contractor, suggests that the primary focus is on established capabilities and large-scale production. While large prime contractors often engage small businesses as subcontractors, the absence of direct set-asides means that opportunities for small businesses to compete for the prime contract itself are limited in this instance. The subcontracting plan, if any, will be crucial for understanding the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract is primarily the responsibility of the Department of the Navy's contracting and program management offices. The Cost Plus Incentive Fee (CPIF) structure necessitates close monitoring of costs, performance milestones, and incentive targets. Transparency is generally limited for sole-source defense contracts, with detailed information often classified or restricted. The Inspector General of the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

Unmanned Maritime Systems (UMS)
Naval Surface Warfare
Mine Countermeasures Systems
Defense Advanced Research Projects Agency (DARPA) Programs
Undersea Warfare Technology

Risk Flags

Sole-source award
Potential for cost overruns in CPIF contracts
Lack of competitive benchmarking
Technical risks associated with retrofitting

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $81.9 million to GENERAL DYNAMICS MISSION SYSTEMS, INC.. KNIFEFISH PROGRAM - UNMANNED UNDERSEA VEHICLE (UUV) BLOCK 1 LOW RATE INITIAL PRODUCTION (LRIP) RETROFITTED FROM BLOCK 0 LRIP (DESIGN, INTEGRATION, PRODUCTION, AND ENGINEERING SUPPORT SERVICES)

Who is the contractor on this award?

The obligated recipient is GENERAL DYNAMICS MISSION SYSTEMS, 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 $81.9 million.

What is the period of performance?

Start: 2021-05-07. End: 2024-09-30.

What is the track record of General Dynamics Mission Systems with similar UUV contracts?

General Dynamics Mission Systems (GDMS) has a significant track record in developing and producing complex defense systems, including unmanned maritime vehicles. They have been involved in various naval programs, often serving as a prime contractor for sophisticated platforms. While specific details on their past UUV contracts, especially those involving retrofitting or similar scale and complexity to the KNIFEFISH Block 1 LRIP, are not readily available in the public domain due to the sensitive nature of defense acquisitions, GDMS's established presence in the defense sector suggests a level of experience. Their history includes work on sonar systems, command and control, and other critical naval technologies, which are foundational to UUV development and integration. Further analysis would require access to contract performance databases and potentially classified information regarding their past performance on similar sole-source or competitively awarded UUV programs.

How does the cost-plus-incentive-fee (CPIF) structure compare to other contract types for this type of acquisition?

The Cost-Plus-Incentive-Fee (CPIF) contract is a type of cost-reimbursement contract where the contractor is reimbursed for allowable costs and receives a target fee, plus a share of any savings below a target cost, or a share of any excess cost above the target cost. For complex, developmental, or production programs like the KNIFEFISH UUV where technical uncertainties or production efficiencies are significant, CPIF can be advantageous. It incentivizes the contractor to control costs while meeting performance specifications. Compared to Firm-Fixed-Price (FFP) contracts, CPIF offers more flexibility for the government in managing evolving requirements and technical risks, but it requires more intensive oversight to ensure costs remain reasonable. Compared to Cost-Plus-Fixed-Fee (CPFF), CPIF adds a stronger incentive for cost reduction. However, the government bears the cost risk, and the final price can fluctuate.

What are the primary risks associated with retrofitting Block 0 LRIP systems to Block 1?

Retrofitting existing Block 0 LRIP systems to Block 1 standards presents several potential risks. Firstly, there's the risk of technical incompatibility or integration challenges, where the new Block 1 components or software may not seamlessly integrate with the existing Block 0 hardware architecture. This could lead to performance degradation or require extensive redesign. Secondly, schedule delays are a common risk in retrofitting projects, as unforeseen issues often arise during the modification process, impacting the planned production timeline. Thirdly, cost overruns are also a significant concern; the initial cost estimates may not account for all the complexities discovered during the retrofitting, leading to increased expenses. Finally, there's a risk to the overall system reliability and maintainability if the retrofitting process is not executed with meticulous engineering and quality control, potentially impacting the long-term operational effectiveness of the UUV.

What is the historical spending trend for the KNIFEFISH program or similar UUVs within the Department of the Navy?

Historical spending data specifically for the KNIFEFISH program prior to this Block 1 LRIP award is not publicly detailed. However, the Department of the Navy has been consistently increasing its investment in Unmanned Maritime Systems (UMS), including UUVs, over the past decade. This trend is driven by a strategic shift towards leveraging autonomous capabilities for various missions, such as intelligence, surveillance, reconnaissance (ISR), mine countermeasures (MCM), and anti-submarine warfare (ASW). Programs like the Mk18 family of UUVs (which KNIFEFISH is based on) and other developmental UUV initiatives have seen significant funding allocations. While exact figures for comparable UUV production contracts are often classified or not directly comparable due to differing capabilities and contract types, the overall budget for UMS procurement and development within the Navy has shown a steady upward trajectory, indicating a sustained commitment to this technology area.

What are the implications of this contract being 'NOT COMPETED' for future UUV procurements?

The 'NOT COMPETED' status for this KNIFEFISH UUV Block 1 LRIP contract has several implications for future procurements. Primarily, it signifies that the government determined only one source, General Dynamics Mission Systems, could fulfill the requirement, potentially due to unique capabilities, existing technology integration, or specific program phase needs. This sole-source award limits the opportunity for other potential vendors to enter the market or challenge existing solutions, which can stifle innovation and competition in the long run. For future UUV procurements, this could set a precedent, making it easier to justify sole-source awards if the technology is seen as proprietary or deeply integrated. It also means that taxpayers may not benefit from the cost savings and improved value that typically result from a competitive bidding process. Agencies must carefully justify sole-source actions to ensure they are truly necessary and in the government's best interest.

Industry Classification

NAICS: Manufacturing › Navigational, Measuring, Electromedical, and Control Instruments Manufacturing › Search, Detection, Navigation, Guidance, Aeronautical, and Nautical System and Instrument Manufacturing

Product/Service Code: COMM/DETECT/COHERENT RADIATION

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002420R6304

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: General Dynamics Corp

Address: 553 S ST, QUINCY, MA, 02169

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: $88,952,264

Exercised Options: $84,452,264

Current Obligation: $81,896,181

Subaward Activity

Number of Subawards: 52

Total Subaward Amount: $18,557,321

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline