Navy awards $473M design engineering contract for DDG(X) destroyers to Bath Iron Works

Contract Overview

Contract Amount: $47,293,115 ($47.3M)

Contractor: Bath Iron Works Corporation

Awarding Agency: Department of Defense

Start Date: 2022-07-22

End Date: 2028-07-21

Contract Duration: 2,191 days

Daily Burn Rate: $21.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: DDG(X) SHIPBUILDER DESIGN ENGINEERING

Place of Performance

Location: BATH, SAGADAHOC County, MAINE, 04530

State: Maine Government Spending

Plain-Language Summary

Department of Defense obligated $47.3 million to BATH IRON WORKS CORPORATION for work described as: DDG(X) SHIPBUILDER DESIGN ENGINEERING Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant investment in future naval capabilities. 3. Long-term contract duration suggests a sustained need for these services. 4. Cost-plus award fee structure incentivizes performance but requires careful oversight. 5. Focus on design and engineering indicates early-stage program development. 6. Potential for follow-on production contracts for the DDG(X) class.

Value Assessment

Rating: fair

The contract value of $472.9 million for design engineering services is substantial, reflecting the complexity of developing a new class of warship. As a sole-source award, direct price comparisons to other shipbuilders for this specific design phase are not feasible. However, the cost-plus award fee structure necessitates robust government oversight to ensure costs remain reasonable and that the contractor achieves performance targets. Benchmarking against previous large-scale naval design programs would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Bath Iron Works was the only bidder considered. This approach is often used when a specific contractor possesses unique capabilities, intellectual property, or is deemed essential for program continuity. However, the lack of competition means that the government did not benefit from a competitive bidding process, which typically drives down prices and fosters innovation among multiple offerors.

Taxpayer Impact: The absence of competition for this critical design phase means taxpayers may not have received the most cost-effective solution. Without competing bids, there is a risk that the awarded price is higher than it might have been in a competitive environment.

Public Impact

The primary beneficiary is the U.S. Navy, which will receive the design for its next-generation DDG(X) destroyers. This contract supports the development of advanced naval combat capabilities essential for national security. The contract is geographically focused on Maine, supporting jobs and economic activity in the region where Bath Iron Works is located. It will sustain and potentially grow the specialized engineering and design workforce required for complex shipbuilding projects.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus award fee contracts can lead to cost overruns if not managed tightly.
Long contract duration (5 years) increases exposure to potential cost escalations.
Lack of transparency in the sole-source justification requires scrutiny.

Positive Signals

Award to an established, experienced shipbuilder with a track record in naval construction.
Focus on design and engineering is crucial for developing advanced platforms.
Cost-plus award fee structure can incentivize meeting performance milestones.
Long-term commitment signals strategic investment in future fleet capabilities.

Sector Analysis

The shipbuilding and repair industry is a critical sector for national defense, characterized by high barriers to entry, long production cycles, and significant government investment. This contract for the DDG(X) destroyer design falls within the naval shipbuilding segment, a highly specialized area dominated by a few major contractors. The total addressable market for naval vessels is substantial, driven by ongoing modernization efforts and strategic geopolitical demands. Comparable spending benchmarks would involve analyzing previous design and engineering contracts for major naval platforms like destroyers and cruisers.

Small Business Impact

This contract does not appear to include specific small business set-asides. Given the specialized nature of naval shipbuilding design and engineering, it is likely that Bath Iron Works will subcontract portions of the work. The extent to which these subcontracts will be awarded to small businesses will be a key factor in assessing the overall impact on the small business ecosystem. Without explicit set-aside requirements, the flow-down to small businesses may be less than optimal.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy's contracting and program management offices. The cost-plus award fee structure necessitates rigorous monitoring of costs, progress, and performance against defined award criteria. Transparency will depend on the Navy's willingness to release details regarding the sole-source justification and performance evaluations. The Inspector General for the Department of Defense may also conduct audits or investigations into cost management and contract execution.

Related Government Programs

DDG-51 Arleigh Burke-class Destroyer Program
Littoral Combat Ship (LCS) Program
Constellation-class Frigate Program
Naval Surface Warfare Center (NSWC) Contracts
Shipbuilding and Conversion, Navy (SCN) appropriations

Risk Flags

Sole-source award
Cost-plus award fee structure
Long contract duration
Potential for cost overruns
Limited public competition data

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.3 million to BATH IRON WORKS CORPORATION. DDG(X) SHIPBUILDER DESIGN ENGINEERING

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 $47.3 million.

What is the period of performance?

Start: 2022-07-22. End: 2028-07-21.

What is the track record of Bath Iron Works in delivering complex naval design and engineering services on time and within budget?

Bath Iron Works (BIW) has a long history of constructing major surface combatants for the U.S. Navy, including the Arleigh Burke-class destroyers. While BIW has successfully delivered numerous vessels, like any large defense contractor, it has faced challenges. Past performance reviews and program management assessments would provide specific insights into their historical success rates for design and engineering phases. Factors such as labor relations, supply chain management, and the complexity of evolving designs can impact delivery schedules and costs. The Navy's source selection evaluation, though not publicly detailed for sole-source awards, would have considered BIW's relevant experience and past performance metrics.

How does the awarded value compare to similar large-scale naval design and engineering contracts?

Direct comparison of the $472.9 million award for DDG(X) design engineering is challenging due to the unique nature of developing a new destroyer class and the sole-source award. However, historical data on major naval platform design contracts can offer benchmarks. For instance, the design and engineering phases for previous destroyer classes or major upgrades often ran into hundreds of millions of dollars, reflecting the extensive research, development, prototyping, and systems integration required. The cost-plus award fee structure, while common, means the final expenditure could vary based on performance and cost control. A detailed analysis would require comparing the scope, duration, and complexity of the DDG(X) design effort against similar historical contracts.

What are the primary risks associated with this sole-source, cost-plus award fee contract?

The primary risks associated with this contract are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher costs than if multiple bidders had competed. This reduces the government's leverage in price negotiation. Secondly, the cost-plus award fee (CPAF) structure, while incentivizing performance, carries inherent risks of cost growth. If the contractor's cost estimating or management is inadequate, or if unforeseen technical challenges arise, costs could escalate beyond initial projections. Effective government oversight is critical to mitigate these risks by closely monitoring expenditures, validating costs, and ensuring performance targets are met efficiently.

What is the expected effectiveness of the DDG(X) program based on this design and engineering investment?

The effectiveness of the DDG(X) program hinges on the successful execution of this foundational design and engineering contract. The investment aims to produce a next-generation destroyer capable of meeting future threats, incorporating advanced technologies, and providing enhanced operational capabilities compared to current platforms. The success of this phase will directly influence the program's overall effectiveness, impacting factors like survivability, lethality, power projection, and integration with future naval systems. Positive performance outcomes under the CPAF structure are intended to ensure the design meets stringent naval requirements, paving the way for a capable and effective warship class.

How does this contract fit into the Navy's broader shipbuilding strategy and historical spending patterns?

This contract represents a critical step in the Navy's long-term shipbuilding strategy, specifically focused on replacing aging platforms and introducing advanced capabilities with the DDG(X) class. Historically, the Navy has allocated significant portions of its budget to shipbuilding, with major destroyer and cruiser programs representing substantial investments. This $473 million award for design and engineering aligns with historical spending patterns for the initial phases of major warship development. It signals a commitment to modernizing the fleet's surface combatant force, ensuring the Navy maintains its technological edge and operational capacity in a changing global security environment.

What are the implications of the 5-year contract duration for program stability and cost management?

The 5-year duration (2191 days) for this design and engineering contract provides program stability and allows for a methodical development process, which is crucial for a complex warship design. This extended period enables the contractor, Bath Iron Works, to dedicate resources and expertise over the long term, fostering a deeper understanding of the program's requirements and challenges. From a cost management perspective, a longer duration can help spread costs, but it also increases exposure to economic fluctuations, such as inflation and potential changes in labor or material costs. Robust contract clauses addressing economic price adjustments and diligent oversight are essential to manage costs effectively over this extended period.

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: N0002422R2318

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: $106,614,957

Exercised Options: $72,540,184

Current Obligation: $47,293,115

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline