DoD's $109M ship repair contract awarded to BAE Systems for USS Mitscher, raising value-for-money questions

Contract Overview

Contract Amount: $109,004,328 ($109.0M)

Contractor: BAE Systems Maritime Solutions Norfolk Inc.

Awarding Agency: Department of Defense

Start Date: 2021-12-22

End Date: 2023-09-11

Contract Duration: 628 days

Daily Burn Rate: $173.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: USS MITSCHER (DDG 57) FY22 DRY-DOCKING SELECTED RESTRICTED AVAILABILITY

Place of Performance

Location: NORFOLK, NORFOLK CITY County, VIRGINIA, 23523

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $109.0 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC. for work described as: USS MITSCHER (DDG 57) FY22 DRY-DOCKING SELECTED RESTRICTED AVAILABILITY Key points: 1. The contract's value appears high relative to the duration and scope, warranting a closer look at cost-effectiveness. 2. Limited public data on comparable ship repair costs makes a precise value benchmark challenging. 3. The firm-fixed-price structure aims to control costs, but the final expenditure warrants scrutiny. 4. This contract falls within the broader shipbuilding and repair sector, which is critical for naval readiness. 5. The duration of the contract suggests a significant overhaul or repair, impacting operational availability of the USS Mitscher. 6. The absence of small business subcontracting goals requires monitoring to ensure broader economic participation.

Value Assessment

Rating: fair

The $109 million awarded for the USS Mitscher's dry-docking and repair is substantial. While firm-fixed-price contracts aim for cost certainty, the lack of readily available public benchmarks for similar complex naval vessel repairs makes a definitive value assessment difficult. The duration of the contract (over 600 days) suggests extensive work, but the cost per day is high. Further analysis would require access to detailed work breakdown structures and historical cost data for comparable availabilities on similar vessels.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the number of bids received (2) is on the lower side for a contract of this magnitude, which could suggest a specialized market or limited capacity among potential offerors. This level of competition generally supports price discovery, but a low number of bidders might indicate less aggressive pricing.

Taxpayer Impact: While full and open competition is ideal for taxpayer value, only two bidders may have limited the downward pressure on pricing compared to a more robust competitive field.

Public Impact

The primary beneficiary is the U.S. Navy, ensuring the operational readiness of the USS Mitscher (DDG 57). Services delivered include dry-docking, selected restricted availability, and extensive repairs to maintain the vessel's combat effectiveness. The geographic impact is centered around the Norfolk Naval Shipyard, a key hub for naval maintenance and repair. This contract supports a specialized workforce of maritime technicians, engineers, and shipyard workers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen issues arise during the extensive repair period.
Limited competition (2 bidders) may have resulted in a higher-than-optimal price.
Lack of specific small business subcontracting goals could limit opportunities for smaller firms in this large contract.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Awarded under full and open competition, adhering to procurement best practices.
BAE Systems is an established maritime solutions provider with experience in naval ship repair.

Sector Analysis

The shipbuilding and repairing sector (NAICS 336611) is a critical component of the defense industrial base, supporting naval fleet readiness. This contract represents a significant investment within this specialized market. Comparable spending benchmarks are difficult to establish publicly due to the proprietary nature of ship repair costs and the unique requirements of each vessel's availability. However, major overhauls for destroyers can range from tens to hundreds of millions of dollars.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific small business subcontracting requirements. While BAE Systems may engage small businesses as subcontractors, the absence of explicit goals means there is no mandated level of participation. This could limit the direct economic benefit to the small business ecosystem within the maritime repair industry for this specific contract.

Oversight & Accountability

The contract is a firm-fixed-price definitive contract, which provides a degree of cost control. Oversight would typically be managed by the Naval Sea Systems Command (NAVSEA) and the contracting officer's representative (COR) at the shipyard. Transparency is limited by the proprietary nature of defense contracts, but contract awards and basic details are publicly available through federal procurement databases. Inspector General involvement would be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Maintenance and Repair Contracts
Shipbuilding and Repair Services
Defense Readiness Contracts
Dry-Docking Services
DDG Class Destroyer Maintenance

Risk Flags

Potential for cost escalation due to complexity of repairs.
Limited competition may impact price competitiveness.
Long contract duration requires robust oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $109.0 million to BAE SYSTEMS MARITIME SOLUTIONS NORFOLK INC.. USS MITSCHER (DDG 57) FY22 DRY-DOCKING SELECTED RESTRICTED AVAILABILITY

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS MARITIME SOLUTIONS NORFOLK 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 $109.0 million.

What is the period of performance?

Start: 2021-12-22. End: 2023-09-11.

What is the typical cost range for a Selected Restricted Availability (SRA) for a DDG-51 class destroyer?

The cost range for a Selected Restricted Availability (SRA) for a DDG-51 class destroyer can vary significantly based on the specific work required, the condition of the vessel, and the shipyard performing the work. However, based on publicly available data and industry knowledge, SRAs for this class of ship can typically range from $50 million to over $150 million. Factors influencing the cost include the extent of hull work, propulsion system overhauls, combat system upgrades, and modernization efforts. The $109 million awarded to BAE Systems falls within this broad range, but its position within the range warrants scrutiny against the specific scope of work and the number of bids received.

How does the awarded amount compare to historical spending on similar maintenance for the USS Mitscher or its sister ships?

Direct historical spending comparisons for the USS Mitscher's specific FY22 dry-docking selected restricted availability are not readily available in the public domain. However, analyzing past availabilities for DDG-51 class destroyers provides context. For instance, similar maintenance periods for vessels in this class have historically cost anywhere from $70 million to upwards of $120 million, depending on the scope and shipyard. The $109 million awarded to BAE Systems appears to be at the higher end of this historical spectrum, suggesting either a particularly extensive scope of work or potentially less competitive pricing dynamics for this specific procurement.

What specific risks are associated with a firm-fixed-price contract for complex ship repair?

While firm-fixed-price (FFP) contracts are designed to provide cost certainty to the government, they carry specific risks in complex repair scenarios like naval ship availabilities. The primary risk is that the contractor may cut corners on quality or materials to maintain profitability if unforeseen issues arise or costs escalate beyond initial estimates. Conversely, if the contractor accurately anticipates all potential issues and prices accordingly, the government might overpay if the work proves less complex than anticipated. For the shipyard, the risk lies in absorbing unexpected costs, potentially leading to financial strain or disputes. Effective government oversight is crucial to mitigate these risks and ensure the work is performed to the required standards.

What is the significance of the contract duration (628 days) in relation to the awarded amount?

A contract duration of 628 days (approximately 21 months) for a Selected Restricted Availability (SRA) is substantial and indicates a major overhaul or modernization effort for the USS Mitscher (DDG 57). This extended period suggests that the scope of work likely goes beyond routine maintenance, potentially including significant structural repairs, system upgrades (e.g., combat systems, propulsion), or modernization to extend the ship's service life. The awarded amount of $109 million, when spread over this long duration, translates to a significant daily expenditure. Evaluating the value requires understanding if the extensive timeline and associated costs are justified by the complexity and criticality of the required modernization and repair tasks.

What does the limited number of bidders (2) suggest about the market for naval ship repair services?

The fact that only two bids were received for this $109 million naval ship repair contract suggests a potentially concentrated market for specialized services like the Selected Restricted Availability (SRA) for DDG-51 class destroyers. This could be due to several factors: the high technical expertise required, the significant capital investment needed for shipyard facilities, the specific security clearances necessary, or the geographic concentration of capable shipyards. A limited number of bidders can reduce competitive pressure, potentially leading to higher prices than if more firms were competing. It also highlights the strategic importance of maintaining a healthy competitive base within the defense industrial base for critical maintenance services.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › NON-NUCLEAR SHIP REPAIR

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002421R4490

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Compagnie DE Developpement DE L'eau S.A.

Address: 750 W BERKLEY AVE, NORFOLK, VA, 23523

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: $117,273,548

Exercised Options: $109,004,328

Current Obligation: $109,004,328

Actual Outlays: $103,687,709

Subaward Activity

Number of Subawards: 205

Total Subaward Amount: $26,399,008

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline