Navy awards $517M to Electric Boat for VACL materials, a sole-source contract for shipbuilding

Contract Overview

Contract Amount: $517,248,825 ($517.2M)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2023-09-15

End Date: 2028-09-30

Contract Duration: 1,842 days

Daily Burn Rate: $280.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: VACL MATERIALS

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $517.2 million to ELECTRIC BOAT CORPORATION for work described as: VACL MATERIALS Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Long-term delivery order indicates sustained need for VACL materials. 3. FIRM FIXED PRICE contract type provides cost certainty for the government. 4. High value suggests critical components for major naval platforms. 5. Contract duration of over 5 years points to significant program commitment. 6. No small business set-aside indicates focus on specialized capabilities.

Value Assessment

Rating: fair

The total award value of $517.2 million for VACL materials over a 5-year period is substantial. Without specific per-unit cost data or benchmarks for VACL materials, a direct value-for-money assessment is challenging. However, the sole-source nature of the award raises concerns about potential overpricing compared to a competitive environment. The fixed-price contract offers some cost predictability, but the lack of competitive bidding limits the government's ability to ensure the best possible price.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Electric Boat Corporation, was solicited. This approach is typically used when a unique capability or proprietary technology is required, or when only one responsible source is available. The lack of competition means that the government did not benefit from multiple proposals and the price discovery that typically occurs in a competitive bidding process.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure, as the contractor faces less incentive to offer the lowest possible price.

Public Impact

The primary beneficiary is the Department of the Navy, ensuring the supply of critical VACL materials for shipbuilding and repair. Services delivered include the provision of specialized materials essential for naval vessel construction and maintenance. Geographic impact is concentrated in Connecticut, where Electric Boat Corporation is located and likely performs the work. Workforce implications include sustained employment at Electric Boat and its supply chain, particularly in specialized manufacturing roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and potentially increases costs for taxpayers.
Lack of transparency in the procurement process due to limited competition.
Potential for cost overruns if not closely managed, despite fixed-price terms.
Dependence on a single supplier for critical materials could pose supply chain risks.

Positive Signals

Long-term contract provides supply chain stability for essential naval materials.
Fixed-price contract offers predictability in budgeting and cost management.
Award to a known, established contractor (Electric Boat) suggests a degree of reliability.
Contract duration aligns with long-term shipbuilding and maintenance schedules.

Sector Analysis

The shipbuilding and repair sector is a critical component of national defense, characterized by high barriers to entry, complex manufacturing processes, and significant government investment. This contract for VACL materials fits within the broader defense industrial base, specifically supporting naval vessel construction and maintenance. The market for specialized shipbuilding materials is often concentrated among a few key suppliers due to stringent quality and performance requirements. Comparable spending benchmarks are difficult to establish without more specific material details, but large-scale naval contracts often run into hundreds of millions or billions of dollars.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses based on the provided data. The award to a large, established prime contractor like Electric Boat Corporation suggests a focus on specialized capabilities that may not be readily available from smaller firms. This could limit the direct economic impact on the small business ecosystem within this specific procurement.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the contract terms, including delivery schedules and material specifications. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to investigate any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Submarine Construction Contracts
Naval Shipyard Support Services
Defense Material Procurement
Ship Building and Repair Contracts
Department of the Navy Major Contracts

Risk Flags

Sole-source procurement
Potential lack of price competition
Dependence on single supplier

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $517.2 million to ELECTRIC BOAT CORPORATION. VACL MATERIALS

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 $517.2 million.

What is the period of performance?

Start: 2023-09-15. End: 2028-09-30.

What is the specific nature of VACL materials and why are they critical for naval shipbuilding?

VACL materials likely refer to specialized components or systems used in naval vessels, potentially related to ventilation, air conditioning, or other critical life support and operational systems. Their criticality stems from the demanding environment of naval operations, requiring materials that can withstand extreme conditions, corrosion, and ensure the safety and functionality of the ship. Without specific product details, it's difficult to pinpoint the exact function, but in shipbuilding, such materials are often integral to hull integrity, propulsion, habitability, or combat systems. The Navy's reliance on Electric Boat Corporation for these materials suggests they are either proprietary, require highly specialized manufacturing processes, or are deeply integrated into Electric Boat's specific vessel designs, making them difficult to source elsewhere.

How does the sole-source nature of this award impact the potential cost-effectiveness for the Navy?

The sole-source award to Electric Boat Corporation significantly limits cost-effectiveness by removing competitive pressure. In a competitive environment, multiple bidders would vie for the contract, driving prices down through negotiation and proposal evaluation. Without this, the Navy relies on Electric Boat's proposed pricing, which may not reflect the lowest possible market rate. While the contract is fixed-price, which caps the government's liability, the initial price could be higher than if competition were present. The Navy's justification for a sole-source award would need to demonstrate that no other responsible source can meet the requirement, or that a deviation from full and open competition is in the government's best interest, often due to unique technical requirements or long-standing relationships.

What are the potential risks associated with a long-term, sole-source contract for critical materials?

A long-term, sole-source contract presents several risks. Firstly, there's the risk of price escalation over the contract's duration, even with fixed-price terms, if the initial pricing was not aggressively negotiated. Secondly, supply chain vulnerability increases, as the Navy becomes dependent on a single supplier. Any disruption at Electric Boat Corporation, whether due to labor issues, material shortages, or unforeseen operational problems, could directly impact naval readiness. Thirdly, technological stagnation is a risk; without competitive pressure, the supplier may have less incentive to innovate or adopt more cost-effective manufacturing methods. Finally, there's the risk of contractor lock-in, making it difficult and costly to switch suppliers in the future, even if better alternatives emerge.

What is Electric Boat Corporation's track record with the Department of the Navy, particularly regarding shipbuilding materials?

Electric Boat Corporation (EB) has a long and established track record with the Department of the Navy, primarily as the designer and builder of U.S. Navy submarines. They are a critical part of the nation's strategic shipbuilding industrial base. Their history includes delivering numerous nuclear-powered submarines, such as the Ohio, Virginia, and Columbia-class programs. Given their role, EB has extensive experience in procuring and managing complex supply chains for specialized materials required in submarine construction. Awards like this $517 million contract for VACL materials are consistent with their core business and long-standing relationship with the Navy, suggesting a deep understanding of the Navy's requirements and EB's capability to meet them, albeit through a sole-source mechanism.

How does this contract's value compare to other major shipbuilding material procurements by the Navy?

The $517 million award for VACL materials is a significant sum, reflecting the high cost of specialized components in naval shipbuilding. While specific comparisons are difficult without knowing the exact nature of VACL materials, it aligns with the scale of major subcontracts or material packages for large naval platforms. For context, the construction of a single Virginia-class submarine can cost upwards of $3 billion, and a Columbia-class submarine is projected to cost over $9 billion. Material procurements, especially for critical systems or components like those potentially represented by VACL, often represent a substantial portion of the overall vessel cost. Therefore, $517 million for a specific category of materials over five years is substantial but not unusual within the context of major naval shipbuilding programs.

What are the implications of this contract for the broader defense industrial base and supply chain resilience?

This contract highlights the critical role of specialized suppliers within the defense industrial base. The sole-source nature suggests a concentrated supply chain for these VACL materials, potentially impacting broader resilience. If Electric Boat is the sole producer or primary integrator of these materials, any disruption to their operations or their own upstream suppliers could have cascading effects on submarine production schedules. This underscores the importance of monitoring the health and capacity of key suppliers within the defense industrial base. While this contract ensures supply for the Navy, it also emphasizes the need for strategies to foster competition or develop alternative sources for critical defense materials to enhance long-term supply chain resilience.

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: N0002421R4305

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

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: $517,248,825

Exercised Options: $517,248,825

Current Obligation: $517,248,825

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0002422G4304

IDV Type: BOA

Timeline