Navy awards $4.96B for long-lead time materials for submarines, with no competition

Contract Overview

Contract Amount: $4,960,017,500 ($5.0B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2023-10-13

End Date: 2035-09-30

Contract Duration: 4,370 days

Daily Burn Rate: $1.1M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST NO FEE

Sector: Defense

Official Description: SSN 814 & SSN 815 LONG LEAD TIME MATERIAL

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $4.96 billion to ELECTRIC BOAT CORPORATION for work described as: SSN 814 & SSN 815 LONG LEAD TIME MATERIAL Key points: 1. Significant investment in critical submarine components highlights long-term defense needs. 2. The contract's sole-source nature raises questions about price discovery and potential cost efficiencies. 3. A long performance period suggests a complex and lengthy production cycle for these materials. 4. The absence of small business set-asides indicates a focus on large, specialized contractors. 5. This award represents a substantial portion of the shipbuilding and repair sector's federal spending.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and the specialized, long-lead time materials involved. Without competitive bids, it's difficult to assess if the $4.96 billion represents a fair market price. The cost-plus-no-fee structure, while common for complex defense procurements, can incentivize cost overruns if not rigorously managed. Further analysis would require detailed cost breakdowns and comparisons to similar, albeit rare, sole-source awards for submarine components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning Electric Boat Corporation was the only bidder. This approach is typically justified when only one responsible source is available, often due to unique capabilities, proprietary technology, or urgent national security needs. The lack of competition means there was no opportunity for price negotiation or comparison against alternative suppliers, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers are exposed to the full cost of production without the downward pressure that competition typically provides. This necessitates robust government oversight to ensure costs are reasonable and justified.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet modernization programs. This contract ensures the supply of critical long-lead time materials essential for submarine construction. The geographic impact is concentrated in Connecticut, where Electric Boat Corporation is located. This award supports a highly specialized segment of the U.S. industrial base and its associated workforce.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost-plus contract type can incentivize higher spending if not closely monitored.
Long performance period increases exposure to potential cost escalations and schedule delays.
Lack of transparency in sole-source justification requires careful review.
Specialized nature of materials may limit future contractor options.

Positive Signals

Secures critical components for essential national defense assets (submarines).
Supports a key U.S. defense industrial base contractor with specialized expertise.
Ensures continuity of supply for long-term, complex defense programs.
Awarding to a known entity with a track record in submarine construction can mitigate some technical risks.

Sector Analysis

The shipbuilding and repair sector is a critical component of the U.S. defense industrial base, characterized by high barriers to entry, significant capital investment, and long production cycles. Federal spending in this area is heavily concentrated within the Department of Defense, supporting naval fleet readiness and modernization. This contract for long-lead time materials is essential for the sustained production of advanced submarines, a capability held by very few domestic firms. Comparable spending benchmarks are difficult to establish due to the unique nature of submarine construction and the sole-source procurement method.

Small Business Impact

This contract does not appear to include specific small business set-asides, which is common for large, sole-source defense procurements involving highly specialized components. The prime contractor, Electric Boat Corporation, is a large entity. While there may be subcontracting opportunities for small businesses within the broader supply chain, the primary award does not directly benefit small businesses through set-aside provisions. The impact on the small business ecosystem is indirect, relying on the prime contractor's subcontracting practices.

Oversight & Accountability

Oversight for this contract will primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and cost-plus structure, rigorous oversight of cost, schedule, and performance will be crucial. The Defense Contract Audit Agency (DCAA) and potentially the Department of Defense Inspector General (DoDIG) would likely be involved in auditing costs and ensuring compliance. Transparency is limited by the sole-source justification, but contract modifications and performance reports should be subject to review.

Related Government Programs

Submarine Construction Programs
Naval Ship Building
Long Lead Time Material Procurement
Defense Industrial Base Sustainment
Strategic Weapons Systems

Risk Flags

Sole-source award
Cost-plus contract type
Long performance period
Lack of competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.96 billion to ELECTRIC BOAT CORPORATION. SSN 814 & SSN 815 LONG LEAD TIME MATERIAL

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 $4.96 billion.

What is the period of performance?

Start: 2023-10-13. End: 2035-09-30.

What is the historical spending trend for long-lead time materials for submarines with Electric Boat Corporation?

Analyzing historical spending for long-lead time materials for submarines with Electric Boat Corporation requires examining past contracts for similar components and programs. While specific data for 'long-lead time material' as a distinct category might not be readily available across all historical contracts, overall spending on submarine construction and modernization by the Navy with Electric Boat has been substantial and often involves multi-year, sole-source or limited-competition awards. For instance, previous contracts for Virginia-class and Columbia-class submarine components have also represented significant investments. The current $4.96 billion award for SSN 814 & SSN 815 reflects the ongoing, high-cost nature of maintaining and advancing the U.S. submarine fleet. Trends generally show increasing costs due to inflation, technological advancements, and the complexity of these platforms. Without access to detailed historical contract databases specifically isolating 'long-lead time materials,' a precise trend analysis is difficult, but the overall trajectory indicates sustained, high-value investment in this critical area.

How does the $4.96 billion award compare to the total budget for submarine construction or shipbuilding within the Department of the Navy?

The $4.96 billion award for long-lead time materials represents a significant, but not the entirety, of the funding required for the SSN 814 and SSN 815 submarines. The total cost for constructing a nuclear-powered submarine is substantially higher, often ranging from $5 billion to over $9 billion per vessel, depending on the class and specific configuration. This award specifically targets the initial, long-lead time components necessary to begin production, which are often procured years in advance due to their complex manufacturing processes and extended supply chains. Within the Department of the Navy's overall shipbuilding budget, which can exceed $30 billion annually, this single award constitutes a notable portion, underscoring the high priority placed on submarine programs. It highlights the substantial upfront investment required to maintain the U.S. submarine force's technological edge and operational capacity.

What are the specific risks associated with a sole-source, cost-plus contract for long-lead time materials?

Sole-source, cost-plus contracts for long-lead time materials present several key risks. Firstly, the lack of competition means the government cannot leverage market forces to achieve the lowest possible price, potentially leading to inflated costs. The contractor has less incentive to control expenses because costs are reimbursed, albeit with a fee. This 'cost-plus-no-fee' structure, while intended to cover costs, still requires diligent oversight to prevent unnecessary expenditures. Secondly, the long-lead nature of the materials means the government is committed to a significant investment years in advance, increasing exposure to economic fluctuations, technological obsolescence, or shifts in strategic priorities. If the project scope changes or unforeseen technical challenges arise, cost overruns are a significant risk. Finally, the absence of competition can reduce the contractor's motivation for innovation in efficiency or cost-saving measures, relying instead on the government's willingness to cover incurred costs.

What is Electric Boat Corporation's track record with the U.S. Navy, particularly regarding submarine construction?

Electric Boat Corporation (EB) has a long and established track record as a primary builder of U.S. Navy submarines, dating back over a century. They are one of only two shipyards in the United States capable of constructing nuclear-powered submarines, the other being Huntington Ingalls Industries' Newport News Shipbuilding. EB is the prime contractor for the Virginia-class attack submarines and is a key partner, along with HII, in the construction of the new Columbia-class ballistic missile submarines. Their history includes building numerous classes of submarines, from early diesel-electric models to the most advanced nuclear-powered vessels. While complex, large-scale defense programs inherently face challenges, EB has generally been regarded as a capable and essential contributor to the U.S. submarine industrial base, delivering critical platforms for national security.

What are the implications of awarding long-lead time materials on a sole-source basis for future competition or market development?

Awarding long-lead time materials on a sole-source basis can have significant implications for future competition and market development within the defense industrial base. By consolidating such critical, specialized work with a single incumbent contractor, it can create or reinforce barriers to entry for potential competitors. Smaller or newer firms may find it exceedingly difficult to gain a foothold or develop the necessary expertise and infrastructure to compete for these types of contracts in the future. This can lead to a less dynamic market, potentially reducing innovation and increasing long-term reliance on a limited number of suppliers. While sometimes necessary for national security reasons, such sole-source awards warrant careful consideration of their impact on the broader competitive landscape and the long-term health and diversity of the defense supply chain.

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: N0002423R2110

Offers Received: 1

Pricing Type: COST NO FEE (S)

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: $5,131,518,000

Exercised Options: $5,131,518,000

Current Obligation: $4,960,017,500

Subaward Activity

Number of Subawards: 214

Total Subaward Amount: $343,550,915

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline