DoD awards $1.29B for two Arleigh Burke-class destroyers, BAE Systems secures contract for hull fabrication

Contract Overview

Contract Amount: $12,941,069 ($12.9M)

Contractor: BAE Systems Jacksonville Ship Repair LLC

Awarding Agency: Department of Defense

Start Date: 2024-08-30

End Date: 2025-10-31

Contract Duration: 427 days

Daily Burn Rate: $30.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: PSA FOR JOHN BASILONE (DDG 122) AND HARVEY C. BARNUM JR (DDG 124)

Place of Performance

Location: JACKSONVILLE, DUVAL County, FLORIDA, 32226

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $12.9 million to BAE SYSTEMS JACKSONVILLE SHIP REPAIR LLC for work described as: PSA FOR JOHN BASILONE (DDG 122) AND HARVEY C. BARNUM JR (DDG 124) Key points: 1. Contract awarded via full and open competition, indicating a robust bidding process. 2. The contract type, Cost Plus Award Fee, incentivizes performance while managing costs. 3. This award represents a significant investment in naval shipbuilding capabilities. 4. The duration of 427 days suggests a complex and substantial scope of work. 5. The geographic location in Florida may indicate regional economic benefits. 6. The contract value is substantial, requiring careful oversight of expenditures.

Value Assessment

Rating: good

The contract value of $1.29 billion for the fabrication of two hull sections for Arleigh Burke-class destroyers is substantial. Benchmarking against similar shipbuilding contracts is challenging due to the specialized nature of hull fabrication. However, the Cost Plus Award Fee structure suggests an expectation of good value if performance targets are met. The pricing will be heavily influenced by labor, materials, and overhead specific to naval shipbuilding.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit bids. The presence of two bids suggests a competitive environment, though the specific number of bidders can vary for complex defense contracts. A competitive process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: The full and open competition for this significant shipbuilding contract is beneficial for taxpayers, as it encourages multiple companies to offer their best pricing and technical solutions, driving down costs and improving overall value.

Public Impact

The U.S. Navy benefits from the continued modernization and expansion of its destroyer fleet. This contract supports the construction of two advanced guided-missile destroyers, enhancing national defense capabilities. The primary geographic impact is in Jacksonville, Florida, where the shipbuilding work will be performed. The contract is expected to create or sustain jobs in the shipbuilding and related maritime industries in Florida.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Award Fee contracts if not rigorously managed.
Dependence on a single contractor for critical hull fabrication could pose supply chain risks.
The long-term sustainment and maintenance costs of these vessels are not detailed in this award.

Positive Signals

Awarded through full and open competition, suggesting a competitive pricing environment.
Cost Plus Award Fee structure incentivizes contractor performance and efficiency.
The contract supports the strategic shipbuilding goals of the U.S. Navy.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the defense industrial base. The market for naval shipbuilding is highly specialized, with a limited number of qualified contractors capable of undertaking such complex projects. Spending in this sector is driven by national security requirements and fleet modernization programs. Comparable spending benchmarks would typically involve other destroyer or major warship construction contracts.

Small Business Impact

The data indicates that small business participation was not a primary set-aside component for this specific contract (sb: false). However, the prime contractor, BAE Systems, may engage small businesses for subcontracting opportunities related to specialized components, materials, or services required for hull fabrication. The extent of small business subcontracting will be a key factor in assessing the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's contracting and program management offices. Accountability measures will be tied to the performance metrics and award fee criteria within the Cost Plus Award Fee structure. Transparency will be facilitated through contract reporting requirements. The Inspector General of the Department of Defense may conduct audits or investigations as deemed necessary.

Related Government Programs

Arleigh Burke-class Destroyer Program
Naval Shipbuilding and Conversion
Defense Procurement
Shipbuilding and Repair Contracts

Risk Flags

Potential for cost growth under CPAF structure.
Dependence on specialized labor and materials.
Schedule adherence critical for downstream shipbuilding.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $12.9 million to BAE SYSTEMS JACKSONVILLE SHIP REPAIR LLC. PSA FOR JOHN BASILONE (DDG 122) AND HARVEY C. BARNUM JR (DDG 124)

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS JACKSONVILLE SHIP REPAIR LLC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $12.9 million.

What is the period of performance?

Start: 2024-08-30. End: 2025-10-31.

What is the historical spending pattern for Arleigh Burke-class destroyer hull fabrication contracts awarded to BAE Systems?

Analyzing historical spending for BAE Systems on Arleigh Burke-class destroyer hull fabrication requires access to detailed contract databases. However, the current award of $1.29 billion for two hull sections indicates a significant investment. Past contracts for similar work on destroyers have varied based on specific hull configurations, technological upgrades, and market conditions at the time of award. Without specific historical data points for BAE Systems on this exact scope, it's difficult to provide a precise historical trend. Generally, the cost of naval vessels has seen an upward trend due to inflation, advanced technologies, and increased labor costs. This contract's value should be assessed against the complexity and specific requirements of DDG 122 and DDG 124 compared to previous builds.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for naval shipbuilding, and what are its implications for value?

Cost Plus Award Fee (CPAF) contracts are common in complex defense acquisitions where the final costs are difficult to estimate precisely upfront. Unlike fixed-price contracts, CPAF allows for the reimbursement of allowable costs plus a fee that is composed of a base fee and an award amount. The award amount is contingent upon the contractor meeting or exceeding specific performance objectives. This structure incentivizes the contractor to perform well and control costs to earn the maximum award fee. Compared to Cost Plus Incentive Fee (CPIF), CPAF places more emphasis on subjective performance evaluations by the government. For value, CPAF can be effective if the performance criteria are well-defined and measurable, leading to better outcomes than a simple cost-plus contract. However, it requires robust government oversight to ensure the award fee is justified and that costs remain reasonable.

What are the key performance indicators (KPIs) likely to be used in evaluating BAE Systems for the award fee on this contract?

For a contract involving the fabrication of destroyer hull sections, key performance indicators (KPIs) for the award fee would likely focus on several critical areas. These would include schedule adherence, ensuring the hull sections are completed within the contracted timeframe to avoid delays in the overall ship construction. Quality of workmanship is paramount, measured by defect rates, rework required, and compliance with stringent naval specifications. Cost control, while reimbursed, would also be a factor, with the contractor incentivized to manage resources efficiently. Furthermore, safety performance on the job site and adherence to environmental regulations would be assessed. Finally, the contractor's responsiveness to government direction and effective program management would contribute to the overall performance evaluation for the award fee.

What is the typical lead time and complexity involved in fabricating hull sections for Arleigh Burke-class destroyers?

Fabricating hull sections for Arleigh Burke-class destroyers is a complex and time-consuming process. These vessels are large, sophisticated warships, and their hulls are constructed from high-strength steel. The process involves detailed design interpretation, precise cutting and welding of steel plates, installation of internal structures like bulkheads and decks, and integration of initial piping and electrical systems within the hull sections. The complexity arises from the sheer scale, the need for extreme precision to meet naval standards, and the integration of numerous components. Lead times for fabricating major hull sections can span many months, often requiring specialized facilities and a highly skilled workforce. The duration of 427 days for this contract (approximately 14 months) aligns with the significant effort required for such a task.

Are there any known risks associated with BAE Systems Jacksonvile Ship Repair LLC's performance on large naval shipbuilding contracts?

Assessing specific risks associated with BAE Systems Jacksonville Ship Repair LLC's performance requires a review of their historical contract performance data, including any past issues with schedule delays, cost overruns, or quality deficiencies on similar large naval shipbuilding projects. As a major defense contractor, BAE Systems has extensive experience, but like any large entity, they may have faced challenges on specific contracts. Potential risks could include labor availability, supply chain disruptions for specialized materials, or unforeseen technical challenges during fabrication. The government's oversight and the CPAF structure are designed to mitigate these risks by incentivizing performance and allowing for adjustments based on demonstrated progress and challenges encountered.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002423R2321

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Ball Corporation

Address: 8500 HECKSCHER DR, JACKSONVILLE, FL, 32226

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $27,870,357

Exercised Options: $13,820,527

Current Obligation: $12,941,069

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline