Navy awards $4.13B contract to Electric Boat Corp. for submarine services, highlighting long-term strategic partnership

Contract Overview

Contract Amount: $4,133,038,047 ($4.1B)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 1999-10-14

End Date: 2013-05-10

Contract Duration: 4,957 days

Daily Burn Rate: $833.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: GROTON, NEW LONDON County, CONNECTICUT, 06340

State: Connecticut Government Spending

Plain-Language Summary

Department of Defense obligated $4.13 billion to ELECTRIC BOAT CORPORATION for work described as: Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Sole-source award suggests limited competition and potentially higher prices. 3. Long contract duration of over 13 years may indicate a stable but potentially inflexible arrangement. 4. Significant value suggests a critical national security requirement. 5. Awarded to a single, established contractor, potentially limiting innovation from new entrants. 6. Focus on submarine services points to a specialized and high-stakes defense sector.

Value Assessment

Rating: fair

The contract's value of over $4.13 billion over its 13-year duration is substantial, reflecting the high cost of submarine services. Benchmarking this specific contract is challenging due to its specialized nature and sole-source award. However, cost-plus-fixed-fee contracts inherently carry a risk of cost escalation, as the contractor is reimbursed for costs plus a fixed fee. Without detailed cost breakdowns and comparisons to similar, competed contracts (which are likely scarce for this type of specialized service), a definitive value-for-money assessment is difficult. The fixed fee component provides some incentive for cost control, but the overall pricing structure warrants careful monitoring.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This is often the case for highly specialized defense systems or services where only one contractor possesses the necessary expertise, technology, or facilities. While this ensures the required capabilities are met, it significantly limits price discovery and can lead to higher costs for the government compared to a competitive procurement. The lack of competition means taxpayers do not benefit from the downward price pressure that multiple bidders would typically exert.

Taxpayer Impact: The sole-source nature of this award means taxpayers are likely paying a premium, as there was no opportunity for competitive bidding to drive down costs. This highlights the importance of strong negotiation and oversight to ensure fair pricing.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, ensuring the continued operation and maintenance of critical submarine assets. Services delivered likely include maintenance, repair, modernization, and potentially new construction support for submarines. Geographic impact is concentrated around naval bases and facilities where submarine operations and maintenance occur, primarily in Connecticut. Workforce implications include sustained employment for highly skilled engineers, technicians, and tradespeople at Electric Boat Corporation and its subcontractors.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Cost-plus-fixed-fee structure carries inherent risks of cost overruns if not closely managed.
Long contract duration may reduce flexibility to adapt to changing technological needs or market conditions.
Lack of transparency in sole-source procurements can obscure true cost drivers and value for money.

Positive Signals

Award to a single, established contractor ensures continuity of critical, specialized services for national security.
Long-term nature of the contract provides stability for workforce planning and investment in specialized facilities.
The significant value indicates a high level of trust and a proven track record with the contractor.
Focus on submarine services suggests a critical capability is being maintained and supported.

Sector Analysis

The defense industrial base, particularly the submarine sector, is characterized by high barriers to entry, significant capital investment, and long development cycles. This contract falls within the specialized segment of naval shipbuilding and maintenance, a market dominated by a few key players. Electric Boat Corporation is a primary contractor for U.S. submarine construction and maintenance. Comparable spending benchmarks are difficult to establish due to the unique nature of submarine platforms, but overall defense spending on naval assets represents a substantial portion of the federal budget.

Small Business Impact

This contract does not appear to have a specific small business set-aside component mentioned in the provided data. As a sole-source award to a large prime contractor, the primary impact on small businesses would be through subcontracting opportunities. The extent to which Electric Boat Corporation utilizes small business subcontractors for specialized services or components will determine the ripple effect on the small business ecosystem. Without specific subcontracting plans or goals, it's difficult to assess the direct benefit to small businesses.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the cost-plus-fixed-fee structure and long duration, robust oversight mechanisms, including regular audits, performance reviews, and cost tracking, are crucial. The Inspector General for the Department of Defense would likely have jurisdiction for investigating any potential fraud, waste, or abuse. Transparency is often limited in sole-source procurements, making detailed public scrutiny challenging.

Related Government Programs

Naval Ship Systems
Submarine Maintenance and Repair
Defense Procurement
Major Weapon Systems Acquisition
Strategic Weapons Systems

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.13 billion to ELECTRIC BOAT CORPORATION. See the official description on USAspending.

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 $4.13 billion.

What is the period of performance?

Start: 1999-10-14. End: 2013-05-10.

What is the historical spending pattern for submarine services with Electric Boat Corporation?

Historical spending data for submarine services with Electric Boat Corporation would reveal trends in contract values, types, and durations over time. Analyzing past awards can indicate whether this $4.13 billion contract represents a significant increase or is in line with previous investments. It can also highlight shifts in the nature of services procured, such as a move from maintenance to modernization or new construction. Understanding historical spending helps contextualize the current contract's scale and identify any patterns of increasing costs or reliance on sole-source awards for critical submarine programs. Without specific historical data, it's difficult to provide precise figures, but the long-standing relationship between the Navy and Electric Boat suggests a consistent, substantial financial commitment to submarine sustainment and development over decades.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar defense services?

The Cost-Plus-Fixed-Fee (CPFF) contract type, used here, reimburses the contractor for allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often employed when the scope of work is not precisely defined or involves significant uncertainty, such as research and development or complex services like submarine maintenance over an extended period. Compared to Firm-Fixed-Price (FFP) contracts, CPFF offers less price certainty for the government but provides greater flexibility and can incentivize contractors to undertake high-risk, complex projects they might otherwise avoid. However, CPFF contracts place a greater burden on the government for cost oversight to prevent overspending. Other types like Cost-Plus-Incentive-Fee (CPIF) aim to share cost savings or overruns, while Cost-Plus-Award-Fee (CPAF) includes performance-based award fees. The choice of CPFF suggests the Navy prioritized flexibility and the contractor's ability to perform complex, evolving tasks over strict cost certainty at the outset.

What are the key performance indicators (KPIs) used to measure the success of this contract?

Key Performance Indicators (KPIs) for a contract of this nature, involving complex submarine services, would likely focus on technical performance, schedule adherence, and cost control, despite the CPFF structure. Technical KPIs might include the successful completion of maintenance, repair, or modernization tasks according to specified standards, system reliability metrics, and the absence of critical defects. Schedule KPIs would track the timely completion of milestones and overall project delivery against the planned timeline. While the fee is fixed, cost KPIs would involve monitoring actual costs against projected budgets, ensuring efficient resource utilization, and identifying potential areas for cost savings or efficiencies. Additionally, safety performance and compliance with environmental regulations would be critical KPIs. The Navy would establish specific, measurable targets for these areas, with performance potentially influencing future contract awards or options.

What is the track record of Electric Boat Corporation in delivering similar submarine services to the Navy?

Electric Boat Corporation has a long and established track record as a primary builder and maintainer of U.S. Navy submarines, dating back over a century. They are one of only two shipyards in the U.S. capable of building nuclear-powered submarines. Their history includes the construction of numerous classes of submarines, from early diesel-electric models to the current Virginia-class attack submarines and the Ohio-class ballistic missile submarines. The Navy has consistently awarded major submarine construction and overhaul contracts to Electric Boat, indicating a high level of confidence in their technical capabilities, workforce expertise, and ability to manage complex, long-term projects. While specific performance metrics for past contracts are not detailed here, the continued awarding of substantial contracts suggests a generally positive performance history, though like any large defense contractor, they may have faced challenges or scrutiny on specific projects over the years.

What are the potential risks associated with the long duration (4957 days) of this contract?

The long duration of this contract, approximately 13.6 years, presents several potential risks. Firstly, technological obsolescence is a significant concern; advancements in submarine technology could render the services or systems being maintained or upgraded less relevant or efficient over such a long period. Secondly, economic fluctuations and changes in defense budgets could impact the government's ability to sustain funding, potentially leading to contract modifications, delays, or even termination for convenience. Thirdly, contractor performance can degrade over extended periods due to changes in key personnel, workforce stability, or evolving management priorities. Finally, the extended timeframe limits the government's flexibility to re-evaluate market options, incorporate new technologies, or switch to potentially more cost-effective solutions if they emerge during the contract period. This long commitment necessitates robust contract management and periodic reviews to mitigate these risks.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 75 EASTERN POINT RD, GROTON, CT, 06340

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline