Navy awards $703M engineering services contract to Electric Boat Corporation for submarine development

Contract Overview

Contract Amount: $70,265,847 ($70.3M)

Contractor: Electric Boat Corporation

Awarding Agency: Department of Defense

Start Date: 2004-06-17

End Date: 2008-09-30

Contract Duration: 1,566 days

Daily Burn Rate: $44.9K/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 $70.3 million 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 raises questions about competition and potential for inflated pricing. 3. Long contract duration of over 4 years suggests a significant, ongoing need. 4. The contract falls under engineering services, a critical but often complex sector. 5. Focus on submarine development highlights strategic defense priorities. 6. No small business set-aside indicates a focus on large prime contractors.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a sole-source award, presents a risk for value for money. Without competitive bidding, it's difficult to benchmark pricing against market rates or similar contracts. The fixed fee component offers some cost control, but the 'cost plus' element means the government bears the risk of increased costs. Further analysis would be needed to compare the negotiated fee and overhead rates against industry standards for similar complex engineering services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded sole-source, meaning only one bidder, Electric Boat Corporation, was solicited. This typically occurs when a specific capability or proprietary technology is required, or in cases of urgent need where competition is not feasible. The lack of competition limits price discovery and may result in higher costs for the government compared to a fully competed contract. The rationale for the sole-source award should be thoroughly documented and justified.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive pressure. The government's ability to negotiate the best possible price is diminished in a sole-source scenario.

Public Impact

The primary beneficiary is the Department of the Navy, ensuring continued development and maintenance of submarine capabilities. Services delivered include critical engineering expertise for submarine platforms. The geographic impact is primarily centered in Connecticut, where Electric Boat Corporation is located. This contract supports a highly specialized engineering workforce, contributing to national security expertise.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure can lead to cost overruns.
Sole-source award limits competitive pricing and may inflate costs.
Long contract duration increases exposure to potential cost increases and performance issues.
Lack of small business participation may limit innovation and broader economic impact.

Positive Signals

Award to a sole, established contractor (Electric Boat) suggests deep expertise in submarine design and construction.
Focus on engineering services for critical defense assets ensures national security.
Fixed fee component provides some level of cost predictability for the contractor's profit.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), which is a significant part of the defense industrial base. The market for submarine engineering and construction is highly specialized and dominated by a few key players, with Electric Boat Corporation being a primary entity for the US Navy. Spending in this sector is often characterized by large, long-term contracts due to the complexity and strategic importance of the projects. Comparable spending benchmarks are difficult to establish due to the unique nature of submarine development.

Small Business Impact

This contract does not appear to have a small business set-aside component (ss=false, sb=false). As a sole-source award to a large prime contractor, it is unlikely to involve significant subcontracting opportunities for small businesses unless explicitly mandated or pursued by the prime. This limits the direct economic benefit to the small business ecosystem in this specific contract award.

Oversight & Accountability

Oversight for this contract would 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 incurred costs, performance against milestones, and adherence to the fixed fee is crucial. Transparency may be limited due to the sole-source justification, but contract modifications, performance reports, and financial audits would be key accountability measures. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Systems Engineering
Submarine Procurement
Defense Engineering Services
Strategic Weapons Systems Development

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Critical defense asset development

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $70.3 million 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 $70.3 million.

What is the period of performance?

Start: 2004-06-17. End: 2008-09-30.

What is the historical spending pattern for engineering services related to submarine development awarded to Electric Boat Corporation?

Analyzing historical spending requires access to detailed contract databases beyond the provided data. However, it is generally known that submarine development and maintenance are multi-billion dollar, long-term endeavors. Electric Boat Corporation has been the primary builder of US Navy submarines for decades, implying a consistent and substantial flow of federal funds for engineering and construction. Past contracts have often been sole-source or limited competition due to the specialized nature of the work. Trends likely show increasing costs over time due to inflation, technological advancements, and evolving platform requirements. A detailed analysis would involve aggregating spending across multiple contract vehicles over several fiscal years to identify trends in contract types, award values, and cost performance.

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

Cost-plus-fixed-fee (CPFF) contracts are common for research and development or complex engineering efforts where the scope is not fully defined at the outset, making firm-fixed-price contracts impractical. In a CPFF contract, the government reimburses the contractor for allowable costs plus a fixed fee representing profit. This contrasts with firm-fixed-price (FFP) contracts, where the price is set regardless of actual costs, incentivizing contractor efficiency. Cost-plus-incentive-fee (CPIF) contracts share cost-saving incentives. For defense engineering, CPFF is often used for early-stage design and development, while FFP might be used for production phases. The choice depends on the level of cost uncertainty and the desired risk allocation between the government and the contractor. CPFF shifts more cost risk to the government compared to FFP.

What are the key performance indicators (KPIs) typically used to assess the success of submarine engineering contracts?

Key performance indicators for submarine engineering contracts often revolve around schedule adherence, cost control (within the CPFF framework), technical performance, and quality. Specific KPIs might include meeting critical design review milestones, achieving specified performance parameters for new systems (e.g., speed, stealth, weapon system integration), successful completion of system integration tests, and adherence to safety and quality standards during the design and development process. For a CPFF contract, tracking actual costs against the estimated cost baseline and ensuring the fixed fee is earned through satisfactory performance are also crucial. Post-delivery performance of the submarine, such as reliability and maintainability, can also indirectly reflect the quality of the initial engineering effort.

What is Electric Boat Corporation's track record with sole-source contracts from the Department of Defense?

Electric Boat Corporation (EB) has a long history of working with the Department of Defense, particularly the Navy, on submarine programs. Given the highly specialized and critical nature of submarine design and construction, EB has frequently been the recipient of sole-source or limited-competition contracts. This is often justified by their unique facilities, intellectual property, workforce expertise, and established relationship with the Navy. While sole-source awards can raise concerns about price competition, EB's track record is generally viewed as delivering essential, complex defense capabilities. Performance reviews and historical contract data would be needed to fully assess the outcomes of their past sole-source awards in terms of cost, schedule, and technical success.

What are the potential risks associated with the 'engineering services' classification for a contract of this magnitude?

The 'engineering services' classification (NAICS 541330) for a contract of this magnitude ($70.3M award, though the total contract value could be higher) implies a focus on design, development, consulting, and technical analysis rather than direct manufacturing or construction. Potential risks include scope creep, where the definition of 'engineering services' expands beyond the original intent, leading to cost overruns. There's also the risk of technical challenges in highly complex systems like submarines, where unforeseen issues can arise during the design phase. Ensuring the contractor possesses and maintains the necessary specialized expertise and clearances is critical. Furthermore, the government must effectively manage the contractor's performance and ensure the engineering deliverables meet stringent military specifications and operational requirements.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: GUIDED MISSLES

Competition & Pricing

Extent Competed: NOT COMPETED

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Contractor Details

Parent Company: General Dynamics Corp (UEI: 001381284)

Address: 75 EASTERN POINT RD, GROTON, CT, 02

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Cost or Pricing Data: YES

Timeline