Navy awards $261.8M for deep-sea freight, with a 5-year duration and firm-fixed-price contract

Contract Overview

Contract Amount: $261,773,902 ($261.8M)

Contractor: Horizon Lines, LLC

Awarding Agency: Department of Defense

Start Date: 2004-10-01

End Date: 2009-09-30

Contract Duration: 1,825 days

Daily Burn Rate: $143.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 7

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: 200511!434948!1700!N00033!MILITARY SEALIFT COMMAND !N0003304C2501 !A!N! !N! !P00001!20041001!20050930!151072670!151072670!151072670!N!HORIZON LINES LLC !1700 GALLOPING HILL RD !KENILWORTH !NJ!07033!36690!039!34!KENILWORTH !UNION !NEW JERSEY!+000018458170!N!N!000000000000!V124!MARINE CHARTER FOR THINGS !S1 !SERVICES !000 !* !483111!E! !3! ! !C! ! !20200930!B! ! !A! !A!Y!J!2!007!A! !C!N!Z! ! !N!C!N! ! ! !A!D!A!A!000!A!A!N! ! ! ! !1700!N00033!0001! !

Place of Performance

Location: KENILWORTH, UNION County, NEW JERSEY, 07033

State: New Jersey Government Spending

Plain-Language Summary

Department of Defense obligated $261.8 million to HORIZON LINES, LLC for work described as: 200511!434948!1700!N00033!MILITARY SEALIFT COMMAND !N0003304C2501 !A!N! !N! !P00001!20041001!20050930!151072670!151072670!151072670!N!HORIZON LINES LLC !1700 GALLOPING HILL RD !KENILWORTH !NJ!07033!36690!039!34!KENILWORTH !UNIO… Key points: 1. Contract awarded for deep-sea freight transportation services, indicating a need for reliable and extensive shipping capabilities. 2. The firm-fixed-price contract type suggests predictable costs for the government, minimizing budget uncertainty. 3. A 5-year contract duration points to a long-term strategic requirement for these transportation services. 4. The significant award amount highlights the substantial investment in maintaining logistical support for naval operations. 5. The contractor, Horizon Lines, LLC, has secured a major contract, suggesting established capabilities in the maritime logistics sector.

Value Assessment

Rating: good

The total award of $261.8 million over five years for deep-sea freight transportation is substantial. Benchmarking this against similar large-scale maritime charter contracts is challenging without more specific service details. However, the firm-fixed-price structure generally indicates a good value proposition for the government, as it locks in costs and shifts performance risk to the contractor. The contract's duration suggests a stable, long-term need, which can sometimes lead to better pricing through economies of scale.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of 7 bids suggests a reasonably competitive environment for this type of service. A competitive process is crucial for ensuring that the government receives fair market pricing and that the most capable contractor is selected.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it drives down prices through market forces and encourages innovation among potential bidders, ultimately leading to more cost-effective government services.

Public Impact

The primary beneficiaries are the Department of the Navy and potentially other Department of Defense entities requiring global maritime logistics. Services delivered include deep-sea freight transportation, essential for moving personnel, equipment, and supplies across vast distances. The geographic impact is global, supporting naval operations and power projection worldwide. Workforce implications include employment for mariners, logistics personnel, and support staff within the winning contractor's organization and related maritime industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for price increases in future contract renewals if competition diminishes.
Dependence on a single contractor for critical long-term freight needs could pose a risk if the contractor faces financial or operational difficulties.

Positive Signals

Firm-fixed-price contract provides cost certainty for the duration of the award.
Full and open competition suggests a robust market for these services, likely resulting in competitive pricing.
Long contract duration (5 years) allows for stable planning and execution of logistical operations.

Sector Analysis

The maritime transportation sector is critical for global commerce and national defense. This contract falls within the broader logistics and transportation services industry, which is characterized by large, capital-intensive operations. The Navy's reliance on private sector carriers for deep-sea freight highlights the importance of this sector in supporting military readiness and deployment. Comparable spending benchmarks would typically involve analyzing other large-scale government charters or commercial shipping contracts of similar scope and duration.

Small Business Impact

This contract was awarded to Horizon Lines, LLC, and there is no indication of a small business set-aside. Given the scale and nature of deep-sea freight transportation, it is common for such contracts to be awarded to large, established companies with significant assets and operational capacity. Subcontracting opportunities for small businesses might exist in areas such as port services, maintenance, or specialized equipment, but the primary contract is unlikely to be directly set aside for them.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the firm-fixed-price contract, requiring the contractor to deliver services as specified. Transparency is facilitated by the contract award data being publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

Military Sealift Command (MSC) Operations
Defense Transportation Services
Global Maritime Logistics Contracts
Deep Sea Shipping Charters
Navy Fleet Support Services

Risk Flags

Contract Duration
Contract Value
Contract Type
Competition Level

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $261.8 million to HORIZON LINES, LLC. 200511!434948!1700!N00033!MILITARY SEALIFT COMMAND !N0003304C2501 !A!N! !N! !P00001!20041001!20050930!151072670!151072670!151072670!N!HORIZON LINES LLC !1700 GALLOPING HILL RD !KENILWORTH !NJ!07033!36690!039!34!KENILWORTH !UNION !NEW JERSEY!+000018458170!N!N!000000000000!V124!MARINE CHARTER FOR THINGS !S1 !SERVICES !000 !* !483111!E! !3! ! !C! ! !202

Who is the contractor on this award?

The obligated recipient is HORIZON LINES, 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 $261.8 million.

What is the period of performance?

Start: 2004-10-01. End: 2009-09-30.

What is the historical spending pattern of the Department of the Navy for deep-sea freight transportation services over the last decade?

Analyzing the historical spending patterns of the Department of the Navy for deep-sea freight transportation reveals a consistent and significant investment in maritime logistics. While specific figures fluctuate year-to-year based on operational tempo and global deployments, the overall trend indicates a sustained reliance on contracted shipping services. Contracts awarded by entities like the Military Sealift Command (MSC) often span multiple years and involve substantial dollar values, similar to the $261.8 million award to Horizon Lines, LLC. Spending is influenced by geopolitical events, troop movements, and the need to transport equipment and supplies to various theaters of operation. Benchmarking this specific award against historical data would require a detailed review of MSC's procurement history, looking for comparable vessel types, durations, and service areas to assess if the current award represents a market-rate expenditure or a deviation.

How does the firm-fixed-price (FFP) contract type compare to other pricing arrangements for similar maritime services in terms of cost predictability and risk allocation?

The firm-fixed-price (FFP) contract type is generally favored by the government for services where the scope of work is well-defined, such as deep-sea freight transportation. Under an FFP agreement, the contractor agrees to a set price for the specified services, regardless of their actual costs incurred. This provides excellent cost predictability for the government, making budgeting more straightforward and minimizing the risk of cost overruns. In contrast, cost-plus contracts, while offering flexibility for undefined scopes, shift more cost risk to the government. For maritime services, FFP is advantageous because it incentivizes the contractor to manage their operational costs efficiently to maximize profit. This contrasts with time-and-materials contracts, which can be suitable for smaller, less defined tasks but carry higher cost uncertainty for larger, long-term engagements like this five-year charter.

What are the key performance indicators (KPIs) typically used to evaluate the success of deep-sea freight transportation contracts for the Navy?

Evaluating the success of deep-sea freight transportation contracts for the Navy typically involves a range of Key Performance Indicators (KPIs) focused on reliability, timeliness, and cost-effectiveness. Primary KPIs often include on-time delivery rates for cargo and personnel, vessel availability and operational readiness, fuel efficiency, and adherence to safety and environmental regulations. For a contract like the one awarded to Horizon Lines, LLC, metrics such as the percentage of scheduled voyages completed without significant delay, the successful transport of specified cargo tonnages, and the maintenance of vessel uptime would be critical. Furthermore, compliance with contractual terms, reporting accuracy, and responsiveness to emergent operational needs are also closely monitored to ensure the contractor is meeting the Navy's strategic logistical requirements effectively and efficiently.

What is the track record of Horizon Lines, LLC in fulfilling government contracts, particularly those related to maritime transportation?

Horizon Lines, LLC has a history of operating large container ships and providing domestic and international shipping services. While specific details on their past government contract performance require in-depth database searches, companies of this scale often engage in various government logistics contracts. Their experience in managing complex supply chains and operating a fleet of vessels suggests a capacity to handle significant government requirements. Assessing their track record would involve examining past contract awards, performance reviews, and any reported issues or successes in fulfilling similar transportation needs for federal agencies. A positive track record would indicate reliability, adherence to schedules, and effective cost management, which are crucial for military logistics.

How does the $261.8 million award compare to the typical market rates for similar deep-sea freight charter services?

Determining precise market rates for deep-sea freight charter services is complex due to variations in vessel size, type, route, duration, and specific service requirements. However, the $261.8 million award over five years, averaging approximately $52.36 million per year, for what is described as 'MARINE CHARTER FOR THINGS' by the Navy, suggests a significant commitment. This figure needs to be contextualized within the broader maritime charter market, which can be volatile. Factors such as global shipping demand, fuel prices, and geopolitical stability heavily influence charter rates. Without more granular data on the specific vessel specifications and operational parameters mandated by the Navy, a direct comparison to 'market rates' is challenging. However, the firm-fixed-price nature and the competitive bidding process suggest the Navy aimed to secure a cost-effective solution within the prevailing market conditions for such extensive, long-term logistical support.

Industry Classification

NAICS: Transportation and Warehousing › Deep Sea, Coastal, and Great Lakes Water Transportation › Deep Sea Freight Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Offers Received: 7

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Horizon Lines Holding Corp. (UEI: 193305187)

Address: 1700 GALLOPING HILL RD, KENILWORTH, NJ, 07033

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline