DoD's $16M Deep Sea Freight Contract for Arabian Gulf Operations Awarded to Maersk Line, Limited

Contract Overview

Contract Amount: $16,087,388 ($16.1M)

Contractor: Maersk Line, Limited

Awarding Agency: Department of Defense

Start Date: 2008-09-12

End Date: 2010-04-21

Contract Duration: 586 days

Daily Burn Rate: $27.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: TIME CHARTER ARABIAN GULF

Place of Performance

Location: NORFOLK, NORFOLK (CITY) County, VIRGINIA, 23510

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $16.1 million to MAERSK LINE, LIMITED for work described as: TIME CHARTER ARABIAN GULF Key points: 1. Contract value represents a significant investment in maritime logistics for defense operations. 2. Competition was robust, suggesting potential for competitive pricing and value. 3. Contract duration of nearly two years indicates a sustained need for these services. 4. Fixed-price contract type shifts risk to the contractor, potentially stabilizing costs. 5. The award to a major player like Maersk suggests reliance on established, experienced providers. 6. Focus on the Arabian Gulf highlights a critical operational theater for the Navy.

Value Assessment

Rating: good

The contract's value of approximately $16 million for 586 days of service suggests a daily rate of roughly $27,453. Benchmarking this against similar deep-sea freight transportation contracts is challenging without more specific service details (e.g., vessel size, specific routes, included services). However, given the specialized nature of military logistics and the inclusion of potential operational support, this rate appears within a reasonable range for a firm fixed-price contract of this duration and scope. The absence of significant modifications or overruns, if applicable, would further support its value.

Cost Per Unit: $27,453 per day (estimated)

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited and considered. The presence of four bidders, as suggested by the 'no' field, points to a healthy level of market interest and competition for this service. This competitive environment generally benefits the government by driving down prices and encouraging better service offerings, as contractors vie for the award.

Taxpayer Impact: Full and open competition ensures that taxpayer dollars are used efficiently by leveraging market forces to secure the best possible price and service for essential deep-sea freight transportation.

Public Impact

Naval forces operating in the Arabian Gulf benefit from reliable and timely transportation of personnel, equipment, and supplies. The contract supports critical defense logistics, ensuring operational readiness in a key strategic region. Geographic impact is focused on the Arabian Gulf and associated operational areas. The contract likely supports a specialized maritime workforce, including vessel crews and logistics personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen operational complexities arise, though mitigated by fixed-price structure.
Dependence on a single contractor for critical logistics could pose a risk if performance issues emerge.
Geopolitical instability in the Arabian Gulf could impact service delivery and potentially increase costs.

Positive Signals

Award to a reputable and experienced maritime carrier like Maersk Line, Limited suggests a high likelihood of reliable service.
Firm fixed-price contract provides cost certainty for the government.
Full and open competition indicates a robust market and potential for competitive pricing.
Contract duration suggests a stable, long-term requirement, allowing for efficient planning and resource allocation.

Sector Analysis

Deep Sea Freight Transportation is a critical component of global logistics and supply chains, particularly for industries reliant on international trade and resource movement. The defense sector represents a significant, albeit specialized, consumer of these services, requiring secure and timely transport of materiel to operational theaters. Market size for global freight is in the trillions, with specialized military logistics forming a niche within this. This contract fits within the broader category of defense logistics support, ensuring the Navy's ability to project power and maintain presence.

Small Business Impact

There is no indication from the provided data that this contract included specific small business set-asides or subcontracting requirements. As a large-scale service contract likely awarded to a major carrier, the primary focus would be on the prime contractor's capabilities. However, large prime contractors often utilize a network of subcontractors, which could include small businesses for specialized support services, though this is not explicitly detailed.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract terms, requiring the contractor to deliver services as specified. Transparency is generally maintained through contract award databases and reporting requirements. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Military Sealift Command Contracts
Defense Transportation Services
Global Freight and Shipping Contracts
Naval Operations Support Contracts

Risk Flags

Potential for geopolitical instability impacting service delivery.
Reliance on a single contractor for critical logistics.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $16.1 million to MAERSK LINE, LIMITED. TIME CHARTER ARABIAN GULF

Who is the contractor on this award?

The obligated recipient is MAERSK LINE, LIMITED.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $16.1 million.

What is the period of performance?

Start: 2008-09-12. End: 2010-04-21.

What is the track record of Maersk Line, Limited in performing similar government contracts, particularly those involving military logistics in high-risk areas?

Maersk Line, Limited, as a subsidiary of the global shipping giant A.P. Moller-Maersk, has a long history of providing commercial and government shipping services. While specific details on their performance for this exact contract (TIME CHARTER ARABIAN GULF) are not provided, their extensive experience in global container shipping and logistics suggests a strong capability. Government contracts, especially for defense, often undergo rigorous vetting. Maersk has historically been a significant player in supporting military logistics, including chartering vessels for troop and equipment transport. Performance metrics for such contracts typically involve on-time delivery, vessel readiness, and adherence to safety and security protocols. Without access to specific past performance reviews or contract data for Maersk on similar DoD contracts, a definitive assessment is limited, but their market position implies a generally reliable track record.

How does the daily rate of approximately $27,453 compare to market rates for similar deep-sea freight charter services, considering the operational context?

The estimated daily rate of $27,453 for this deep-sea freight charter is difficult to benchmark precisely without knowing the specific vessel type, size, speed, and the exact services included (e.g., crewing, maintenance, fuel, security). Commercial time charter rates for large container ships or tankers can vary significantly based on market conditions, vessel age, and charter duration. However, for a dedicated military charter, especially one operating in a potentially high-risk area like the Arabian Gulf, rates can be higher due to increased security requirements, operational flexibility demands, and the need for reliable, often government-specified, crewing and maintenance standards. Compared to purely commercial spot market rates, this daily figure might appear higher, but it likely reflects the specialized nature, duration, and operational context of a government contract requiring sustained availability and specific performance standards.

What are the primary risks associated with this contract, and how are they mitigated by the contract type and contractor selection?

The primary risks associated with this deep-sea freight charter contract include potential operational disruptions (e.g., geopolitical events, piracy, mechanical failures), cost overruns if not managed effectively, and performance failures by the contractor. The contract type, Firm Fixed Price (FFP), is a key mitigation strategy, as it places the financial risk of cost overruns primarily on the contractor (Maersk Line, Limited), incentivizing them to manage costs efficiently. The selection of Maersk, a large and experienced maritime operator, also mitigates performance risk, as they possess the infrastructure, expertise, and resources to manage complex logistics operations. However, risks related to the operational environment (Arabian Gulf) and potential unforeseen geopolitical events remain largely outside the contractor's control and require robust government contingency planning.

How does this contract contribute to the overall effectiveness of U.S. military operations in the Arabian Gulf?

This contract is crucial for the effectiveness of U.S. military operations in the Arabian Gulf by ensuring the consistent and reliable transportation of essential resources. Deep-sea freight transportation underpins the logistical backbone required to sustain naval presence, deploy equipment, and move personnel within this strategically vital region. By chartering a vessel for a significant duration (586 days), the Department of the Navy secures dedicated capacity for its logistical needs, reducing reliance on potentially less predictable commercial shipping schedules. This capability directly supports power projection, freedom of navigation, and response readiness, enabling military forces to operate effectively and maintain security objectives in the area.

What has been the historical spending pattern for similar deep-sea freight transportation services by the Department of the Navy or Department of Defense?

Historical spending patterns for deep-sea freight transportation by the Department of the Navy (DoN) and the broader Department of Defense (DoD) are substantial and fluctuate based on global operational tempo, geopolitical requirements, and strategic priorities. The Military Sealift Command (MSC) is the primary entity responsible for DoD's ocean transportation. MSC manages a diverse fleet, including chartered vessels, to meet global logistics demands. Spending in this category can range from hundreds of millions to billions of dollars annually, encompassing various types of sea lift capabilities, from containerized cargo to specialized tankers and troop transports. Contracts like the one awarded to Maersk are part of this larger, ongoing investment in maintaining robust maritime logistics capabilities, essential for projecting and sustaining military power worldwide.

Industry Classification

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

Product/Service Code: LEASE/RENT EQUIPMENT › LEASE OR RENTAL OF EQUIPMENT

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: A.P. Møller - Mærsk A/S (UEI: 305391054)

Address: ONE COMMERCIAL PL 20TH FL, NORFOLK, VA, 03

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

Financial Breakdown

Contract Ceiling: $16,087,388

Exercised Options: $16,087,388

Current Obligation: $16,087,388

Contract Characteristics

Cost or Pricing Data: NO

Timeline