Boeing awarded $150M contract for DDG 51 shipsets, a sole-source award for shipbuilding

Contract Overview

Contract Amount: $15,002,563 ($15.0M)

Contractor: THE Boeing Company

Awarding Agency: Department of Defense

Start Date: 2009-08-10

End Date: 2013-06-26

Contract Duration: 1,416 days

Daily Burn Rate: $10.6K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: GEDMS SHIPSETS FOR DD51

Place of Performance

Location: HUNTINGTON BEACH, ORANGE County, CALIFORNIA, 92647

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $15.0 million to THE BOEING COMPANY for work described as: GEDMS SHIPSETS FOR DD51 Key points: 1. This contract represents a significant investment in naval shipbuilding capabilities. 2. The sole-source nature of the award warrants scrutiny regarding price justification. 3. Long-term sustainment and potential follow-on work are key considerations. 4. The duration of the contract suggests a substantial, multi-year commitment. 5. Performance metrics and delivery schedules will be critical for success. 6. The absence of competition may limit opportunities for innovation from other firms.

Value Assessment

Rating: fair

Benchmarking the value of this sole-source contract is challenging without competitive data. The $150 million award for shipsets indicates a substantial cost, and its fairness hinges on detailed cost breakdowns and justification provided by the contractor. Comparisons to similar sole-source awards for complex defense systems would be necessary to assess if the pricing is reasonable. Without competitive bids, there's a risk of overpayment if robust cost oversight is not maintained.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not solicit bids from multiple potential suppliers. This approach is typically used when only one source is capable of meeting the requirement, often due to unique capabilities, proprietary technology, or urgent needs. The lack of competition means that price discovery through market forces was bypassed, placing a greater emphasis on the government's negotiation and cost-analysis capabilities.

Taxpayer Impact: For taxpayers, a sole-source award means the government cannot leverage competition to drive down prices. This necessitates rigorous justification and negotiation to ensure the price paid is fair and reasonable, potentially leading to higher costs compared to a competed contract.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving critical components for its DDG 51 class destroyers. This contract supports the construction and outfitting of naval vessels, enhancing national defense capabilities. The geographic impact is concentrated in areas where Boeing's shipbuilding facilities are located, likely supporting jobs in those regions. It sustains a specialized workforce within the defense industrial base, including engineers, technicians, and manufacturing personnel.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to lack of competitive pressure.
Risk of schedule delays if production challenges arise in a sole-source environment.
Dependency on a single contractor for critical ship components.

Positive Signals

Boeing's established track record in large-scale defense manufacturing.
Contract is for a known platform (DDG 51), reducing technical risk.
Firm Fixed Price contract type provides cost certainty for the government.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the U.S. defense industrial base. The market for large naval vessels is highly concentrated, with a limited number of prime contractors capable of undertaking such complex projects. Spending in this sector is driven by national security requirements and naval modernization programs. Comparable spending benchmarks would involve other major naval platform construction or modification contracts.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss: false' and 'sb: false'. The prime contractor, Boeing, is a large aerospace and defense company. Subcontracting opportunities for small businesses may exist, but they would be determined by Boeing's procurement practices. The impact on the small business ecosystem is indirect, relying on Boeing's subcontracting strategy rather than a direct set-aside mandate.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices. Accountability measures would include performance reviews, milestone tracking, and adherence to the contract's terms and conditions. Transparency is generally limited for sole-source defense contracts, though cost and performance data are typically reviewed internally. The Inspector General's office may conduct audits or investigations if specific concerns arise regarding fraud, waste, or abuse.

Related Government Programs

DDG 51 Class Destroyer Program
Naval Shipbuilding and Conversion
Defense Procurement
Ship Building and Repair

Risk Flags

Sole-source award lacks competitive pricing.
Potential for cost overruns without market pressure.
Dependency on a single supplier for critical components.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $15.0 million to THE BOEING COMPANY. GEDMS SHIPSETS FOR DD51

Who is the contractor on this award?

The obligated recipient is THE BOEING COMPANY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $15.0 million.

What is the period of performance?

Start: 2009-08-10. End: 2013-06-26.

What is Boeing's historical performance on similar large-scale shipbuilding contracts?

Boeing has a long and extensive history in large-scale defense manufacturing, including significant contributions to naval programs. While primarily known for aircraft, their experience extends to complex systems integration and production for naval platforms. Specific performance data on past DDG 51 related contracts or similar shipbuilding endeavors would require a deeper dive into historical contract databases and performance reports. However, as a major defense contractor, Boeing generally operates under stringent performance monitoring by the Department of Defense. Their track record suggests a capacity to handle complex, high-value contracts, though specific on-time delivery and budget adherence metrics would need to be examined on a contract-by-contract basis.

How does the $150 million award compare to the total cost of a DDG 51 class destroyer?

The $150 million award for 'GEDMS SHIPSETS FOR DD51' represents a significant portion of the overall cost of a DDG 51 class destroyer, but it is not the total cost. Shipsets typically include the major components and systems required for the hull and superstructure, but exclude many other critical elements such as propulsion, weapons systems, electronics, and outfitting. The total cost of a Flight III Arleigh Burke-class destroyer can range from over $1.8 billion to upwards of $2 billion, depending on the specific configuration and year of construction. Therefore, this $150 million contract covers a substantial but specific segment of the total vessel's value.

What are the primary risks associated with a sole-source award for critical ship components?

The primary risks associated with a sole-source award for critical ship components like these shipsets include potential overpricing due to the absence of competitive bidding, reduced incentive for the contractor to innovate or improve efficiency, and a heightened dependency on a single supplier. If the sole source encounters production issues, delays, or quality problems, the entire shipbuilding program could be jeopardized with limited alternative options. Furthermore, the government's negotiating power is diminished, making robust cost analysis and oversight even more crucial to ensure fair value.

What is the significance of the 'Ship Building and Repairing' NAICS code (336611) in the context of this contract?

The North American Industry Classification System (NAICS) code 336611, 'Ship Building and Repairing,' signifies that this contract falls under the primary industrial activity of constructing and repairing large vessels. For the Department of Defense, this code is crucial for categorizing spending, tracking industry trends, and identifying key contractors within the maritime defense sector. It indicates that the work involves the fabrication of ship structures, integration of major components, and potentially the assembly of large sections or modules that form the backbone of a naval vessel like the DDG 51.

How does the contract duration (1416 days) translate into project timeline and potential impact on shipbuilding schedules?

A contract duration of 1416 days, approximately 3.88 years, indicates a substantial, long-term commitment for the delivery of these shipsets. This duration suggests that the work will likely span multiple fiscal years and potentially cover the construction of several vessels or major components for a batch of destroyers. Such a long timeline allows for detailed planning, phased production, and integration with the broader shipbuilding schedule for the DDG 51 class. It also implies a steady demand for Boeing's resources and a significant commitment from the Navy, aligning with the multi-year nature of naval platform acquisition.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0017809R2003

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 5301 BOLSA AVE, HUNTINGTON BEACH, CA, 92647

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

Financial Breakdown

Contract Ceiling: $15,002,563

Exercised Options: $15,002,563

Current Obligation: $15,002,563

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NOT OBTAINED - WAIVED

Timeline