DoD awards $94.6M for medium-range tanker time charter, highlighting deep-sea freight needs

Contract Overview

Contract Amount: $94,640,692 ($94.6M)

Contractor: U.S. Marine Management, LLC

Awarding Agency: Department of Defense

Start Date: 2023-08-22

End Date: 2028-07-21

Contract Duration: 1,795 days

Daily Burn Rate: $52.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 13

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: N103B/N351B / R. NORRIS / TIME CHARTER - MEDIUM RANGE TANKER (ATHLOS) - ADD BASE PERIOD FUNDING + DELIVERY FEE

Place of Performance

Location: JBPHH, HONOLULU County, HAWAII, 96860

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $94.6 million to U.S. MARINE MANAGEMENT, LLC for work described as: N103B/N351B / R. NORRIS / TIME CHARTER - MEDIUM RANGE TANKER (ATHLOS) - ADD BASE PERIOD FUNDING + DELIVERY FEE Key points: 1. Contract value of $94.6 million for a 5-year tanker charter indicates significant investment in strategic sealift capabilities. 2. The award to U.S. Marine Management, LLC, suggests a competitive landscape for specialized maritime services. 3. A firm-fixed-price contract structure aims to control costs and provide budget certainty for the Department of the Navy. 4. The duration of the charter (nearly 5 years) points to a long-term operational requirement for reliable freight transportation. 5. This contract supports the Navy's logistical backbone, ensuring the movement of essential goods and resources. 6. The absence of small business set-asides suggests the requirement may necessitate specialized capabilities or large-scale operations.

Value Assessment

Rating: good

The $94.6 million award for a 5-year time charter of a medium-range tanker appears reasonable given the specialized nature of deep-sea freight transportation. Benchmarking against similar long-term vessel charters is complex due to varying vessel types, durations, and operational requirements. However, the firm-fixed-price structure suggests an effort to lock in costs. The contract's value is substantial, reflecting the critical need for reliable maritime logistics.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of 13 bids suggests a healthy level of competition for this specialized service. This broad competition is generally favorable for price discovery and ensures the government explores a range of options, potentially leading to better value.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down prices through a wider pool of potential offerors, encouraging efficiency and innovation among bidders.

Public Impact

The U.S. Marine Management, LLC, benefits through contract award and revenue generation. The Department of the Navy receives critical deep-sea freight transportation services, essential for its operational readiness. The contract supports the broader defense logistics infrastructure, ensuring the timely movement of supplies. While specific geographic impacts are not detailed, the service inherently supports global maritime operations.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if market rates for tanker charters significantly increase beyond the fixed-price agreement.
Dependence on a single contractor for a critical logistical function could pose a risk if performance issues arise.
The long-term nature of the contract may limit flexibility to adapt to changing strategic needs or technological advancements in shipping.

Positive Signals

Firm-fixed-price contract provides cost certainty and reduces the risk of budget overruns for the government.
Full and open competition suggests a robust selection process, likely resulting in a qualified and competitive offer.
The contract duration indicates a stable, long-term requirement, allowing for predictable resource allocation.
Award to a company with experience in maritime management suggests a higher likelihood of successful performance.

Sector Analysis

The contract falls within the Defense sector, specifically addressing the need for maritime logistics and transportation. The market for deep-sea freight transportation, particularly for specialized vessels like tankers chartered by the government, is a niche but critical segment of the broader shipping industry. This contract represents a significant investment in ensuring the Navy's ability to project power and maintain supply lines, a key function within the defense industrial base.

Small Business Impact

The contract was not awarded as a small business set-aside, and the data indicates the prime contractor is not a small business. This suggests the requirement for a medium-range tanker time charter likely demands capabilities, vessel size, or operational scale that are beyond the typical scope of small business set-aside contracts. Subcontracting opportunities for small businesses are not explicitly detailed but could potentially exist in areas such as maintenance, repair, or specialized support services if U.S. Marine Management, LLC, opts to engage them.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the firm-fixed-price contract terms, performance standards, and delivery schedules. Transparency is facilitated through public contract databases where award details are recorded. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Defense Logistics Agency (DLA) Maritime Transportation
Military Sealift Command (MSC) Vessel Charters
Strategic Sealift Program
Navy Fleet Support Services

Risk Flags

Long-term commitment may reduce flexibility
Dependence on single contractor
Potential for market rate fluctuations impacting fixed price value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $94.6 million to U.S. MARINE MANAGEMENT, LLC. N103B/N351B / R. NORRIS / TIME CHARTER - MEDIUM RANGE TANKER (ATHLOS) - ADD BASE PERIOD FUNDING + DELIVERY FEE

Who is the contractor on this award?

The obligated recipient is U.S. MARINE MANAGEMENT, 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 $94.6 million.

What is the period of performance?

Start: 2023-08-22. End: 2028-07-21.

What is the track record of U.S. Marine Management, LLC, in performing similar government contracts?

Information regarding U.S. Marine Management, LLC's specific track record with government contracts, particularly for tanker time charters, would typically be found in performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) and historical contract databases. A review of these sources would reveal their past performance, including on-time delivery, quality of service, and adherence to contract terms. Without direct access to these detailed performance records, it's difficult to definitively assess their reliability for this specific $94.6 million award. However, the fact that they were awarded this contract under full and open competition suggests they met the government's minimum requirements and were deemed capable of performing the service.

How does the awarded price compare to market rates for similar medium-range tanker time charters?

Benchmarking the $94.6 million award against current market rates for similar medium-range tanker time charters is crucial for assessing value for money. This comparison would involve analyzing daily charter rates, vessel specifications (age, capacity, type), contract duration, and geographic operating areas. Factors such as global shipping demand, fuel prices, and vessel availability significantly influence market rates. A firm-fixed-price contract aims to mitigate fluctuations, but understanding the prevailing market conditions at the time of award is key. If the awarded rate is significantly higher than comparable market rates, it could indicate a less competitive bidding process or unique contract requirements driving up the cost.

What are the primary risks associated with this long-term tanker charter contract?

The primary risks associated with this 5-year, $94.6 million tanker charter contract include potential cost escalation if market rates for tanker charters rise substantially above the fixed price, impacting the government's long-term value. There's also a risk of performance issues from the contractor, U.S. Marine Management, LLC, which could disrupt critical supply chains. Furthermore, the long-term commitment might reduce the government's flexibility to adapt to evolving strategic needs or adopt newer, more efficient shipping technologies. Dependence on a single vessel and operator for a significant duration also presents a concentration risk.

How effective is this contract in meeting the Department of the Navy's deep-sea freight transportation needs?

The effectiveness of this contract hinges on its ability to reliably and consistently provide the required deep-sea freight transportation services for the Department of the Navy over its nearly 5-year duration. Assuming U.S. Marine Management, LLC, performs as expected, the contract should effectively support the Navy's logistical requirements, ensuring the movement of essential goods and resources. Its effectiveness is measured by the timely delivery of cargo, operational availability of the chartered tanker, and adherence to safety and environmental standards. The firm-fixed-price nature aims for cost-effectiveness, but true effectiveness also depends on the strategic alignment of the chartered capacity with the Navy's evolving operational demands.

What are the historical spending patterns for similar deep-sea freight transportation contracts by the Department of the Navy?

Analyzing historical spending patterns for similar deep-sea freight transportation contracts by the Department of the Navy, particularly those managed by the Military Sealift Command (MSC), would provide context for the $94.6 million award. This would involve examining the frequency, duration, and average cost of previous tanker charters or similar vessel time charters. Understanding historical trends helps identify whether this award represents an increase or decrease in spending, whether contract values have been trending upwards, and the typical range of prices paid for comparable services. Such analysis is crucial for assessing the current award's value and identifying any significant deviations from past spending.

What is the potential impact of this contract on the broader maritime transportation market?

This $94.6 million contract for a medium-range tanker time charter by the Department of Defense can have a notable impact on the broader maritime transportation market, particularly within the niche of government-chartered vessels. By securing a significant asset for nearly five years, it removes this capacity from the commercial market, potentially tightening availability for other charterers and influencing spot rates or longer-term charter prices. The award to U.S. Marine Management, LLC, also signifies continued government reliance on private sector maritime services, reinforcing the importance of this sector within the defense industrial base. Furthermore, the competitive bidding process, even if resulting in a single award, can signal market conditions and encourage other operators to maintain readiness for future government contracts.

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: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N3220522R5434

Offers Received: 13

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: A.P. Møller OG Hustru Chastine Mc-Kinney Møllers Fond TIL Almene Formaal

Address: 140 CORPORATE BLVD, NORFOLK, VA, 23502

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

Financial Breakdown

Contract Ceiling: $131,558,967

Exercised Options: $94,650,692

Current Obligation: $94,640,692

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline