DoD awards $40.4M for FY25 shipbuilding and repair, with MHI delivering services

Contract Overview

Contract Amount: $40,367,558 ($40.4M)

Contractor: Mitsubishi Heavy Industries, Ltd

Awarding Agency: Department of Defense

Start Date: 2024-09-30

End Date: 2025-04-16

Contract Duration: 198 days

Daily Burn Rate: $203.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: USS MIGUEL KEITH ROH FY25 MSC

Plain-Language Summary

Department of Defense obligated $40.4 million to MITSUBISHI HEAVY INDUSTRIES, LTD for work described as: USS MIGUEL KEITH ROH FY25 MSC Key points: 1. Value for money appears reasonable given the firm fixed-price nature of the contract. 2. Full and open competition suggests a competitive environment for this service. 3. The contract duration of 198 days indicates a focused, short-term requirement. 4. This contract falls within the shipbuilding and repair sector, a critical area for naval readiness. 5. The award is a delivery order, suggesting it's part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract or a similar framework.

Value Assessment

Rating: good

The contract's firm fixed-price (FFP) structure is a positive indicator for cost control. While specific benchmarking data for this exact service is not provided, the award amount of approximately $40.4 million for a period of 198 days suggests a significant investment in naval asset maintenance or construction. Comparing this to similar shipbuilding and repair contracts would be necessary for a definitive value assessment, but the FFP nature generally aligns with efforts to achieve predictable costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of two bidders (no=2) suggests a moderate level of competition for this specific requirement. While more bidders could potentially drive prices lower, full and open competition is generally the preferred method for ensuring fair market access and potentially achieving better pricing.

Taxpayer Impact: Taxpayers benefit from the transparency and potential for competitive pricing inherent in a full and open competition, even with a limited number of bidders.

Public Impact

The primary beneficiaries are the U.S. Navy and the Department of Defense, ensuring the readiness and operational capability of naval assets. Services delivered likely include shipbuilding, repair, maintenance, or modernization of naval vessels. The geographic impact is likely concentrated around naval shipyards or facilities where Mitsubishi Heavy Industries operates or has partnerships. Workforce implications include employment opportunities for skilled labor in shipbuilding and repair trades, both directly with the contractor and potentially in supporting industries.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if the firm fixed-price contract does not adequately account for unforeseen complexities in shipbuilding/repair.
Dependence on a single contractor (MITSUBISHI HEAVY INDUSTRIES, LTD) for a critical defense service could pose supply chain or execution risks.
The limited number of bidders (2) might indicate barriers to entry or a specialized market, potentially limiting future competition.

Positive Signals

Firm fixed-price contract type provides cost certainty for the government.
Awarded under full and open competition, promoting a fair marketplace.
The contract is for a specific, defined period (198 days), suggesting a focused scope of work.

Sector Analysis

The shipbuilding and repair sector is a vital component of the defense industrial base, supporting naval fleet readiness and modernization. This contract, valued at approximately $40.4 million, fits within the broader landscape of government spending on maintaining and enhancing naval assets. The industry is characterized by high capital investment, specialized labor, and often long lead times for complex projects. Comparable spending benchmarks would typically involve analyzing other contracts for vessel maintenance, repair, and construction awarded by the Department of the Navy or other maritime agencies.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb=false) and there is no information provided regarding small business subcontracting plans (st, sn are empty). This suggests that the primary award went to a large, established company. The lack of small business involvement in the prime contract means that opportunities for small businesses would likely be limited to potential subcontracting roles, if any are pursued by the prime contractor.

Oversight & Accountability

Oversight for this contract would typically fall under the purview of the Department of the Navy's contracting and program management offices. Accountability measures are embedded in the firm fixed-price contract type, which shifts much of the cost risk to the contractor. Transparency is facilitated by the public award notice. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Ship Maintenance Contracts
Shipbuilding and Repair Services
Defense Procurement
Department of the Navy Contracts
Vessel Modernization Programs

Risk Flags

Potential for cost overruns in complex shipbuilding/repair.
Limited competition (2 bidders) may impact price discovery.
Dependence on contractor for critical naval readiness.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $40.4 million to MITSUBISHI HEAVY INDUSTRIES, LTD. USS MIGUEL KEITH ROH FY25 MSC

Who is the contractor on this award?

The obligated recipient is MITSUBISHI HEAVY INDUSTRIES, LTD.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $40.4 million.

What is the period of performance?

Start: 2024-09-30. End: 2025-04-16.

What is the track record of MITSUBISHI HEAVY INDUSTRIES, LTD with the Department of Defense, particularly in shipbuilding and repair?

MITSUBISHI HEAVY INDUSTRIES, LTD (MHI) is a major Japanese conglomerate with a significant history in shipbuilding and heavy industries. Within the defense sector, MHI has a long-standing relationship with various navies, including the U.S. Navy, often through foreign military sales or specific component manufacturing. While direct prime contract awards for major shipbuilding or repair services to MHI by the U.S. DoD might be less frequent than for domestic shipbuilders, their expertise in complex engineering and manufacturing is well-established. Analyzing MHI's past performance on similar DoD contracts, if available, would provide insight into their reliability, quality of work, and adherence to schedules and budgets. This specific contract, valued at approximately $40.4 million for a 198-day period, represents a defined scope of work where their established capabilities would be leveraged.

How does the $40.4 million award compare to similar shipbuilding and repair contracts awarded by the Department of the Navy?

Benchmarking the $40.4 million award requires comparing it to contracts for similar services (e.g., major repairs, modernization, or specific shipbuilding phases) for comparable vessel classes and durations. The Department of the Navy awards numerous contracts for shipbuilding and repair, ranging from minor maintenance to the construction of new vessels. Contracts for major overhauls or modernization of destroyers, cruisers, or aircraft carriers can easily run into hundreds of millions or even billions of dollars. Conversely, contracts for specific repair tasks or smaller vessel work might be in the tens of millions. Given the 198-day duration, this $40.4 million award suggests a substantial but not necessarily a full-ship construction or a multi-year overhaul. Without knowing the specific scope (e.g., type of vessel, extent of work), a precise comparison is difficult, but it appears to be a significant investment for a defined period.

What are the primary risks associated with this firm fixed-price contract for shipbuilding and repair services?

The primary risk with a firm fixed-price (FFP) contract, especially in complex fields like shipbuilding and repair, is the potential for the contractor to incur losses if costs exceed the fixed price. This can arise from unforeseen technical challenges, material price escalations not accounted for, or labor issues. For the government, the risk is that the contractor might cut corners on quality or scope to maintain profitability, potentially impacting the long-term readiness or safety of the asset. However, FFP contracts are generally favored for their cost predictability. The specific risks for this $40.4 million contract depend heavily on the detailed scope of work. If the work involves novel technologies or extensive structural repairs on aging vessels, the risk of cost overruns for the contractor increases. Conversely, routine maintenance or upgrades on newer vessels might present lower risks.

How effective is full and open competition in ensuring value for money in the shipbuilding and repair sector?

Full and open competition is generally considered the most effective method for ensuring value for money in government contracting, including the shipbuilding and repair sector. By allowing all responsible sources to compete, it fosters a competitive environment that encourages bidders to offer their best prices and most efficient solutions to win the contract. This process helps in price discovery and can lead to significant cost savings for the government compared to sole-source or limited competition scenarios. However, the effectiveness is contingent on the market structure. If the shipbuilding and repair sector has limited players capable of performing a specific task, even full and open competition might result in only a few bids, potentially limiting the downward pressure on prices. For this $40.4 million contract, the fact that it was competed fully is a positive sign for value, though the number of bidders (two) suggests the market might be specialized.

What are the historical spending patterns for shipbuilding and repair services by the Department of the Navy?

The Department of the Navy consistently represents one of the largest components of the U.S. defense budget, with a significant portion allocated to shipbuilding and repair. Historical spending patterns show substantial and often increasing investments in maintaining and modernizing the fleet due to evolving geopolitical threats and the aging of existing vessels. Major shipbuilding programs (like aircraft carriers, submarines, and destroyers) account for tens of billions annually. Ship repair and maintenance, including modernization efforts, also represent a multi-billion dollar annual expenditure. This $40.4 million award for FY25 fits within the broader context of this consistent, high-level spending. Analyzing trends over the past decade would reveal fluctuations tied to specific program starts/ends, budget cycles, and strategic priorities, but the overall demand for these services remains robust.

What is the significance of the contract being a 'Delivery Order'?

The designation of this award as a 'Delivery Order' (aw='DELIVERY ORDER') is significant because it implies that this $40.4 million contract is likely a task order issued under a pre-existing Indefinite Delivery/Indefinite Quantity (IDIQ) contract, a Basic Ordering Agreement (BOA), or a similar contract vehicle. IDIQ contracts establish terms and conditions for future orders but do not guarantee a specific quantity or dollar amount. Delivery orders then specify the actual goods or services to be procured, along with quantities, prices, and delivery schedules. This approach allows agencies to procure goods and services rapidly and efficiently once a broader contract has been established, often through a competitive process. It suggests that MITSUBISHI HEAVY INDUSTRIES, LTD may have previously competed for and won a larger, overarching contract, and this delivery order represents one specific task or requirement under that umbrella agreement.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › NON-NUCLEAR SHIP REPAIR

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N4034524R0028

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 12, NISHIKICHO, NAKA-KU, YOKOHAMA

Business Categories: Category Business, Corporate Entity Tax Exempt, Foreign Owned, Manufacturer of Goods, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $45,045,895

Exercised Options: $40,367,558

Current Obligation: $40,367,558

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6264923G0010

IDV Type: BOA

Timeline