DoD's $9.95M contract for ship repair awarded to BAE Systems, highlighting a firm fixed-price structure

Contract Overview

Contract Amount: $9,952,017 ($10.0M)

Contractor: BAE Systems SAN Francisco Ship Repair Inc.

Awarding Agency: Department of Defense

Start Date: 2006-08-31

End Date: 2009-09-30

Contract Duration: 1,126 days

Daily Burn Rate: $8.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: CATEGORY 'A' ITEMS

Place of Performance

Location: SAN FRANCISCO, SAN FRANCISCO County, CALIFORNIA, 94107

State: California Government Spending

Plain-Language Summary

Department of Defense obligated $10.0 million to BAE SYSTEMS SAN FRANCISCO SHIP REPAIR INC. for work described as: CATEGORY 'A' ITEMS Key points: 1. The contract's firm fixed-price nature suggests a defined scope and cost control, though potential for cost overruns exists if unforeseen issues arise. 2. Awarded under full and open competition, this contract indicates a competitive bidding process was utilized. 3. The contractor, BAE Systems, has a significant presence in the defense shipbuilding and repair sector. 4. The contract duration of 1126 days points to a substantial, long-term service requirement. 5. The absence of small business set-aside suggests the primary focus was on obtaining the best value from the broader market. 6. The contract's value, while significant, needs to be benchmarked against similar ship repair services to fully assess value for money.

Value Assessment

Rating: fair

Benchmarking the $9.95 million award for ship repair services is challenging without specific details on the scope of work and vessel type. However, given the contractor's specialization, the price may be within a reasonable range for complex repairs. The firm fixed-price contract aims to control costs, but the ultimate value depends on the efficiency of execution and the avoidance of change orders. Further analysis would require comparing this award to similar contracts for comparable naval vessels and repair tasks.

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 suggests a moderate level of competition for this specific requirement. While two bidders are better than one, a higher number of bids typically leads to more robust price discovery and potentially lower prices for the government.

Taxpayer Impact: A competitive award process, even with two bidders, generally benefits taxpayers by encouraging more favorable pricing and service offerings compared to sole-source or limited competition scenarios.

Public Impact

The primary beneficiaries are the U.S. Navy vessels requiring repair and maintenance services, ensuring operational readiness. This contract supports critical ship maintenance and repair operations, contributing to the U.S. Navy's fleet sustainment. The geographic impact is likely concentrated around the contractor's facilities in California, supporting regional economic activity. The contract supports skilled labor in the shipbuilding and repair industry, potentially including welders, electricians, and pipefitters.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen complexities arise during repairs, despite the fixed-price structure.
Limited competition with only two bidders could mean less aggressive pricing than a more crowded field.
The long contract duration might introduce risks related to material price fluctuations or labor availability over time.

Positive Signals

Awarded under full and open competition, maximizing the pool of potential bidders.
Firm fixed-price contract provides cost certainty for the government, assuming scope is well-defined.
Contractor BAE Systems is a recognized leader in naval shipbuilding and repair, suggesting expertise.

Sector Analysis

The shipbuilding and repairing sector (NAICS 336611) is a critical component of the defense industrial base, involving complex manufacturing and maintenance services for naval vessels. This contract fits within the broader defense procurement landscape, where the Navy relies on specialized contractors for fleet readiness. Spending in this sector is often characterized by large, long-term contracts due to the high cost and complexity of naval assets. Comparable spending benchmarks would involve analyzing other major repair and overhaul contracts for similar classes of naval ships.

Small Business Impact

The contract was not awarded as a small business set-aside, and the 'sb' field is false, indicating no specific provisions for small businesses in the prime contract. This suggests that the primary goal was to secure the best technical and price solution from the broader market. Subcontracting opportunities for small businesses may exist, depending on BAE Systems' procurement practices and the specific needs of the repair work, but they are not mandated by the prime contract's structure.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the firm fixed-price structure, which incentivizes the contractor to complete work within budget. 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

Naval Ship Repair Contracts
Defense Maintenance and Repair Services
Shipbuilding and Repair Industry Contracts
Department of the Navy Procurement

Risk Flags

Limited competition (2 bidders)
Potential for cost escalation in long-duration FFP contracts
Need for detailed benchmarking of repair scope and cost

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $10.0 million to BAE SYSTEMS SAN FRANCISCO SHIP REPAIR INC.. CATEGORY 'A' ITEMS

Who is the contractor on this award?

The obligated recipient is BAE SYSTEMS SAN FRANCISCO SHIP REPAIR INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $10.0 million.

What is the period of performance?

Start: 2006-08-31. End: 2009-09-30.

What is the track record of BAE Systems San Francisco Ship Repair Inc. with the Department of the Navy for similar services?

BAE Systems San Francisco Ship Repair Inc. has a substantial history of performing ship repair and maintenance services for the Department of the Navy. As a major defense contractor, they are frequently awarded contracts for complex availabilities, including overhauls, modernization, and routine maintenance on various naval vessels. Their performance history with the Navy is generally characterized by extensive experience in shipyard operations, skilled labor, and adherence to stringent quality and safety standards. While specific performance metrics for individual contracts are often not publicly detailed, their continued selection for significant contracts suggests a generally satisfactory performance record in meeting the Navy's demanding requirements for fleet readiness and vessel upkeep.

How does the $9.95 million value compare to other ship repair contracts awarded by the Navy in recent years?

The $9.95 million value of this contract is moderate for a significant ship repair project. Major overhauls or modernization efforts for larger naval vessels can easily run into tens or hundreds of millions of dollars. However, this amount could represent a substantial repair availability for a smaller vessel, a specific component overhaul, or a period of routine maintenance. To provide a precise comparison, one would need to analyze contracts for similar vessel classes (e.g., destroyers, cruisers, auxiliaries) and the scope of work performed (e.g., dry-docking, hull work, system upgrades, propulsion repairs). The Navy awards numerous contracts in the multi-million dollar range annually for ship maintenance, making this award one of many supporting fleet readiness.

What are the primary risks associated with a firm fixed-price contract for ship repair, especially over a 1126-day duration?

The primary risk for the government in a firm fixed-price (FFP) contract for ship repair, particularly over a long duration like 1126 days, is that the contractor may cut corners on quality or scope to maintain profitability if unforeseen issues arise or costs escalate beyond initial estimates. Conversely, the contractor bears the risk of cost overruns if their initial pricing was too low or if unexpected technical challenges emerge. For long-duration contracts, risks also include potential fluctuations in material costs and labor availability, which the contractor must absorb under an FFP agreement. Effective oversight and clear contract specifications are crucial to mitigate these risks and ensure the work is performed to the required standards.

What does the 'Ship Building and Repairing' (NAICS 336611) sector entail in terms of market size and key players?

The Ship Building and Repairing sector (NAICS 336611) is a capital-intensive and highly specialized industry critical to national defense and global commerce. It encompasses establishments primarily engaged in building, repairing, and converting ships and boats. The market size is substantial, driven by naval procurement, commercial shipping needs, and offshore energy exploration. Key players in the U.S. defense shipbuilding and repair market include large conglomerates like Huntington Ingalls Industries and General Dynamics, as well as specialized repair yards such as BAE Systems. The sector is characterized by long lead times, complex engineering, stringent regulatory requirements, and significant government contracts, particularly for naval shipbuilding and maintenance.

How does the competition level (2 bidders) impact price discovery and potential savings for the taxpayer in this specific contract?

A competition level with only two bidders suggests a moderate, rather than robust, competitive environment. While it is superior to a sole-source award, a higher number of bidders typically intensifies price competition, potentially driving down the offered price and increasing the likelihood of significant savings for the taxpayer. With only two bidders, there is a greater chance that the winning bid may not represent the absolute lowest price achievable in a more crowded market. The government's ability to secure favorable pricing depends heavily on the accuracy of the independent government cost estimate and the negotiation leverage derived from the two proposals received.

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: N4044206R2500

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: BAE Systems PLC (UEI: 217304393)

Address: FOOT OF 20TH ST PIER 70, SAN FRANCISCO, CA, 90

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $11,205,967

Exercised Options: $9,952,017

Current Obligation: $9,952,017

Contract Characteristics

Cost or Pricing Data: NO

Timeline