Navy awards $152M for three blocking vessels, raising questions about competition and value

Contract Overview

Contract Amount: $152,000,000 ($152.0M)

Contractor: Hornbeck Offshore Services LLC

Awarding Agency: Department of Defense

Start Date: 2015-02-27

End Date: 2015-08-28

Contract Duration: 182 days

Daily Burn Rate: $835.2K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: PROCUREMENT OF THREE BLOCKING VESSEL

Place of Performance

Location: COVINGTON, ST. TAMMANY County, LOUISIANA, 70433, UNITED STATES OF AMERICA

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $152.0 million to HORNBECK OFFSHORE SERVICES LLC for work described as: PROCUREMENT OF THREE BLOCKING VESSEL Key points: 1. The contract was awarded on a sole-source basis, limiting competitive pressure on pricing. 2. The duration of 182 days for vessel delivery appears short, potentially impacting quality or cost. 3. The fixed-price contract type shifts risk to the government if costs escalate. 4. The specific need for 'blocking vessels' warrants further clarification regarding operational requirements. 5. The absence of small business participation is noted, with no set-aside provisions. 6. The procurement value of $152 million is significant for specialized shipbuilding.

Value Assessment

Rating: questionable

Benchmarking the value for three specialized blocking vessels is challenging without more detailed specifications and market comparisons. The raw dollar amount of $152 million suggests a substantial investment. However, the lack of competition and the fixed-price nature of the contract mean that the government bears the risk of cost overruns. Without a competitive bidding process, it's difficult to ascertain if this price represents fair market value or if alternative, more cost-effective solutions were overlooked. The per-unit cost, if calculated, would likely be high given the specialized nature of the vessels.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor, Hornbeck Offshore Services LLC, was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances, such as urgent needs or unique capabilities, they inherently reduce price competition and may lead to higher costs for the government. The lack of multiple bidders means there was no direct comparison of pricing or technical solutions from different companies.

Taxpayer Impact: Sole-source awards limit the government's ability to secure the best possible price through market competition, potentially resulting in taxpayer funds being used less efficiently.

Public Impact

The primary beneficiary is Hornbeck Offshore Services LLC, the sole contractor awarded this significant deal. The services delivered are the procurement of three specialized 'blocking vessels' for the Department of the Navy. The geographic impact is primarily related to the contractor's operational base in Louisiana, where the vessels may be built or maintained. Workforce implications could include job creation within the shipbuilding and repair sector at the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases cost to taxpayers.
Fixed-price contract shifts cost overrun risk to the government.
Short delivery timeline (182 days) may compromise quality or necessitate premium pricing.
Lack of small business participation means missed opportunities for economic inclusion.
Ambiguity in 'blocking vessel' definition could lead to scope creep or unmet needs.

Positive Signals

Contract awarded to a known entity in the maritime services sector.
Fixed-price contract provides cost certainty if contractor manages risks effectively.
Clear end date for the contract performance period.

Sector Analysis

The shipbuilding and repair industry (NAICS 336611) is a capital-intensive sector involving complex engineering and manufacturing. This contract falls within the defense industrial base, specifically supporting naval operations. The value of $152 million is substantial for acquiring specialized vessels. Comparable spending benchmarks would typically involve analyzing other government procurements for similar naval assets or commercial vessel construction projects, factoring in size, complexity, and technological features. The market for such specialized vessels is often limited to a few key players.

Small Business Impact

This contract did not include any small business set-aside provisions, nor does it appear to involve significant subcontracting opportunities for small businesses based on the information provided. The award was made directly to Hornbeck Offshore Services LLC, a large business. This means that the potential economic benefits for the small business ecosystem in the shipbuilding and repair sector were not actively pursued through this specific procurement. Future contracts of this nature could explore subcontracting goals to ensure broader participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are typically embedded in the contract terms, including delivery schedules and specifications. Transparency is limited due to the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected during the procurement or execution phases.

Related Government Programs

Naval Vessel Construction
Maritime Support Services
Shipbuilding and Repair Contracts
Defense Procurement

Risk Flags

Sole-source award
Aggressive delivery timeline
Lack of small business participation
Ambiguous vessel designation ('blocking vessels')

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $152.0 million to HORNBECK OFFSHORE SERVICES LLC. PROCUREMENT OF THREE BLOCKING VESSEL

Who is the contractor on this award?

The obligated recipient is HORNBECK OFFSHORE SERVICES 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 $152.0 million.

What is the period of performance?

Start: 2015-02-27. End: 2015-08-28.

What specific capabilities do 'blocking vessels' provide to the Navy, and why were these particular vessels required?

The term 'blocking vessels' is not a standard naval classification, suggesting a specialized or perhaps proprietary designation. Typically, vessels used for 'blockade' or 'interdiction' roles might be fast, maneuverable craft designed for patrol, interception, or area denial. However, without further clarification from the Department of the Navy, the precise operational function and strategic importance of these three 'blocking vessels' remain unclear. Understanding their intended mission is crucial for assessing the necessity and appropriateness of the $152 million expenditure. This ambiguity could indicate a lack of detailed justification or a need for more precise mission-critical requirements definition within the procurement documentation.

How does the $152 million price compare to similar naval vessel procurements or commercial equivalents?

Direct comparison of the $152 million price for three 'blocking vessels' is difficult without precise specifications and a clear understanding of their capabilities and size. However, the average cost per vessel would be approximately $50.7 million. This figure needs to be benchmarked against the cost of other specialized naval craft, such as patrol boats, mine countermeasures vessels, or even smaller auxiliary ships. Commercial vessel construction costs vary widely based on type, size, and complexity. Given the sole-source nature of this award, it is challenging to determine if this price reflects competitive market rates or if it includes a premium due to the lack of competition and potentially expedited delivery.

What are the risks associated with a sole-source award for such a significant procurement?

Sole-source awards carry inherent risks, primarily the lack of competitive pressure, which can lead to inflated prices and reduced innovation. Without multiple bidders, the government cannot be assured it is receiving the best value for its money. There's also a risk that the chosen contractor may not possess the most advanced technology or efficient production methods available in the market. Furthermore, sole-source contracts can sometimes indicate a lack of adequate market research or planning by the procuring agency. For taxpayers, the primary risk is that their funds are not being utilized as efficiently as they could be in a competitive environment, potentially leading to higher overall defense spending.

What is Hornbeck Offshore Services LLC's track record with the Department of Defense, particularly in shipbuilding or vessel construction?

Hornbeck Offshore Services LLC is primarily known as a provider of offshore oilfield support vessels and services. While they operate a large fleet, their direct experience in constructing specialized naval vessels for the Department of Defense may be limited or less prominent compared to traditional defense shipbuilders. A review of their contract history would be necessary to ascertain the extent of their involvement in similar government procurements, especially those requiring adherence to stringent military specifications and delivery timelines. Their expertise in commercial vessel operations does not automatically translate to proficiency in defense-specific shipbuilding, which can involve different regulatory, technical, and quality assurance standards.

What are the implications of the 182-day contract duration for vessel delivery?

A contract duration of 182 days (approximately six months) for the procurement of three vessels, especially specialized ones, is an extremely aggressive timeline. This short duration raises several concerns. Firstly, it may indicate an urgent operational need by the Navy, potentially driven by unforeseen circumstances. Secondly, it could imply that the vessels were already under construction or nearing completion at the time of the award, which might justify the sole-source decision. However, it also increases the risk of rushed production, potentially compromising quality control, safety standards, or the integration of necessary systems. The contractor may also factor in a premium for expedited delivery, impacting the overall cost-effectiveness of the procurement.

How does the absence of small business participation affect the broader defense industrial base?

The exclusion of small businesses from this $152 million contract represents a missed opportunity to foster growth and innovation within the defense industrial base. Small businesses often provide specialized capabilities, agility, and competitive pricing that can benefit larger programs. By not setting aside portions of this contract for small businesses or requiring significant subcontracting, the Department of the Navy may be limiting the pool of potential suppliers and hindering the development of emerging defense contractors. This can lead to a less resilient and diverse industrial base in the long run, potentially increasing reliance on a few large prime contractors.

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

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Hornbeck Offshore Services, Inc. (UEI: 947299590)

Address: 103 NORTHPARK BLVD STE 300, COVINGTON, LA, 70433

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

Financial Breakdown

Contract Ceiling: $152,000,000

Exercised Options: $152,000,000

Current Obligation: $152,000,000

Contract Characteristics

Cost or Pricing Data: NO

Timeline