Navy awards $484M for vessel operations and charter, a sole-source contract with a 10-year duration

Contract Overview

Contract Amount: $484,292,625 ($484.3M)

Contractor: Hornbeck Offshore Operators LLC

Awarding Agency: Department of Defense

Start Date: 2015-02-25

End Date: 2025-02-28

Contract Duration: 3,656 days

Daily Burn Rate: $132.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: OPERATION AND MAINTENANCE OF THREE BLOCKING VESSELS AND TIME CHARTER OF ONE BLOCKING VESSEL

Place of Performance

Location: COVINGTON, SAINT TAMMANY County, LOUISIANA, 70433

State: Louisiana Government Spending

Plain-Language Summary

Department of Defense obligated $484.3 million to HORNBECK OFFSHORE OPERATORS LLC for work described as: OPERATION AND MAINTENANCE OF THREE BLOCKING VESSELS AND TIME CHARTER OF ONE BLOCKING VESSEL Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price efficiencies. 2. Long-term contract (10 years) provides stability but may limit opportunities for competitive re-evaluation. 3. High contract value suggests critical operational support for naval assets. 4. Fixed-price contract type shifts cost risk to the contractor. 5. Contractor has a significant contract value, indicating established relationship with the Navy. 6. Focus on vessel operations and charter points to a specialized maritime service requirement.

Value Assessment

Rating: fair

The total contract value of $484 million over 10 years averages to $48.4 million annually. Benchmarking this against similar vessel operation and charter contracts is challenging without more specific service details. However, the long duration and sole-source nature suggest that the pricing may not have benefited from competitive pressures. Further analysis would require comparing the scope of services and vessel types to publicly available data on maritime support contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one vendor can provide the required services, often due to unique capabilities, existing infrastructure, or national security considerations. The lack of competition means that pricing was negotiated directly with the contractor, potentially leading to higher costs than if multiple bids had been solicited.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less assurance that the government secured the best possible price for these essential maritime services.

Public Impact

The U.S. Navy benefits from the continuous operation and availability of three blocking vessels and the charter of one additional vessel. These services are critical for maintaining naval operational readiness and potentially for port security or interdiction missions. The contract supports specialized maritime operations, ensuring the availability of necessary vessels and crews. The geographic impact is likely concentrated around naval bases or operational areas where these vessels are deployed, primarily in Louisiana based on the contractor's location.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs for taxpayers.
Long contract duration (10 years) may reduce flexibility and opportunities for cost savings through re-competition.
Lack of transparency in the justification for sole-source award requires further scrutiny.

Positive Signals

Firm fixed-price contract shifts cost overrun risk to the contractor.
Long-term contract provides stability and ensures consistent availability of critical maritime assets.
Contractor's established presence and likely specialized expertise may ensure high-quality service delivery.

Sector Analysis

The maritime services sector encompasses a wide range of activities, including vessel operation, chartering, maintenance, and logistics. This contract falls within the specialized niche of providing blocking vessels and charter services, which are crucial for defense and national security operations. The market for such specialized maritime support is often characterized by a limited number of qualified providers, which can influence competition dynamics. Comparable spending benchmarks are difficult to establish without detailed service specifications, but the significant value indicates a substantial operational requirement.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'sb' field being false. The large value and specialized nature of the services suggest that prime contracting opportunities for small businesses may be limited. However, the prime contractor, Hornbeck Offshore Operators LLC, may engage small businesses for subcontracting, particularly for maintenance, repair, or logistical support services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Given the long duration and significant value, regular performance reviews and financial audits are expected. Transparency regarding the justification for the sole-source award and ongoing performance metrics would be key indicators of effective oversight. The Inspector General's office for the Department of Defense would have jurisdiction for investigating any potential fraud, waste, or abuse.

Related Government Programs

Naval Vessel Operations
Maritime Support Services
Vessel Charter Services
Fleet Maintenance and Repair
Coastal and Great Lakes Freight Transportation

Risk Flags

Sole-source award may indicate lack of competition, potentially leading to higher costs.
Long contract duration increases risk of unfavorable pricing due to market fluctuations.
Lack of detailed service scope makes value assessment difficult.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $484.3 million to HORNBECK OFFSHORE OPERATORS LLC. OPERATION AND MAINTENANCE OF THREE BLOCKING VESSELS AND TIME CHARTER OF ONE BLOCKING VESSEL

Who is the contractor on this award?

The obligated recipient is HORNBECK OFFSHORE OPERATORS 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 $484.3 million.

What is the period of performance?

Start: 2015-02-25. End: 2025-02-28.

What is the specific operational purpose of the three blocking vessels and the chartered vessel?

The provided data indicates the contract is for 'OPERATION AND MAINTENANCE OF THREE BLOCKING VESSELS AND TIME CHARTER OF ONE BLOCKING VESSEL'. Blocking vessels are typically used to prevent unauthorized entry into a port or waterway, often for security or operational control purposes. The time charter of an additional vessel suggests a need for flexible or supplementary capacity for specific missions or durations. Without further details, the exact operational context (e.g., specific naval exercises, port security duties, or interdiction operations) remains unspecified, but their role is clearly tied to naval operational requirements and potentially homeland security.

What is the justification for awarding this contract on a sole-source basis?

The data explicitly states the contract was 'NOT COMPETED', indicating a sole-source award. While the specific justification is not provided, common reasons for sole-source contracts in defense include unique capabilities possessed by only one contractor, the need for compatibility with existing systems, urgent requirements where competition is not feasible, or national security imperatives. For maritime services, this could relate to specialized vessel types, proprietary operational knowledge, or existing infrastructure that makes switching contractors impractical or detrimental to mission readiness. A formal Justification for Other than Full and Open Competition (JOFOC) would typically be required and should be publicly accessible.

How does the $484 million contract value compare to historical spending on similar services by the Navy?

Comparing the $484 million contract value requires context on the duration and scope of services. This is a 10-year contract (February 2015 - February 2025), averaging approximately $48.4 million per year. To benchmark effectively, one would need to identify previous contracts for similar blocking vessels and charter services, considering vessel size, capabilities, operational tempo, and duration. Historical spending patterns for maritime support within the Department of the Navy, particularly for specialized assets like blocking vessels, would provide a basis for assessing whether this contract represents a reasonable investment or potentially an outlier. Without access to detailed historical contract data for comparable services, a precise comparison is difficult.

What are the key performance indicators (KPIs) and service level agreements (SLAs) associated with this contract?

The provided data does not specify the Key Performance Indicators (KPIs) or Service Level Agreements (SLAs) for this contract. However, for vessel operation and maintenance contracts, typical KPIs would likely include vessel availability rates, response times for maintenance and repairs, fuel efficiency, adherence to safety and environmental regulations, and crew readiness. SLAs would define the expected standards for these metrics, with potential penalties for non-performance and incentives for exceeding expectations. Effective oversight would rely on robust reporting mechanisms to track performance against these undefined KPIs and SLAs.

What is the track record of Hornbeck Offshore Operators LLC in performing similar government contracts?

Hornbeck Offshore Operators LLC has a history of performing contracts for the U.S. government, particularly within the maritime sector. While this specific $484 million contract is a significant award, the company has experience with various vessel types and charter services. Assessing their track record would involve reviewing past performance evaluations (e.g., CPARS reports), any past performance issues or disputes, and their overall experience in providing reliable and safe maritime support. Their ability to secure a 10-year sole-source contract suggests a level of trust and established capability with the Department of the Navy, likely built upon previous successful contract performance.

What are the potential risks associated with a 10-year firm-fixed-price contract for vessel operations?

A 10-year firm-fixed-price (FFP) contract for vessel operations carries several potential risks. For the government, the primary risk is that market conditions or operational needs might change significantly over the decade, making the fixed price suboptimal. If costs for fuel, labor, or maintenance increase substantially beyond initial projections, the contractor is protected, but the government might be overpaying relative to a revised market. Conversely, if costs decrease, the contractor benefits from higher profit margins. Another risk is contractor complacency or reduced incentive to innovate or seek efficiencies over such a long period, especially in a sole-source context. Ensuring robust contract management and potential price adjustment clauses (if any exist) is crucial.

Industry Classification

NAICS: Transportation and Warehousing › Deep Sea, Coastal, and Great Lakes Water Transportation › Coastal and Great Lakes Freight Transportation

Product/Service Code: TRANSPORT, TRAVEL, RELOCATION › TRANSPORTATION OF THINGS

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

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: $484,292,625

Exercised Options: $484,292,625

Current Obligation: $484,292,625

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline