DoD's $2.77B Dry Dock 3 Replacement Project at JBPHH Faces Potential Cost Overruns and Schedule Delays

Contract Overview

Contract Amount: $2,772,165,518 ($2.8B)

Contractor: Dragados/Hawaiian Dredging/Orion JV

Awarding Agency: Department of Defense

Start Date: 2023-03-31

End Date: 2027-09-30

Contract Duration: 1,644 days

Daily Burn Rate: $1.7M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE AWARD FEE

Sector: Construction

Official Description: FY23 MCON PROJECT P-209, DRY DOCK 3 REPLACEMENT, JOINT BASE PEARL HARBOR HICKAM, HAWAII

Place of Performance

Location: PEARL HARBOR, HONOLULU County, HAWAII, 96860

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $2.77 billion to DRAGADOS/HAWAIIAN DREDGING/ORION JV for work described as: FY23 MCON PROJECT P-209, DRY DOCK 3 REPLACEMENT, JOINT BASE PEARL HARBOR HICKAM, HAWAII Key points: 1. The project's fixed-price award fee contract structure, while aiming for cost control, introduces complexity in performance incentives. 2. Competition was robust with full and open bidding, suggesting a competitive price discovery process initially. 3. Significant risks include potential cost increases due to the project's long duration and the specialized nature of dry dock construction. 4. The construction sector, particularly large-scale civil engineering projects, is susceptible to material cost fluctuations and labor shortages.

Value Assessment

Rating: questionable

The $2.77 billion award for Dry Dock 3 Replacement is substantial. Benchmarking against similar large-scale naval infrastructure projects is difficult without more granular cost data, but the scale suggests a need for close monitoring of cost performance.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating a broad market solicitation. This method generally promotes competitive pricing, but the fixed-price award fee structure requires careful management to ensure the government receives value.

Taxpayer Impact: The significant investment of $2.77 billion represents a substantial allocation of taxpayer funds towards critical naval infrastructure modernization.

Public Impact

Enhances naval readiness by providing a modern, capable dry dock for fleet maintenance and repair. Supports economic activity in Hawaii through construction jobs and related services. Addresses aging infrastructure, reducing the risk of operational disruptions for the Navy's Pacific fleet.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long project duration (over 4 years) increases exposure to economic volatility.
Fixed-price award fee structure can incentivize contractor behavior that may not align perfectly with cost efficiency.
Potential for scope creep or unforeseen site conditions in complex civil engineering projects.
Reliance on a joint venture may introduce coordination challenges.

Positive Signals

Full and open competition suggests a competitive initial award.
Project addresses a critical, long-term infrastructure need for national defense.
Awarded to a joint venture with relevant experience.

Sector Analysis

This project falls within the heavy and civil engineering construction sector, characterized by large capital investments and long project lifecycles. Spending benchmarks for similar naval dry dock replacements are scarce due to their unique nature, but the scale of this award is significant.

Small Business Impact

While the prime contract was awarded to a joint venture, opportunities for small businesses may exist further down the subcontracting chain. The data does not indicate specific small business participation goals or achievements for this contract.

Oversight & Accountability

The Department of the Navy, as the awarding agency, is responsible for oversight. The fixed-price award fee contract requires diligent performance monitoring and management to ensure cost control and adherence to schedule and quality standards.

Related Government Programs

Other Heavy and Civil Engineering Construction
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

High dollar value ($2.77B) increases financial risk.
Long contract duration (over 4 years) heightens exposure to market volatility.
Complexity of dry dock construction presents technical challenges.
Fixed-price award fee structure requires careful management to ensure value.
Potential for unforeseen site conditions in a major civil engineering project.
Lack of specific small business participation data.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.77 billion to DRAGADOS/HAWAIIAN DREDGING/ORION JV. FY23 MCON PROJECT P-209, DRY DOCK 3 REPLACEMENT, JOINT BASE PEARL HARBOR HICKAM, HAWAII

Who is the contractor on this award?

The obligated recipient is DRAGADOS/HAWAIIAN DREDGING/ORION JV.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $2.77 billion.

What is the period of performance?

Start: 2023-03-31. End: 2027-09-30.

What specific performance metrics are tied to the 'award fee' component, and how will they be objectively measured to ensure fair incentive alignment?

The award fee structure likely includes metrics related to schedule adherence, quality of work, safety performance, and potentially cost control. Objective measurement is crucial; this typically involves detailed progress reports, independent inspections, and adherence to predefined milestones. The Navy's contracting officer representative (COR) plays a key role in evaluating performance against these metrics to determine the fee awarded.

Given the project's duration and complexity, what contingency plans are in place to mitigate risks associated with potential material cost escalations or labor shortages?

Mitigation strategies may include clauses within the contract that address escalation (though less common in fixed-price contracts), proactive engagement with suppliers, and robust workforce planning. The government might also maintain a contingency fund for unforeseen circumstances, although this is typically managed separately from the base contract value. The joint venture's experience in managing such risks is also a critical factor.

How will the effectiveness of the new dry dock be measured post-completion to ensure it meets the Navy's long-term operational and maintenance requirements?

Effectiveness will be measured through a combination of initial operational testing and trials (ITT) and ongoing performance monitoring. This includes assessing the dry dock's capacity, structural integrity under load, efficiency of pumping systems, and overall reliability in supporting fleet maintenance schedules. User feedback from naval commands utilizing the facility will also be crucial in evaluating its long-term effectiveness.

Industry Classification

NAICS: Construction › Other Heavy and Civil Engineering Construction › Other Heavy and Civil Engineering Construction

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCTION OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N6274222R1315

Offers Received: 4

Pricing Type: FIXED PRICE AWARD FEE (M)

Evaluated Preference: NONE

Contractor Details

Address: 605 KAPIOLANI BLVD, HONOLULU, HI, 96813

Business Categories: Category Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $3,299,202,818

Exercised Options: $3,299,202,818

Current Obligation: $2,772,165,518

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N6274222D1311

IDV Type: IDC

Timeline