Navy awards $33.4M engineering support contract to Serco Inc. for surface combatant ships

Contract Overview

Contract Amount: $33,434,898 ($33.4M)

Contractor: Serco Inc

Awarding Agency: Department of Defense

Start Date: 2023-06-15

End Date: 2026-06-14

Contract Duration: 1,095 days

Daily Burn Rate: $30.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NAVAL SYSTEMS ENGINEERING AND LOGISTICS DIRECTORATE ENGINEERING SUPPORT SERVICES (ESS) SUPPORT - SHIP DESIGN, ENGINEERING, AND INTEGRATION SUPPORT FOR SURFACE COMBATANT SHIPS

Place of Performance

Location: HERNDON, FAIRFAX County, VIRGINIA, 20170

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $33.4 million to SERCO INC for work described as: NAVAL SYSTEMS ENGINEERING AND LOGISTICS DIRECTORATE ENGINEERING SUPPORT SERVICES (ESS) SUPPORT - SHIP DESIGN, ENGINEERING, AND INTEGRATION SUPPORT FOR SURFACE COMBATANT SHIPS Key points: 1. Contract provides critical engineering and integration support for surface combatant ships. 2. Awarded via full and open competition, suggesting a competitive bidding process. 3. Duration of 1095 days indicates a long-term need for these specialized services. 4. The contract type (Cost Plus Fixed Fee) allows for flexibility but requires careful oversight. 5. Focus on ship design and integration highlights the complexity of naval engineering. 6. Virginia is the primary location, indicating a concentration of naval engineering activity. 7. The contract value is substantial, reflecting the high cost of specialized engineering services.

Value Assessment

Rating: good

The contract value of $33.4 million over three years for engineering support services for surface combatant ships appears reasonable given the specialized nature of naval engineering and design. Benchmarking against similar contracts for complex engineering services in the defense sector would provide a more precise value-for-money assessment. The Cost Plus Fixed Fee (CPFF) contract type, while common for complex projects where costs are uncertain, necessitates robust oversight to ensure efficiency and prevent cost overruns. Without specific per-unit cost data or detailed task breakdowns, a definitive value assessment is challenging, but the award to a single bidder after full and open competition suggests a potentially fair price was negotiated.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The data shows one award, which could mean either a single strong bidder emerged or that the competition, while open, resulted in only one proposal being deemed acceptable or competitive enough. The level of competition is crucial for price discovery; a robust competition typically drives down prices, while limited competition can lead to higher costs for the government. Further analysis of the number of proposals received would clarify the intensity of the competition.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it promotes a competitive environment that can lead to better pricing and a wider range of innovative solutions. This approach ensures that the government is not unduly limited in its options and can secure services at a more market-driven rate.

Public Impact

The U.S. Navy benefits from specialized engineering and integration support for its surface combatant fleet. Services include ship design, engineering, and integration, crucial for maintaining and modernizing naval capabilities. The primary geographic impact is in Virginia, a hub for naval operations and defense contracting. This contract supports a highly skilled workforce in engineering, naval architecture, and related technical fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee (CPFF) contract type requires diligent oversight to manage costs effectively.
Reliance on a single contractor for critical engineering support could pose a risk if performance falters.
The long-term nature of the contract necessitates ongoing performance monitoring to ensure sustained quality.

Positive Signals

Awarded through full and open competition, indicating a potentially competitive pricing environment.
Contract supports the critical mission of designing and integrating surface combatant ships for the Navy.
The contractor, Serco Inc., likely possesses specialized expertise required for this complex engineering work.

Sector Analysis

This contract falls within the Engineering Services sector (NAICS 541330), a critical component of the defense industrial base. The market for defense engineering services is substantial, driven by the continuous need for modernization, maintenance, and development of military platforms. Companies like Serco Inc. compete for significant government contracts that require deep technical expertise in areas such as naval architecture, systems integration, and lifecycle support. Spending in this sector is often characterized by long-term relationships, high barriers to entry due to specialized knowledge and security requirements, and a strong emphasis on performance and reliability.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or benefits for small businesses stemming from a small business set-aside. However, the prime contractor, Serco Inc., may engage small businesses as subcontractors for specialized services or components, which would contribute to the broader small business ecosystem. The absence of a set-aside means the primary competition was open to all business sizes, and the focus was on securing the best overall value rather than specifically promoting small business participation.

Oversight & Accountability

Oversight for this contract will likely be managed by the Naval Systems Engineering and Logistics Directorate within the Department of the Navy. As a Cost Plus Fixed Fee (CPFF) contract, rigorous financial and performance oversight is essential to ensure that costs are reasonable and allocable, and that the fixed fee is earned through satisfactory performance. Transparency is typically maintained through regular reporting requirements, milestone reviews, and potentially audits by the Defense Contract Audit Agency (DCAA). Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Naval Ship Design and Engineering Services
Surface Combatant Modernization Programs
Defense Engineering Support Contracts
Department of the Navy Shipbuilding and Conversion Contracts

Risk Flags

Potential for cost overruns due to CPFF contract type.
Reliance on a single contractor for critical engineering functions.
Need for robust oversight to ensure performance and value.
Limited competition may impact price discovery.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $33.4 million to SERCO INC. NAVAL SYSTEMS ENGINEERING AND LOGISTICS DIRECTORATE ENGINEERING SUPPORT SERVICES (ESS) SUPPORT - SHIP DESIGN, ENGINEERING, AND INTEGRATION SUPPORT FOR SURFACE COMBATANT SHIPS

Who is the contractor on this award?

The obligated recipient is SERCO 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 $33.4 million.

What is the period of performance?

Start: 2023-06-15. End: 2026-06-14.

What is Serco Inc.'s track record with similar Department of Defense contracts, particularly in naval engineering?

Serco Inc. has a significant history of performing various services for the Department of Defense, including IT, logistics, and technical support. While specific details on their naval engineering track record for surface combatants require deeper database analysis, their extensive experience with government contracts suggests a familiarity with defense procurement processes and performance expectations. Past performance evaluations and contract awards would provide a clearer picture of their capabilities and reliability in this specific domain. It is important to review their history for any significant performance issues or contract disputes related to complex engineering projects to fully assess their suitability for this role.

How does the $33.4 million contract value compare to similar engineering support contracts for naval vessels?

The $33.4 million contract value for three years of engineering support for surface combatant ships is within a typical range for specialized defense services. However, direct comparisons are difficult without knowing the exact scope of work, deliverables, and the specific class of ships involved. Contracts for major platform design, integration, and modernization can range from tens to hundreds of millions of dollars. Factors such as the level of system complexity, the required engineering disciplines (e.g., combat systems, propulsion, hull design), and the duration of support significantly influence pricing. Benchmarking against contracts for similar services on comparable naval platforms would provide a more precise assessment of value for money.

What are the primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for engineering services?

The primary risks associated with a CPFF contract revolve around cost control and contractor incentive. While the fixed fee provides the contractor with an incentive to control costs to maximize profit, the government bears the risk of cost overruns if the initial cost estimates are inaccurate or if unforeseen complexities arise. This necessitates robust government oversight to scrutinize costs, ensure they are reasonable and allocable, and verify that the contractor is performing efficiently. Without diligent oversight, there is a risk that costs could escalate beyond initial projections, potentially diminishing the overall value for money. Contractor performance and adherence to the statement of work are also critical risk areas.

How effective is full and open competition in ensuring competitive pricing for specialized engineering services like this?

Full and open competition is generally the most effective method for ensuring competitive pricing, as it allows all responsible sources to bid, fostering a market-driven environment. However, the effectiveness can vary depending on the specific market. For highly specialized engineering services, the pool of qualified bidders might be limited, potentially reducing the intensity of competition. In such cases, even with full and open competition, only a few bids may be received. The key is not just the openness of the competition but the number and quality of proposals submitted. A robust competition, with multiple strong bidders, is more likely to yield competitive pricing than a situation where only one or two firms can realistically compete.

What is the historical spending pattern for engineering support services for surface combatant ships within the Department of the Navy?

Historical spending on engineering support services for surface combatant ships within the Department of the Navy has been substantial and consistent, reflecting the ongoing need to design, build, maintain, and modernize the fleet. This spending is driven by the lifecycle of naval vessels, which require continuous engineering input from initial concept and design through upgrades and eventual decommissioning. Annual expenditures can fluctuate based on shipbuilding schedules, modernization initiatives, and budget allocations. Analyzing past spending trends for similar contracts can reveal patterns in contractor selection, contract types, and average award values, providing context for the current $33.4 million award.

What are the potential performance risks if Serco Inc. underperforms on this critical engineering support contract?

Underperformance by Serco Inc. on this critical engineering support contract could have significant ramifications for the U.S. Navy's surface combatant fleet. Risks include delays in ship design, integration, or modernization projects, which could impact operational readiness and force projection capabilities. Poor engineering quality could lead to design flaws, increased maintenance costs, or reduced system performance and reliability. Furthermore, if the contract is essential for ongoing fleet support, underperformance could necessitate costly contract re-competition or emergency procurement of services, potentially at higher prices and with significant disruption. The long-term nature of the contract means that sustained underperformance could have cascading negative effects on naval capabilities.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › PROFESSIONAL SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: N6426722R3015

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Address: 12930 WORLDGATE DR STE 600, HERNDON, VA, 20170

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Foreign Owned, Foreign-Owned and U.S.-Incorporated Business, Not Designated a Small Business, Special Designations

Financial Breakdown

Contract Ceiling: $124,612,190

Exercised Options: $72,707,454

Current Obligation: $33,434,898

Subaward Activity

Number of Subawards: 6

Total Subaward Amount: $2,196,416

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0017819D8498

IDV Type: IDC

Timeline