Navy awards $27.7M for LCS execution, with limited competition and cost-plus-fixed-fee structure

Contract Overview

Contract Amount: $27,706,129 ($27.7M)

Contractor: Austal USA, LLC

Awarding Agency: Department of Defense

Start Date: 2018-12-21

End Date: 2020-03-31

Contract Duration: 466 days

Daily Burn Rate: $59.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: POST DELIVERY BASIC ORDERING AGREEMENT ITEM 0001 LCS 14 EXECUTION

Place of Performance

Location: MOBILE, MOBILE County, ALABAMA, 36610

State: Alabama Government Spending

Plain-Language Summary

Department of Defense obligated $27.7 million to AUSTAL USA, LLC for work described as: POST DELIVERY BASIC ORDERING AGREEMENT ITEM 0001 LCS 14 EXECUTION Key points: 1. Contract awarded via a limited competition approach, raising questions about optimal price discovery. 2. The cost-plus-fixed-fee (CPFF) pricing structure may incentivize cost escalation. 3. Performance period spans over 1.5 years, indicating a medium-term engagement. 4. The contract is for execution of Littoral Combat Ship (LCS) program elements. 5. The primary awardee, Austal USA, LLC, is a significant player in naval shipbuilding. 6. Geographic concentration in Alabama suggests potential regional economic impact.

Value Assessment

Rating: fair

The contract's value of $27.7 million for LCS execution appears moderate within the context of large naval shipbuilding programs. However, the cost-plus-fixed-fee (CPFF) contract type, while allowing flexibility, can lead to higher final costs compared to fixed-price contracts if not managed rigorously. Benchmarking against similar LCS execution or support contracts would be necessary for a definitive value assessment, but the CPFF structure warrants careful monitoring of expenditures to ensure value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was not fully and openly competed, falling under a limited competition category. Specific details on the justification for limited competition are not provided, but it implies that not all capable sources were solicited. The limited nature of the competition may have restricted the number of bidders, potentially impacting the government's ability to secure the most competitive pricing and innovative solutions available in the market.

Taxpayer Impact: Limited competition can result in higher costs for taxpayers as it may reduce the pressure on contractors to offer their lowest possible prices. This approach can also limit opportunities for new or smaller businesses to enter the market and compete for significant defense contracts.

Public Impact

The primary beneficiary is the U.S. Navy, receiving execution support for the Littoral Combat Ship program. Services delivered likely include program management, engineering, and logistical support critical to LCS operations. The contract's geographic impact is concentrated in Alabama, where Austal USA, LLC is based. Workforce implications may include employment opportunities for skilled labor in shipbuilding and related support industries in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee structure could lead to cost overruns if not closely managed.
Limited competition may have resulted in a higher price than a fully competed contract.
The contract's duration and scope require robust oversight to ensure performance standards are met.

Positive Signals

Award to an established contractor with experience in naval shipbuilding.
Contract supports a critical naval platform (LCS), aligning with defense priorities.
Geographic concentration in Alabama could support regional economic development and a skilled workforce.

Sector Analysis

The shipbuilding and repair industry is a significant sector within the U.S. economy, heavily influenced by defense spending. The Littoral Combat Ship (LCS) program represents a substantial investment in modern naval capabilities. This contract fits within the broader context of naval vessel construction and sustainment, where competition can be influenced by specialized capabilities and existing production lines. Comparable spending benchmarks would typically involve multi-billion dollar shipbuilding contracts, making this $27.7 million award a component of a larger, ongoing program.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses within the provided data. The award to a large prime contractor like Austal USA, LLC suggests that subcontracting opportunities may exist, but their extent and focus on small businesses would require further investigation into the contractor's subcontracting plan and performance.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the CPFF structure, rigorous financial oversight and performance monitoring are crucial to ensure costs are controlled and objectives are met. The Department of Defense's Inspector General may also conduct audits or investigations into contract performance and expenditures to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

Littoral Combat Ship (LCS) Program
Naval Shipbuilding Contracts
Defense Procurement

Risk Flags

Cost-plus-fixed-fee contract type
Limited competition award
Potential for cost escalation
Dependence on a single prime contractor for specific execution tasks

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $27.7 million to AUSTAL USA, LLC. POST DELIVERY BASIC ORDERING AGREEMENT ITEM 0001 LCS 14 EXECUTION

Who is the contractor on this award?

The obligated recipient is AUSTAL USA, 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 $27.7 million.

What is the period of performance?

Start: 2018-12-21. End: 2020-03-31.

What is Austal USA, LLC's track record with the U.S. Navy, particularly on LCS programs?

Austal USA, LLC has a significant track record with the U.S. Navy, notably as a builder of Littoral Combat Ships (LCS). They have been involved in the construction of multiple LCS variants, including the Independence-class. Their experience encompasses not only new construction but also potentially sustainment and modernization efforts. The company has faced scrutiny and challenges in the past related to production schedules and costs on naval programs, but they remain a key industrial partner for the Navy in this domain. Understanding their performance on prior LCS contracts, including any cost overruns or schedule delays, is crucial for assessing the risk associated with this current award.

How does the $27.7 million award compare to historical spending on LCS execution or similar support contracts?

The $27.7 million award represents a specific delivery order for LCS execution, likely covering a defined period or set of tasks. It is important to note that this figure is a component of the overall LCS program's lifecycle costs, which run into billions of dollars. Comparing this specific award requires identifying similar 'execution' or 'basic ordering agreement' type contracts for LCS or comparable naval platforms. Historical data suggests that individual delivery orders for shipbuilding support can range from a few million to tens of millions of dollars, depending on the scope. Without more granular data on the specific services rendered under this order, a precise comparison is difficult, but it appears to be a moderate-sized award within the broader LCS program funding.

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

The primary risks associated with a Cost Plus Fixed Fee (CPFF) contract for LCS execution revolve around cost control and contractor incentives. In a CPFF structure, the contractor is reimbursed for allowable costs plus a fixed fee, which represents their profit. The main risk for the government is that the contractor has less incentive to control costs compared to a fixed-price contract, as their profit is fixed regardless of the final cost. This can lead to cost overruns if the contractor does not diligently manage expenses or if unforeseen issues arise. For the Navy, this necessitates robust oversight to ensure that all claimed costs are reasonable, allocable, and allowable, and that the contractor is actively seeking efficiencies. The fixed fee itself also needs to be benchmarked against industry standards for similar work.

How effective has the LCS program been, and how does this contract contribute to its overall effectiveness?

The effectiveness of the Littoral Combat Ship (LCS) program has been a subject of ongoing debate and analysis within the defense community. The program aimed to deliver a versatile, modular, and cost-effective surface combatant, but has faced challenges related to its survivability, lethality, and cost-effectiveness compared to alternative platforms. This specific contract for LCS execution contributes to the ongoing sustainment and operational readiness of the LCS fleet. Its effectiveness is therefore tied to the broader success of the LCS program in fulfilling its intended missions, which include surface warfare, anti-submarine warfare, and mine countermeasures. The contract's value lies in ensuring the continued support and development of these critical naval assets.

What are the historical spending patterns for LCS program execution and support over the past five years?

Historical spending patterns for LCS program execution and support over the past five years would likely show significant and fluctuating figures, reflecting the program's multi-year procurement and sustainment phases. Total obligations for the LCS program, encompassing new construction, modernization, and fleet support, have historically been in the billions of dollars annually. Individual contracts for execution, like the one awarded here, represent a fraction of this total. Spending trends are influenced by shipbuilding schedules, the number of ships being built or maintained, and the specific requirements for mission modules and support services. Analyzing these patterns would reveal the government's sustained investment in the LCS platform and the allocation of funds across different aspects of the program.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002414R2304

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Austal Limited

Address: 1 DUNLAP DR, MOBILE, AL, 36610

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

Financial Breakdown

Contract Ceiling: $28,531,129

Exercised Options: $28,531,129

Current Obligation: $27,706,129

Actual Outlays: $3,258,675

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0002415G2304

IDV Type: BOA

Timeline