DoD awards $258.5M contract for medium class hopper dredge to Eastern Shipbuilding Group

Contract Overview

Contract Amount: $258,506,274 ($258.5M)

Contractor: Eastern Shipbuilding Group, Inc.

Awarding Agency: Department of Defense

Start Date: 2023-07-24

End Date: 2027-11-17

Contract Duration: 1,577 days

Daily Burn Rate: $163.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 3010 MEDIUM CLASS HOPPER DREDGE

Place of Performance

Location: PANAMA CITY, BAY County, FLORIDA, 32401

State: Florida Government Spending

Plain-Language Summary

Department of Defense obligated $258.5 million to EASTERN SHIPBUILDING GROUP, INC. for work described as: 3010 MEDIUM CLASS HOPPER DREDGE Key points: 1. Contract awarded through full and open competition, suggesting a robust bidding process. 2. The contract is a definitive contract with a firm fixed price, providing cost certainty. 3. The duration of the contract is over 4 years, indicating a significant long-term need. 4. The awardee, Eastern Shipbuilding Group, Inc., is positioned to deliver a critical asset. 5. The contract falls under the Ship Building and Repairing NAICS code, a specialized sector. 6. The geographic location of the contractor in Florida may have local economic implications.

Value Assessment

Rating: good

The contract value of $258.5 million for a medium class hopper dredge appears reasonable given the specialized nature of shipbuilding. Without specific benchmarks for this exact type of vessel, a direct comparison is difficult. However, the firm fixed-price structure suggests that the government has negotiated a set price, which can be advantageous in managing costs. The number of bids received (3) in a full and open competition provides some basis for price discovery, though more bidders would typically lead to more competitive pricing.

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 a bid. Three bids were received, which suggests a moderate level of competition for this specialized requirement. While three bidders are better than one or two, a higher number of competitors could potentially drive prices down further. The process implies that the government sought the best value through a competitive solicitation.

Taxpayer Impact: The full and open competition, despite receiving three bids, aims to ensure taxpayer funds are used efficiently by fostering a competitive environment that encourages competitive pricing and quality offerings.

Public Impact

The U.S. Army Corps of Engineers will benefit from the acquisition of a new medium class hopper dredge, crucial for maintaining navigable waterways. This contract will support the delivery of a specialized maritime vessel essential for dredging operations. The geographic impact is primarily national, focusing on the maintenance and improvement of U.S. ports and waterways. The contract will likely have positive workforce implications for Eastern Shipbuilding Group and its supply chain in Florida.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen technical challenges arise during construction, despite the firm fixed-price nature.
Dependence on a single contractor for a critical asset could pose a risk if performance issues emerge.
The limited number of bidders (3) might indicate a concentrated market for such specialized vessels, potentially limiting future competition.

Positive Signals

Firm fixed-price contract provides cost certainty for the government.
Awarded through full and open competition, suggesting a fair and transparent procurement process.
The contractor, Eastern Shipbuilding Group, Inc., is an established entity in the shipbuilding sector.
The contract duration allows for a structured and phased delivery of the dredge.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive sector with high barriers to entry, characterized by complex engineering and long production cycles. This contract for a medium class hopper dredge fits within the broader defense and maritime infrastructure sector. Comparable spending benchmarks are difficult to ascertain without detailed specifications of the dredge, but large government contracts for specialized vessels can range from tens to hundreds of millions of dollars. The market for such specialized vessels is relatively concentrated among a few key shipbuilders capable of meeting stringent military and maritime requirements.

Small Business Impact

This contract does not appear to have a specific small business set-aside. The awardee, Eastern Shipbuilding Group, Inc., is a large business. There is no explicit information provided regarding subcontracting plans for small businesses. The impact on the small business ecosystem will depend on whether Eastern Shipbuilding Group actively seeks out small business subcontractors for components or services, which is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract will primarily be managed by the Department of the Army contracting officers and program managers. Accountability measures are embedded within the contract terms, including delivery schedules and specifications. Transparency is facilitated through the Federal Procurement Data System (FPDS), where contract awards are reported. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse related to the contract.

Related Government Programs

U.S. Army Corps of Engineers Dredging Contracts
Naval Vessel Construction Contracts
Maritime Infrastructure Projects
Shipbuilding and Repair Services

Risk Flags

Potential for schedule delays in complex shipbuilding.
Risk of performance not meeting stringent operational requirements.
Market concentration for specialized vessel construction.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $258.5 million to EASTERN SHIPBUILDING GROUP, INC.. 3010 MEDIUM CLASS HOPPER DREDGE

Who is the contractor on this award?

The obligated recipient is EASTERN SHIPBUILDING GROUP, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $258.5 million.

What is the period of performance?

Start: 2023-07-24. End: 2027-11-17.

What is the track record of Eastern Shipbuilding Group, Inc. with Department of Defense contracts?

Eastern Shipbuilding Group, Inc. has a history of performing contracts with the Department of Defense, particularly in shipbuilding and repair. While this specific contract is for a hopper dredge, the company has experience with various vessel types, including those for military applications. Reviewing their past performance on similar large-scale construction projects, adherence to delivery schedules, and quality of work on previous government contracts would provide a more comprehensive understanding of their reliability. Data from contract databases like FPDS can offer insights into their award history, contract values, and any reported performance issues or successes.

How does the value of this contract compare to similar hopper dredge acquisitions?

Benchmarking the $258.5 million contract value for a medium class hopper dredge requires detailed comparison with similar acquisitions, considering vessel size, capabilities, and technological sophistication. Hopper dredges can vary significantly in cost based on their capacity, dredging depth, and specialized equipment. Without access to detailed specifications for this particular dredge and a database of comparable recent procurements, a precise value-for-money assessment is challenging. However, the firm fixed-price nature and the competitive bidding process suggest an effort to secure a fair price. Further analysis would involve examining the technical specifications against market prices for comparable commercial or government-owned vessels.

What are the primary risks associated with this contract for the Department of Defense?

The primary risks associated with this contract include potential schedule delays in the complex shipbuilding process, which could impact the Army Corps of Engineers' operational readiness for waterway maintenance. Cost overruns are a mitigated risk due to the firm fixed-price (FFP) contract type, but unforeseen technical issues or material price fluctuations could still present challenges if not adequately managed. There's also a performance risk related to the dredge meeting all specified operational requirements and durability standards over its lifecycle. Furthermore, the concentration of specialized shipbuilding capabilities means that reliance on a few key contractors, like Eastern Shipbuilding Group, can create a dependency.

How effective is the firm fixed-price contract type in managing costs for this dredge acquisition?

The firm fixed-price (FFP) contract type is generally considered effective in managing costs for acquisitions like this medium class hopper dredge because it shifts the majority of the financial risk to the contractor. The agreed-upon price is fixed, meaning the government is not obligated to pay more than the contract amount, regardless of the contractor's actual costs. This incentivizes the contractor to control expenses and manage the project efficiently to maximize their profit margin. While FFP provides significant cost certainty for the government, it requires a well-defined scope of work and clear specifications upfront to avoid costly change orders later in the project lifecycle.

What is the historical spending pattern for hopper dredges by the Department of Defense or Army Corps of Engineers?

Historical spending patterns for hopper dredges by the Department of Defense, particularly the Army Corps of Engineers, indicate a consistent need for these vessels to maintain U.S. waterways. The Army Corps of Engineers operates and procures dredging equipment as a core function. Spending on such assets is typically project-based and cyclical, influenced by infrastructure needs, budget allocations, and the lifecycle of existing equipment. Major dredge procurements are infrequent due to their high cost and long service life, often occurring when existing fleets require replacement or significant upgrades. Analyzing past awards for similar vessels would reveal the typical contract values, durations, and the frequency of such large capital investments.

What are the implications of awarding this contract to a single entity for future competition in the specialized shipbuilding market?

Awarding a significant contract like this to a single entity, Eastern Shipbuilding Group, Inc., can have implications for future competition in the specialized shipbuilding market. If the company is a major player and this contract consumes a substantial portion of its capacity, it might limit its ability to bid on other large projects in the short term. Conversely, successful execution of this contract could enhance its reputation and capacity, potentially making it a stronger competitor for future work. The overall health and competitiveness of the specialized shipbuilding market depend on the number of capable shipyards and their capacity utilization. A market with few qualified bidders, as suggested by the three bids received, can lead to less competitive pricing in the long run.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W912BU22R0045

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2200 NELSON AVE, PANAMA CITY, FL, 32401

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $258,506,274

Exercised Options: $258,506,274

Current Obligation: $258,506,274

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Timeline