SUBCONTRACT FOR LPD-17 CLASS WORK
by and between
AVONDALE INDUSTRIES INC.
and
BATH IRON WORKS CORPORATION
PREAMBLE
This "Subcontract" is made and entered into by and between AVONDALE
INDUSTRIES INC., a corporation organized and existing under the laws of the
State of Louisiana ("Avondale" or "Prime Contractor") and BATH IRON WORKS
CORPORATION, a corporation organized and existing under the laws of the State of
Maine ("BIW" or "Subcontractor").
WHEREAS, the U.S. Naval Sea Systems Command ("NAVSEA", the "Government")
has issued Solicitation No. N00024-96-R-2101 (the RFP) for the design and
construction of up to three (3) vessels of the LPD-17 Class (the "Project"); and
WHEREAS, Avondale and BIW, in view of their complimentary capabilities have
determined that they would mutually benefit from the teaming of their respective
organizations to develop and to submit to NAVSEA a proposal in response to the
RFP (the "Proposal") in accordance with the existing Teaming Agreement dated May
23, 1996 between the parties; and if the Proposal results in a contract award
(the "Contract" or "Prime Contract"), to perform the services and work, and to
provide the supplies required under the Contract, with Avondale acting as the
prime contractor and BIW participating as one of two principal subcontractors;
and,
BATH IRON WORKS COMPANY CONFIDENTIAL
1
WHEREAS, Avondale has entered into a similar subcontract with the other
principal subcontractor, Xxxxxx Aircraft Company ("Xxxxxx") for enhancing the
respective capabilities of all the parties for a successful Proposal; and
WHEREAS, an objective of the Alliance is the cooperative performance and
completion of the Project for the Government and thereby earning and sharing the
highest possible award fees and incentives;
THEREFORE, in consideration of the premises, and the expectation that
NAVSEA will award the Contract to Avondale, the parties hereto agree to this
Subcontract.
SECTION A SPECIAL PROVISIONS
A-1. AUTHORITY
The existence of this Subcontract is contingent upon the precedent condition of
successful negotiations between NAVSEA and Avondale for the award of the Prime
Contract to Avondale. This Subcontract shall have no force or effect unless and
until Avondale and NAVSEA have executed the Prime Contract.
A-2. RELATIONSHIP OF THE PARTIES
2.1 Pursuant to their Statements of Work (SOW), for the purposes of this
Subcontract, the term "Alliance" shall mean the Avondale/BIW/Xxxxxx
cooperative joint work effort.
2.2 Subcontractor obligations stated in this Subcontract shall be read,
interpreted and understood, to mean the required performance of the
incremental obligations of the Subcontractor pursuant to its Statement of
Work, which performance is sufficient for acceptance by the Government
pursuant to the Prime Contract.
BATH IRON WORKS COMPANY CONFIDENTIAL
2
2.3 Avondale, as the Prime Contractor, is the principal interface with the
Government for the Alliance. Any communications of a contractual nature
initiated by the Subcontractor with the Government regarding the Project,
whether written or oral, shall be communicated and coordinated in advance
with Avondale. In the event that the Government initiates such communication
with the Subcontractor regarding the Project, Subcontractor will promptly
notify Avondale of the event and the contents of the communications.
2.4 Members of the Alliance accept and endorse the relationship of teaming and
cooperation established between them by this Subcontract. The Alliance
members agree to cooperate and further their mutual interests in completing
the Prime Contract. BIW will make all reasonable, cooperative efforts to
exchange technical information with other Avondale subcontractors to
facilitate performance of the work.
A-3. DELIVERY
Except as specifically indicated otherwise in this Subcontract, and except for
the construction, test and delivery of the third vessel at the Subcontractor's
Bath, Maine shipyard, all deliverables shall be delivered to Avondale's main
shipyard.
A-4. COMPLIANCE WITH LAWS, CERTIFICATIONS AND APPROVALS
Except as otherwise provided in this Subcontract, each party shall be
responsible for obtaining any required certifications and approvals with
respect to such party's Statement of Work from the relevant classification
societies or regulatory bodies having jurisdiction. Each party, for their part,
will be responsible for ensuring compliance with all applicable laws,
regulations, and classification society rules and regulations in the performance
of the work.
BATH IRON WORKS COMPANY CONFIDENTIAL
3
A-5. PRIME CONTRACT REQUIREMENTS
5.1 Particular provisions of the Prime Contract have been incorporated (either
in full text or by reference) into this Subcontract. For purposes of
Sections B through J, the terms "Contracting Officer", "Contracting
Officer's Representative", "the Government", "the Navy", "NAVSEA",
"Contracting Administration Office", and the like shall mean the Prime
Contractor unless in such context the terms can only refer to the
Government. The incorporated terms "Contractor" or "Offeror" shall mean
Subcontractor unless in such context the term can only refer to the Prime
Contractor. Instructions or requirements for documentation, certification or
other writing reasonably applicable to the Subcontractor, shall be submitted
by the Subcontractor to the Prime Contractor, unless otherwise required by
federal law or by express provision of the Subcontract.
5.2 Any and all clauses or provisions which are required by the Federal
Acquisition Regulation, 48 C.F.R. Part 1 (FAR), the Department of Defense
FAR Supplement ("DFARS"), and the Navy FAR Supplement to be included in the
Prime Contract are hereby incorporated in this Subcontract by reference.
5.3 Notwithstanding any provision of this Subcontract to the contrary, the
following clauses or subclauses shall apply only if the Government shall
exercise its rights under these clauses with respect to the Prime
Contractor.
FAR 52.249-1 TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED-
PRICE)(SHORT FORM)(APR 1984)(Applies if this contract is
$100,000 or less)
FAR 52.249-2 TERMINATION FOR CONVENIENCE OF THE GOVERNMENT (FIXED
PRICE)(APR 1984)(Applies if this Contract exceeds $100,000)
PARAGRAPH a.1 of
FAR 52.249-6 TERMINATION (COST-REIMBURSEMENT)(MAY 1986)
DFAR 252.246-7001 WARRANTY OF DATA (DEC 1991)
DFAR 252.227-7030 TECHNICAL DATA-WITHHOLDING OF PAYMENT (OCT 1988)
except as provided in paragraph 5.4 below
BATH IRON WORKS COMPANY CONFIDENTIAL
4
5.4 With respect to the clause of this Subcontract entitled DFAR 252.227-7030
"Technical Data--Withholding of Payment" the parties agree that the
following limitations will apply if an action is taken hereunder, and the
Government has not taken an associated action under the Prime Contract.
i) If Avondale suffers delay in actual ship construction as a result of
BIW's failure to deliver technical data in accordance with its Subcontract
obligations; and
ii) If Avondale is able to demonstrate harm and provide the specifics of the
delay and the technical data giving rise to the action; and
iii) If BIW's failure is the result of some action or inaction of BIW and
not the result of performance of Avondale or one of its subcontractors; and
iv) If prior to exercising any of its rights pursuant to this clause
Avondale shall notify the Subcontractor by written notice to the contact point
listed in Section G of this subcontract via certified mail. Such notice shall
specify the failure (including identification of the technical data) giving rise
to the intended action. Subcontractor shall be afforded a period of not less
than 10 days from Subcontractor's receipt of the notice to cure the failure
before Avondale shall implement any withholding of funds pursuant thereto.
In the event the conditions specified above exist, then Avondale may exercise
its rights hereunder, however, the amount to be withheld shall not exceed
$500,000 in aggregate for all occurrences.
A-6. ASSIGNMENT AND SUBCONTRACTING
6.1 This Subcontract may not be assigned or otherwise transferred by either
party, in whole or in part, without the express, prior written consent of
the other party, which
BATH IRON WORKS COMPANY CONFIDENTIAL
5
consent shall not be unreasonably withheld. The foregoing shall not apply in
the event either party shall change its corporate name or merge with another
corporation.
6.2 Subject to any approval of the Prime Contractor with respect to Engineering
Services or Structural Unit Fabrication, and any relevant provisions
contained herein, including without limitation any required approvals of the
Government, Subcontractor shall be entitled to subcontract any portion of
its responsibilities under the SOW. Subcontractor shall not by reason of any
such subcontract be relieved of its responsibilities and liabilities under
this Subcontract. In the event of such subcontract, Subcontractor shall
without delay notify Avondale in writing of the name of its proposed
subcontractor and the details of the portion of its SOW to be subcontracted.
A-7. DISPUTES
7.1 If during performance of the Subcontract, disputes arise between the Prime
Contractor and/or the Subcontractor and the Government concerning any of the
work, the parties agree to follow the disputes resolution procedure defined
in FAR clause 52.233-1 (Reference Clause). Either party may assert a claim
arising out of such a dispute with the Government.
7.2 Notwithstanding any provision herein to the contrary, if a decision on any
question arising under the Contract is made by the Contracting Officer and
such question is also related to this Subcontract, said decision, if binding
upon Avondale under the Contract, shall in turn be binding upon the
Subcontractor insofar as it relates to this Subcontract. If Avondale elects
not to appeal such a decision pursuant to the "Disputes" clause in the
Contract, Avondale may permit (and such permission will not be unreasonably
withheld) the Subcontractor to assert in Avondale's name at Subcontractor's
expense, Avondale's right to appeal such a decision under the "Disputes"
clause in the Contract. Any decision upon such an appeal if binding upon
BATH IRON WORKS COMPANY CONFIDENTIAL
6
Avondale under the Contract shall in turn be binding upon Subcontractor
insofar as it relates to this Subcontract. The decision of the Contracting
Officer regarding any such question or subsequent appeal shall be conclusive
between Avondale and Subcontractor except that Avondale may permit (and such
permission will not be unreasonably withheld) Subcontractor to submit the
question to a court of competent jurisdiction if Subcontractor desires to
assert in Avondale's name and at Subcontractor's expense, Avondale's rights
described in the "Disputes" clause of the Contract to have the question
decided by the courts, and any final judgment by the courts, if binding upon
Avondale under the Contract, shall in turn be binding upon Subcontractor
insofar as it relates to this Subcontract.
7.3 It is the intent of the parties to engage in cooperative decision-making
and communication of information as set forth in this Subcontract. In the
event that a dispute arises between Avondale and BIW that cannot be resolved
by the individuals involved in the performance of the Contract, such matter
shall be referred to the highest levels of management of each company for
resolution. Should these individuals be unable to resolve any claim,
controversy or dispute between the parties involving issues of either law or
fact arising under or relating to this Subcontract, it shall be finally
resolved by binding arbitration pursuant to this provision.
7.4 Any arbitration contemplated by this Subcontract shall be conducted in New
York, New York in accordance with the Rules (the "Rules") of the American
Arbitration Association (the "AAA"). The arbitration will be before a panel
of three arbitrators, one selected by Avondale, one selected by BIW, and one
who will be selected by the aforementioned selected arbitrators. Each
arbitrator shall be knowledgeable about the United States shipbuilding
industry and federal procurement laws, regulations and practices, and shall
not have any direct or indirect, past, present, or expected future
association with either or both of the parties, and who shall otherwise be
BATH IRON WORKS COMPANY CONFIDENTIAL
7
neutral. The parties shall share equally the costs of the arbitration as
provided in the Rules of the AAA.
7.5 The decision of the arbitrators shall be rendered in writing and the reasons
shall be given therefore. The decision of the arbitrators shall be final and
conclusive on the parties, unless determined by the United States District
Court for the Southern District of New York to be subject to being vacated,
modified, or corrected on any of the grounds specified or referred to in the
Uniform Arbitration Act, or for "manifest disregard of law" as judicially
defined by that court. Judgment upon an award rendered by the arbitrators
may be entered in any court of competent jurisdiction. Except as
specifically provided for in this clause, or as may be necessary to enforce
an award of the arbitrators, neither party shall institute any action or
proceeding against the other in any court with respect to any claim,
controversy, or dispute which is or could be subject to this provision.
Neither party may interpose any objection to the procedures set forth herein
or otherwise seek directly or indirectly to challenge the application
thereof to any such claim, controversy or dispute, or any decision
thereunder, in any court.
7.6 Pending the final disposition of any arbitration proceeding initiated
pursuant to this provision, the parties shall at all times proceed
diligently with the performance of this Subcontract.
A-8. AMENDMENT/WAIVER
This Subcontract shall not be amended or modified unless set forth in a document
executed by duly authorized representatives of both Avondale and the
Subcontractor. The failure of either party to exercise any right provided under
this Subcontract shall not be deemed to be a waiver of such right for any future
purpose.
BATH IRON WORKS COMPANY CONFIDENTIAL
8
A-9. ENTIRE AGREEMENT AND SEVERABILITY
9.1 This Subcontract contains the entire agreement between the parties with
respect to the Project and supersedes any prior oral or written agreements,
drafts of this agreement, commitments, understandings, or communications with
respect to the Project exclusive of any non-disclosure agreements between the
parties.
9.2 If any part, term, or provision of this Subcontract shall be held void,
illegal, unenforceable, or in conflict with any law of a federal, state or local
government having jurisdiction over this Subcontract, the validity of the
remaining portions or provisions shall not be affected thereby.
9.3 Section headings in this Subcontract are for convenience only and shall
not be used in interpreting any provision hereof.
A-10. ORDER OF PRECEDENCE
In the event of any inconsistency in this Subcontract, the inconsistency shall
be resolved by giving precedence in the order described herein:
1 Section A - Special Provisions
2 Section B - Supplies, Services, and Pricing
3 Section C - Description, Specification, Statement of Work (exclusive
of the Statement of Work)
4 Section D - Packaging and Marking
Section E - Inspection and Acceptance
Section F - Deliveries or Performance
Section G - Contract Administration Data
Section H - Special Contract Requirements
5 Section I - Contract Clauses
6 Statement of Work and Exhibits thereto
7 Section J - List of Attachments
BATH IRON WORKS COMPANY CONFIDENTIAL
9
A-11. CONSEQUENTIAL, SPECIAL, AND INCIDENTAL DAMAGES
No party shall be liable to the other party under this Subcontract for any
claim for loss of profits or consequential, special, punitive or indirect
damages suffered by the other party.
A-12. INDEPENDENT CONTRACTOR
This Subcontract shall not be construed as creating a joint venture, agency,
partnership, or any other form of business organization, nor does it constitute
a merger into any form of corporation or other business enterprise of the Prime
Contractor, the Subcontractor or the Alliance. At all times, each party is and
will remain an independent contractor. Each party is responsible for its own
officers, employees, agents and parent and subsidiary business elements. Except
as otherwise provided expressly in this Subcontract, each party is solely and
separately responsible for its costs, expenses, profits, losses, causes of
action, suits, damages, demands, liabilities, and obligations of any kind
whatsoever.
A-13. LIABILITIES - NOT USED
A-14. RESTRICTIONS ON HIRING
During the term of this Subcontract, the parties agree that the Prime Contractor
and the Subcontractor will not solicit to hire either party's employees who are
assigned to work on the Project, without the prior written approval of the
affected party. There is no restriction on the open solicitation in public
media for recruitment of personnel. No employee, officer, agent, supplier,
subcontractor, or vendor of either party will be restricted from pursuing
employment or business opportunities on their own initiative.
A-15. PAYMENT
This clause applies to payment for work performed under this Subcontract for
CLINS 0001, 0002, 0003, 0004, 0005, 0007, 0009 and 0012 exclusive of award fee
payments, which are covered under Special Provision A-16 - Distribution of Award
Fee.
BATH IRON WORKS COMPANY CONFIDENTIAL
10
15.1 Interim Payments: BIW will submit invoices to Avondale as work progresses,
but not more frequently than once every two weeks, in amounts determined
to be allowable in accordance with Subpart 31.2 of the Federal
Acquisition Regulation (FAR). Avondale will include BIW's invoice in it's
next xxxx to the NAVSEA and funds will be provided to BIW accordingly.
Invoices will be prepared on a per vessel basis and shall reflect the
total allowable costs in the performance of work, as certified by BIW. For
purposes of this clause, the term "costs" shall include those items listed
in FAR 52.216-7(b). No payment, however, shall be made in an amount that,
when added to the total of all payments previously made, exceeds one
hundred percent (100%) of the cumulative allowable costs certified by BIW.
Each invoice submitted by BIW shall include the following information:
(1) Applicable contract line item numbers (CLIN's)
(2) Date supplies provided or services performed
(3) Costs incurred and allowable by CLIN, as follows:
(a) Cumulative allowable costs incurred (by cost element), less
(b) Previously billed allowable costs, giving
(c) Current billing amount
(4) An estimate at completion (EAC) by CLIN
In addition, BIW will provide, with each invoice, a certificate, signed by
a Company Officer or his designee, verifying, to the best of his knowledge
and belief, the allowability of all billed costs, consistent with FAR
Subpart 31.2. BIW will provide Avondale with a listing of those employees
authorized to sign the certificate that accompanies each invoice. The
certificate will not apply to the CLIN EAC provided with the invoice.
BATH IRON WORKS COMPANY CONFIDENTIAL
11
Prior to submitting the first invoice, BIW shall submit a sample billing
format and sample certificate for review and approval by Avondale.
Avondale and BIW agree that invoice submission and/or payment may take
place electronically. The parties agree to work together to determine the
appropriate means of providing supporting documentation in the event of
such electronic transmissions and/or payments.
15.2 Final Payment: Upon completion of the guarantee period of the final ship
in the contract, BIW will prepare a final invoice by CLIN that
incorporates 1) all allowable costs incurred plus 2) an estimate of
projected allowable costs to complete the contract close-out process. Such
allowable costs shall incorporate indirect costing rates approved by the
Administrative Contracting Officer in connection with BIW's prime
contracts with the Government. Any projected allowable costs shall be
subject to the prior agreement of the Government and approval by Avondale,
which approval shall not be unreasonably withheld.
15.3 Potential Alternative Approach to Payments: Avondale has stated an intent,
which BIW supports, to approach the Government after Contract award to
establish an alternative approach to payments. Under such an alternative
approach, Avondale, with data provided by BIW (and Xxxxxx), would prepare
a "combined invoice," which clearly reflects the allowable costs incurred
by each Alliance member. NAVSEA then would distribute funds directly to
the each party in the amounts specified in the combined invoice. Should
NAVSEA accept this concept in a manner also mutually acceptable to BIW,
Avondale, and Xxxxxx, BIW and Avondale agree to modify Special Provision
A15 to incorporate such an approach.
A-16. DISTRIBUTION OF AWARD FEE
16.1 The award fee, as paid by the Government to the Alliance, shall be
distributed among Avondale, Xxxxxx, and BIW, on the basis of a) earned
value and b)
BATH IRON WORKS COMPANY CONFIDENTIAL
12
performance, as described below. A sample calculation of the formula is
attached as Table 16-1.
a) Earned Value:
Seventy (70) percent of the cumulative award fee payment by the Government
shall be assigned to the Earned Value Pool. The portion of this pool then
distributed to each of Avondale, Xxxxxx, and BIW shall be based on the
Cumulative Earned Value Weighting of each team member. The Cumulative
Earned Value Weighting for each team member shall equal the Cumulative
Earned Value for that team member divided by the sum of Cumulative Earned
Values for all team members. The Cumulative Earned Value for each team
member shall equal the product of 1) the Baseline Value Weighting and 2)
the Cumulative Percent Complete.
. The Baseline Value Weighting for each team member shall
equal to the contractual cost baseline (original contract
award plus signed contract modifications) of that team
member divided by the total contractual cost baseline for
all team members.
. The Cumulative Percent Complete for each team member shall
equal the weighted progress (reflecting labor, overhead,
facilities cost of capital, and material) at the end of the
evaluation period. Such weighted progress for each team
member shall be determined by an earned value system,
approved by the Government in accordance with Department of
Defense Instruction (XXXX) 5000.2.
The current amount of the Earned Value award fee component assigned to
each team member shall equal the Cumulative Earned Value Weighting
multiplied by the Cumulative Earned Value Pool (70 percent of the
cumulative award fee paid by the Government) less the prior period
cumulative Earned Value.
BATH IRON WORKS COMPANY CONFIDENTIAL
13
b) Performance:
Thirty (30) percent of the award fee paid by the Government in each period
shall be assigned to the Performance Pool. The portion of this pool then
distributed to teach of Avondale, Xxxxxx, and BIW shall be determined by
normalizing the Weighted Performance Score of each team member. The
Weighted Performance Score for each team member shall equal the product of
1) the Baseline Value Weighting (as defined above) and 2) the Normalized
Performance Score. The Performance Award Fee for each team member shall
equal the product of 1) Weighted Performance Scores of each team member
and 2) the current period performance pool. The Normalized Performance
Score for each team member shall reflect the Performance Scores provided
by the intra-team Performance Evaluation Board (PEB).
16.2 The intra-team PEB shall consist of the Chief Executive Officers from each
of Avondale, Xxxxxx, and BIW. The PEB will meet within three business days
after each Navy award fee session. At the PEB meeting, each CEO will
provide a performance score (from 0 to 100) to each member of the
Alliance. Such scoring shall reflect, in the judgment of each CEO, the
performance of each team member during the evaluation period. For each
evaluation period, the Performance Score shall equal the simple average of
the scores given by members of the PEB. Weighted criteria that each CEO
will use to determine such scoring will be established within 30 days
after the start of the evaluation period via Memorandum of Agreement.
16.3 For each team member, the total award fee payment in any given
evaluation period shall equal the sum of the Earned Value and Performance
components, as calculated above.
16.4 The attached example (Table 16-1) illustrates the calculation described in
this clause. In the event of a conflict between the example and the text
of this clause the example shall take precedence.
BATH IRON WORKS COMPANY CONFIDENTIAL
14
16.5 Within five business days after each PEB meeting, Avondale shall issue to
each of the other team members a contract modification that specifies the
current amount payable, as calculated above. Avondale will then issue
payment to each team member within two business days after receipt of the
funds from the customer.
16.6 The Final Contract Performance Incentive paid by the Government to the
Prime Contractor shall be distributed between Avondale, Bath, and Xxxxxx
as the final percentage determined for the Distribution of Award Fee of
Article 16 of this Subcontract.
BATH IRON WORKS COMPANY CONFIDENTIAL
15
A-17. RECIPROCAL FACILITIES
Avondale and BIW shall provide office facilities at their respective principal
places of business for each others personnel engaged in the Project. Such
facilities shall be equivalent to those provided for its own employees for
similar purposes. These facilities shall include telephone, photocopy machines
and FAX machine access, and the use of other similar office equipment. Each
shall also provide vehicle parking facilities consistent with the facilities
provided for its own employees for similar purposes.
A-18. APPLICABLE LAW
Irrespective of the place of performance, this Subcontract shall be construed
and interpreted according to the federal common law of government contracts. To
the extent that the federal common law of government contracts is not
dispositive, the laws of the State of New York shall apply. Any civil action
pursuant to this Subcontract shall be brought in the United States District
Court for the Southern District of New York.
In witness hereof, the parties hereto have executed this Subcontract on the
indicated dates.
BATH IRON WORKS CORPORATION AVONDALE INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxxxxx, Xx.
--------------------------- ----------------------------
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx, Xx.
Title: President and Title: Chairman, President and
Chief Executive Officer Chief Executive Officer
Date: 23 June 1996 Date: 24 June 1996
-------------------------- --------------------------
