SUBCONTRACT FOR LPD-17 CLASS WORK
By and Between
AVONDALE INDUSTRIES INC.
and
HUGHES AIRCRAFT CO
PREAMBLE
This Subcontract ("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 HUGHES AIRCRAFT
CO, a corporation organized and existing under the laws of the State of Delaware
("Hughes" 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 Hughes, 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 29, March, 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 Hughes participating as one of two principal
subcontractors; and,
WHEREAS, Avondale has entered into a similar subcontract with the other
principal subcontractor, Bath Iron Works (Bath) for enhancing the respective
capabilities of all the
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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/Bath/Hughes
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.
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,
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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. Hughes 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 Alliance member'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.
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
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the like shall mean the Prime Contractor unless in such context the term
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
major subcontracts in the Prime Contract are hereby incorporated in this
Subcontract by reference.
5.3 Notwithstanding any provision of this Subcontract to the contrary, the
Prime Contractor may exercise its rights under the following clauses or
subclauses only if the Government exercises 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)
DFAR252.246-7001 WARRANTY OF DATA (DEC 1991)
DFAR252.227-7030 TECHNICAL DATA-WITHHOLDING OF PAYMENT (OCT 1988) except
as provided in paragraph 5.4 below
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.
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i) If Avondale suffers delay in actual ship construction as a result
of Hughes' 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) Hughes' failure is the result of some action or inaction of Hughes
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 contract
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 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, 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.
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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 this 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 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
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.
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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 Hughes 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 Hughes, 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
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
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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.
A-9. ENTIRE AGREEMENT AND SEVERABILITY
9.1 This Subcontract contains the entire agreement between the parties with
respect to the Prime Contract and supersedes any prior oral or written
agreements, drafts of this agreement, commitments, understandings, or
communications. The Teaming Agreement shall remain in effect between the
parties for potential future work of the LPD-17 class of vessels for
construction, planning yard services and related solicitations.
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.
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9.3 Section headings in this Subcontract are for convenience only and shall not
be used 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
A-11. CONSEQUENTIAL, SPECIAL, AND INCIDENTAL DAMAGES
Neither 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
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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
For all claims occurring in connection with or arising out of the meetings,
inspections, and/or visits to their respective premises in the performance of
the Project, Prime Contractor and Subcontractor shall defend, indemnify and hold
harmless each other and their officers, directors, employees and agents for
injury to, death of, their respective employees, subcontractors, guests and
visitors, whether or not caused by the acts or omissions or the sole or
concurrent negligence of an indemnified party. The party seeking indemnity
shall provide prompt notice to the other of any event which gives rise to its
claim under the this provision, fully cooperate in its defense and assign the
right to defend and/or settle any such claim to the responsible party.
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.
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15.1 Interim Payments: Hughes 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 Hughe's invoice in it's
next bill to the NAVSEA and funds will be provided to Hughes 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 Hughes. 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 precent (100%) of the cumulative allowable costs certified by
Hughes.
Each invoice submitted by Hughes 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, Hughes 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 Hughes 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.
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Prior to submitting the first invoice, Hughes shall submit a sample billing
format and sample certificate for review and approval by Avondale.
Avondale and Hughes 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 vessel
in the contract, Hughes 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 closeout process. Such
allowable costs shall incorporate indirect costing rates approved by the
Administrative Contracting Officer in connection with Hughes' 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 Hughes supports, to approach the Government after Prime Contract
award to establish an alternative approach to payments. Under such an
alternative approach, Avondale, with data provided by Hughes (and Bath),
would prepare a "combined invoice," which clearly reflects the allowable
costs incurred by each Alliance member. The NAVSEA then would distribute
funds directly to each party in the amounts specified in the combined
invoice. Should NAVSEA accept this concept in a manner also mutually
acceptable to Hughes, Avondale, and Bath. Hughes and Avondale agree to
modify this Special Provision A-15 to incorporate such an approach.
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A-16. DISTRIBUTION OF AWARD FEE
16.1 The award fee, as paid by the Government to the Alliance, shall be
distributed among Avondale, Hughes, and Bath, on the basis of a) earned
value and b) 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, Hughes, and HUGHES shall be based on the
Cumulative Earned Value Weighting of each Alliance member. The Cumulative
Earned Value Weighting for each Alliance member shall equal the Cumulative
Earned Value for that Alliance member divided by the sum of Cumulative
Earned Values for all Alliance members. The Cumulative Earned Value for
each Alliance member shall equal the product of 1) the Baseline Value
Weighting and 2) the Cumulative Percent Complete.
. The Baseline Value Weighting for each Alliance member shall equal
the contractual cost baseline (original contract award plus signed
contract modifications) of that Alliance member divided by the
total contractual cost baseline for all Alliance members.
. The Cumulative Percent Complete for each Alliance 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 Alliance member shall be determined by an
earned value system, approved by the Government in accordance with
Department of Defense Instruction (DODI) 5000.2.
The current amount of the Earned Value award fee component assigned to each
Alliance member shall equal the Cumulative Earned Value Weighting
multiplied by the Cumulative Earned Value Pool (70 percent of the
cumulative award fee paid
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by the Government) less the prior period cumulative Earned Value.
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 each of Avondale, Hughes, and Bath shall be determined by
normalizing the Weighted Performance Score of each Alliance member. The
Weighted Performance Score for each Alliance 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 Alliance member shall
equal the product of 1) Weighted Performance Scores of each Alliance member
and 2) the current period performance pool. The Normalized Performance
Score for each Alliance member shall reflect the Performance Scores
provided by the intra-Alliance Performance Evaluation Board (PEB).
16.2 The intra-Alliance PEB shall consist of the Chief Executive Officers from
each of Avondale, Hughes, and Bath. The PEB will meet within three business
days after each NAVSEA 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 Alliance 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 Alliance 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.
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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.
16.5 Within five business days after each PEB meeting, Avondale shall issue to
each of the other Alliance members a contract modification that specifies
the current amount payable, as calculated above. Avondale will then issue
payment to each Alliance member within two business days after receipt of
the funds from the customer.
(Remainder of page intentionally left blank)
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A-17 FINAL CONTRACT PERFORMANCE INCENTIVES
The Final Contract Performance Incentive paid by the Government to the Prime
Contractor shall be distributed between Avondale, Bath and Hughes as the final
percentage determined for the Award Fee of Special Provision A-16 of this
Subcontract.
A-18. RECIPROCAL FACILITIES
Avondale and HUGHES 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-19. 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.
HUGHES AIRCRAFT CO. AVONDALE INDUSTRIES, INC.
/s/ R. J. ABBOTT /s/ ALBERT L. BOSSIER, JR.
- --------------------------------- ---------------------------------
BY: R. J. Abbott BY: Albert L. Bossier, Jr.
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TITLE: Contracts Manager TITLE: President, Chairman & CEO
--------------------------- ---------------------------
Naval & Maritime Systems
Business Unit
DATE: June 20, 1996 DATE: June 20, 1996
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