Over $1.16 billion awarded for National Security Cutter production and delivery, with a fixed-price incentive contract type

Contract Overview

Contract Amount: $1,164,086,283 ($1.2B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Homeland Security

Start Date: 2010-11-29

End Date: 2023-06-30

Contract Duration: 4,596 days

Daily Burn Rate: $253.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: PRODUCTION&DELIVERY OF NATIONAL SECURITY CUTTER (NSC) 4.

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Homeland Security obligated $1.16 billion to HUNTINGTON INGALLS INCORPORATED for work described as: PRODUCTION&DELIVERY OF NATIONAL SECURITY CUTTER (NSC) 4. Key points: 1. The contract awarded to Huntington Ingalls Incorporated represents a significant investment in naval shipbuilding. 2. The fixed-price incentive contract type aims to balance cost control with contractor performance incentives. 3. The long duration of the contract (over 12 years) suggests a complex and lengthy production cycle. 4. The absence of competition raises questions about potential cost efficiencies and market responsiveness. 5. The contract's focus on a critical national security asset highlights its strategic importance. 6. The specific North American Industry Classification System (NAICS) code 336611 points to shipbuilding and repair activities.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without detailed cost breakdowns and comparisons to similar, competitively awarded naval vessel construction. The fixed-price incentive structure suggests an attempt to manage costs, but the lack of competition means there's no direct market price comparison. The sheer scale and complexity of building a National Security Cutter inherently involve substantial costs, making direct per-unit comparisons difficult without specific program data.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple potential bidders. This approach is often used for highly specialized or unique requirements where only one contractor possesses the necessary capabilities, technology, or security clearances. The lack of competition limits the opportunity for price discovery through market forces and may result in higher costs compared to a competitive procurement.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not benefit from price reductions that typically arise from multiple offers.

Public Impact

The U.S. Coast Guard benefits from the delivery of advanced National Security Cutters, enhancing maritime security and operational capabilities. The contract supports the production of critical naval assets essential for national defense and homeland security missions. The geographic impact is primarily centered around the contractor's facilities in Mississippi, supporting regional economic activity. The contract has implications for the shipbuilding workforce, requiring specialized skills in naval construction and engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially leading to higher costs for taxpayers.
Long contract duration increases exposure to cost overruns and schedule delays.
Lack of transparency in sole-source procurements can obscure true value for money.
Fixed-price incentive contracts can still lead to cost increases if performance targets are not met efficiently.

Positive Signals

Contract supports a critical national security asset for the U.S. Coast Guard.
Fixed-price incentive contract type aims to align contractor and government interests on cost and performance.
Long-term award provides stability for production and workforce planning.
Contractor has a track record in shipbuilding, suggesting technical capability.

Sector Analysis

The shipbuilding and repair industry (NAICS 336611) is characterized by high capital investment, complex engineering, and long production cycles. This contract falls within the defense and homeland security sector, where specialized vessels are crucial for national security. Comparable spending benchmarks would involve other major naval vessel construction contracts, which often run into hundreds of millions or billions of dollars due to the complexity and scale of such projects.

Small Business Impact

This contract does not appear to include specific small business set-aside provisions, nor is there explicit information regarding subcontracting goals for small businesses. As a sole-source award for a large-scale defense asset, the primary contractor, Huntington Ingalls Incorporated, likely manages the majority of the work. The impact on the small business ecosystem would depend on whether the prime contractor actively seeks out small business subcontractors for specialized components or services, which is not detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Coast Guard contracting officers and program managers. Given the significant dollar value and strategic importance, oversight likely includes regular performance reviews, milestone tracking, and financial audits. Transparency is generally limited in sole-source procurements, but the Coast Guard would have internal accountability measures. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

National Security Cutter Program
U.S. Coast Guard Fleet Modernization
Naval Shipbuilding Contracts
Homeland Security Vessel Procurement

Risk Flags

Sole-source procurement
Lack of competition
Long contract duration
High dollar value

Frequently Asked Questions

What is this federal contract paying for?

Department of Homeland Security awarded $1.16 billion to HUNTINGTON INGALLS INCORPORATED. PRODUCTION&DELIVERY OF NATIONAL SECURITY CUTTER (NSC) 4.

Who is the contractor on this award?

The obligated recipient is HUNTINGTON INGALLS INCORPORATED.

Which agency awarded this contract?

Awarding agency: Department of Homeland Security (U.S. Coast Guard).

What is the total obligated amount?

The obligated amount is $1.16 billion.

What is the period of performance?

Start: 2010-11-29. End: 2023-06-30.

What is the historical spending trend for National Security Cutters?

The provided data focuses on a single contract awarded in 2010 for the production and delivery of one National Security Cutter (NSC 4). To understand historical spending trends, one would need to examine all prior and subsequent contracts related to the NSC program. This would involve analyzing the total number of cutters procured, the award dates and values of each contract, the contractors involved, and the contract types used. A comprehensive review would reveal the overall investment in the NSC program over time, identify any cost escalations or efficiencies, and assess the evolution of contract strategies, such as shifts between competitive and sole-source awards or changes in contract types like fixed-price versus cost-plus.

How does the cost of this National Security Cutter compare to other similar vessels?

Directly comparing the cost of this National Security Cutter (NSC 4) to similar vessels is challenging without access to detailed cost breakdowns and data on comparable naval shipbuilding programs. The provided data indicates a total award of over $1.16 billion for NSC 4. However, the 'value for money' can only be assessed by comparing this figure against the costs of other NSCs built under different contracts, or against the costs of other large patrol vessels or cutters with similar capabilities and mission requirements from different navies or coast guards. Factors such as technological advancements, material costs, labor rates, and the specific mission capabilities built into the vessel significantly influence price. A comprehensive benchmark would require analyzing the cost per displacement ton, cost per operational capability, or cost per year of expected service life across a range of similar vessels.

What are the key performance metrics and incentives within this fixed-price incentive contract?

The provided data specifies the contract type as 'FIXED PRICE INCENTIVE' (FPI) but does not detail the specific performance metrics or incentive structures. In an FPI contract, there is a target cost, a target profit, and a price ceiling. The final price is determined by the actual cost incurred, with profit adjusting based on cost performance relative to the target. Incentives are typically tied to achieving specific performance goals, such as delivery schedules, quality standards, or operational readiness. For this National Security Cutter contract, key metrics might include timely delivery of the vessel, meeting specific survivability and operational requirements, and adherence to stringent quality control measures. The government and contractor negotiate the sharing of cost savings or overruns above and below the target cost, aiming to incentivize efficient performance while ensuring the government does not pay beyond the agreed-upon ceiling.

What is Huntington Ingalls Incorporated's track record with large naval shipbuilding contracts?

Huntington Ingalls Industries (HII), the parent company of Huntington Ingalls Incorporated, has a long and extensive track record in large-scale naval shipbuilding for the U.S. Navy and other government agencies. They are a major defense contractor known for constructing aircraft carriers, submarines, destroyers, and amphibious assault ships. Their experience includes managing complex, multi-year programs with significant budgets and advanced technological requirements. The company has demonstrated capabilities in design, engineering, construction, and integration of sophisticated naval platforms. While specific details of their performance on every contract are not publicly available, their sustained role as a primary builder of U.S. naval vessels suggests a generally strong technical and program management capability, though like any large contractor, they may have faced challenges on specific programs related to cost, schedule, or performance.

What are the potential risks associated with a sole-source award for a major defense asset like a National Security Cutter?

A sole-source award for a major defense asset like a National Security Cutter carries several potential risks. Primarily, the lack of competition can lead to higher costs for taxpayers, as there is no market pressure to drive down prices. Without competing bids, the government may not achieve the best possible value for its investment. Secondly, it can reduce the incentive for the sole-source contractor to innovate or improve efficiency, as they face less pressure from potential competitors. There's also a risk of complacency or reduced responsiveness from the contractor. Furthermore, sole-source procurements can sometimes be perceived as less transparent, making it harder for the public and oversight bodies to scrutinize the fairness of the pricing and the overall value proposition. Finally, it limits the government's options if the sole-source contractor encounters significant performance issues or financial instability.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc

Address: 1000 ACCESS RD, PASCAGOULA, MS, 39567

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

Financial Breakdown

Contract Ceiling: $1,168,706,242

Exercised Options: $1,164,086,283

Current Obligation: $1,164,086,283

Subaward Activity

Number of Subawards: 161

Total Subaward Amount: $95,567,591

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline