DoD awards $326M for shipbuilding and repair, with limited competition and a cost-plus award fee structure

Contract Overview

Contract Amount: $326,313,968 ($326.3M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2006-07-31

End Date: 2011-07-31

Contract Duration: 1,826 days

Daily Burn Rate: $178.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: CONTRACT AWARD

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568, UNITED STATES OF AMERICA

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $326.3 million to HUNTINGTON INGALLS INCORPORATED for work described as: CONTRACT AWARD Key points: 1. The contract's cost-plus award fee structure may incentivize performance but requires robust oversight to ensure value. 2. Limited competition for this significant shipbuilding contract raises questions about price discovery and potential cost efficiencies. 3. The contract duration of 1826 days suggests a long-term commitment to specific shipbuilding capabilities. 4. The award was made by the Department of the Navy, indicating a focus on naval asset maintenance and construction. 5. The contractor, Huntington Ingalls Incorporated, is a major player in the defense shipbuilding sector. 6. The contract's 'MS' status (likely 'Major System') suggests it pertains to a significant and complex defense acquisition.

Value Assessment

Rating: fair

Benchmarking the value of this $326 million contract is challenging without specific details on the scope of work and deliverables. The cost-plus award fee (CPAF) structure means the final cost can vary based on performance, making direct comparison to fixed-price contracts difficult. However, CPAF contracts are generally used when cost certainty is low, suggesting inherent risks in the project that could drive up expenses. The absence of detailed performance metrics and comparison data makes a definitive value assessment difficult, but the potential for cost overruns exists.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under a limited competition basis, as indicated by 'NOT COMPETED'. This suggests that only a select number of bidders were solicited, or potentially only one source was considered. While specific reasons for limited competition are not provided, it often arises from unique capabilities, urgent needs, or existing relationships. The limited number of bidders can reduce the pressure on pricing and may lead to higher costs for the government compared to a full and open competition.

Taxpayer Impact: Limited competition means taxpayers may not be benefiting from the most competitive pricing available in the market. This can result in a higher overall expenditure for the government for the same goods or services.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives essential shipbuilding and repair services to maintain its fleet. The contract supports the maintenance, modernization, and potentially construction of naval vessels, ensuring operational readiness. The geographic impact is likely concentrated around the contractor's facilities in Mississippi, supporting local and regional economies. This contract has significant workforce implications, supporting skilled labor in shipbuilding and repair trades within the contractor's operational areas.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure necessitates vigilant oversight to prevent cost creep and ensure performance targets are met.
Limited competition raises concerns about the government securing the best possible price and value for taxpayer dollars.
The long contract duration could lead to scope creep or evolving requirements that may not be optimally managed without adaptive oversight.

Positive Signals

Awarding to Huntington Ingalls Incorporated, a known entity in naval shipbuilding, suggests a degree of confidence in their capabilities.
The 'award fee' component of the contract structure, if managed effectively, can incentivize contractor performance and quality.
The contract supports critical defense needs, contributing to national security objectives.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. This contract falls within the North American Industry Classification System (NAICS) code 336611 (Ship Building and Repairing). The defense shipbuilding market is dominated by a few large, specialized contractors due to the complexity and scale of naval vessels. Spending in this sector is heavily influenced by government defense budgets and strategic priorities, with significant investments often made in maintaining and modernizing aging fleets.

Small Business Impact

The provided data indicates that small business participation (sb: false) was not a primary focus or set-aside for this specific contract. This suggests that the prime contract was awarded to a large business, Huntington Ingalls Incorporated. There is no explicit information on subcontracting plans for small businesses. Without this data, it's difficult to assess the impact on the small business ecosystem, but typically, large prime contracts of this nature may have subcontracting goals, which would then flow down opportunities to smaller firms.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the 'COST PLUS AWARD FEE' structure, rigorous monitoring of costs, performance metrics, and adherence to contract terms would be essential. Transparency may be limited due to the nature of defense contracting, but internal government oversight mechanisms, potentially including Defense Contract Audit Agency (DCAA) reviews and Inspector General (IG) audits, would be in place to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

Naval Ship Modernization Programs
Fleet Readiness and Maintenance Contracts
Defense Shipbuilding Industrial Base
Major Defense Acquisition Programs

Risk Flags

Limited Competition
Cost Plus Award Fee Structure
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $326.3 million to HUNTINGTON INGALLS INCORPORATED. CONTRACT AWARD

Who is the contractor on this award?

The obligated recipient is HUNTINGTON INGALLS INCORPORATED.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $326.3 million.

What is the period of performance?

Start: 2006-07-31. End: 2011-07-31.

What specific types of ships or vessels are covered under this contract, and what is the expected scope of work (e.g., new construction, overhaul, repair)?

The provided data indicates the contract pertains to NAICS code 336611 (Ship Building and Repairing) and was awarded by the Department of the Navy. However, the specific types of vessels or the detailed scope of work (new construction, modernization, repair, maintenance) are not explicitly stated in the abbreviated data. Contracts in this category can range widely, from the construction of new destroyers or aircraft carriers to the mid-life overhauls and routine repairs of existing fleet assets. Understanding the precise nature of the work is crucial for assessing value, risk, and performance.

How does the $326 million award amount compare to historical spending on similar shipbuilding and repair contracts by the Department of the Navy?

The $326 million award is a substantial sum, indicative of a major contract within the shipbuilding and repair domain. To benchmark this effectively, one would need to compare it against the average cost of similar contracts awarded by the Department of the Navy over the past several fiscal years. For instance, if the Navy typically awards contracts for major ship overhauls in the $50-$100 million range, this $326 million figure might represent a more comprehensive modernization effort or the construction of a significant vessel component. Conversely, if it's for routine maintenance, it could be considered high. Detailed analysis requires comparing contract scope, duration, and vessel class.

What are the key performance indicators (KPIs) and award fee criteria associated with this Cost Plus Award Fee (CPAF) contract?

The abbreviated data does not specify the Key Performance Indicators (KPIs) or the criteria for the award fee component of this CPAF contract. In CPAF contracts, the contractor earns a base fee plus an award fee, which is determined by the government based on performance against pre-defined criteria. These criteria often include factors such as schedule adherence, cost control, quality of work, technical performance, and responsiveness to government direction. Without knowing these specific metrics, it's difficult to fully assess how contractor performance is being incentivized and measured, and whether the award fee structure is likely to drive optimal value for the government.

What is the track record of Huntington Ingalls Incorporated in executing similar large-scale shipbuilding and repair contracts for the Department of Defense?

Huntington Ingalls Industries (HII), the parent company of Huntington Ingalls Incorporated, is a major and established defense contractor with a long history in naval shipbuilding and complex defense programs. They are known for constructing aircraft carriers, submarines, and other major naval vessels. Their track record generally includes the successful execution of large, complex contracts, though like any major contractor, they may have faced challenges related to cost, schedule, or performance on specific programs. A thorough assessment would involve reviewing past performance evaluations, any significant contract disputes, and their history with CPAF contracts specifically.

Given the 'NOT COMPETED' status, what justification was provided for limiting the competition for this contract?

The provided data simply states the contract was 'NOT COMPETED,' which is a classification of the procurement method. It does not include the specific justification or documentation that would have been required to support this determination. Common justifications for limiting competition include: sole-source capabilities (only one responsible source exists), urgent and compelling needs that preclude full competition, or specific follow-on work where the original contractor's unique knowledge is essential. Without access to the contract file or justification documents (e.g., a Justification and Approval - J&A), the specific rationale remains unknown.

What are the potential risks associated with the 1826-day duration of this contract, and how are they being mitigated?

A contract duration of 1826 days (approximately 5 years) for shipbuilding and repair introduces several potential risks. These include: cost escalation due to inflation or unforeseen market changes over the long term; scope creep, where requirements evolve or expand beyond the original intent; technological obsolescence if the work involves systems that become outdated; and potential contractor performance degradation over an extended period. Mitigation strategies typically involve robust contract management, regular performance reviews, clear change control processes, and potentially incorporating economic price adjustment clauses. The CPAF structure itself, if well-defined, can help manage performance risks.

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: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc (UEI: 967362331)

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: $349,671,762

Exercised Options: $328,031,230

Current Obligation: $326,313,968

Contract Characteristics

Cost or Pricing Data: NO

Timeline