Navy's $540M contract for USS Enterprise refueling complex overhaul awarded to Huntington Ingalls Inc

Contract Overview

Contract Amount: $540,372,046 ($540.4M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2006-11-16

End Date: 2009-11-01

Contract Duration: 1,081 days

Daily Burn Rate: $499.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CVN 71 RCOH ADVANCED PLANNING.

Place of Performance

Location: NEWPORT NEWS, NEWPORT NEWS CITY County, VIRGINIA, 23607

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $540.4 million to HUNTINGTON INGALLS INC for work described as: CVN 71 RCOH ADVANCED PLANNING. Key points: 1. The contract value represents a significant investment in naval readiness and extends the operational life of a key asset. 2. Awarded on a sole-source basis, the lack of competition may have implications for price negotiation and value optimization. 3. The duration of the contract suggests a complex, multi-year project requiring specialized expertise. 4. Performance context is critical, as the success of this overhaul directly impacts the carrier's availability for national security missions. 5. The shipbuilding and repair sector is characterized by high barriers to entry and a limited number of qualified contractors.

Value Assessment

Rating: fair

The contract value of $540 million for advanced planning of a refueling complex overhaul (RCOH) is substantial. Benchmarking this specific 'advanced planning' phase is difficult without more granular data on the scope of work. However, RCOH projects are inherently complex and costly, often running into billions for the full overhaul. The 'cost plus fixed fee' structure indicates that costs are reimbursed, plus a fixed fee, which can lead to cost overruns if not managed tightly. Comparing this to other RCOH planning phases would be necessary for a more precise value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Huntington Ingalls Inc., was solicited. This typically occurs when a unique capability or specialized knowledge is required, or when there is insufficient time to conduct a competitive procurement. The lack of competition means that the government did not benefit from the price discovery and innovation that typically arises from multiple bidders vying for the contract.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the government lacks the leverage of competitive bidding to secure the best possible price.

Public Impact

The primary beneficiary is the U.S. Navy, which will see the USS Enterprise (CVN 65) undergo critical maintenance to extend its service life. This contract supports the delivery of advanced planning services essential for the complex refueling and complex overhaul process. The geographic impact is concentrated around the shipyard facilities where the work will be performed, likely in Newport News, Virginia. Workforce implications include the employment of highly skilled engineers, technicians, and shipyard workers specializing in naval vessel maintenance and nuclear propulsion.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially impacting cost-effectiveness.
Cost-plus-fixed-fee contracts can incentivize cost growth if not rigorously overseen.
The complexity of RCOH projects carries inherent risks of schedule delays and budget overruns.
The aging nature of the vessel may present unforeseen technical challenges during the overhaul.

Positive Signals

Award to a sole-source contractor implies specialized expertise and capability critical for this unique project.
The contract is for advanced planning, suggesting a structured approach to managing the subsequent complex overhaul.
The Department of the Navy's selection of Huntington Ingalls Inc. indicates confidence in their ability to execute this vital maintenance.

Sector Analysis

The shipbuilding and repair sector is a critical component of national defense, characterized by high capital investment, specialized labor, and long production cycles. Major naval overhauls like RCOH represent a significant portion of this sector's activity. The market is dominated by a few large, experienced firms capable of handling such complex projects. Spending in this area is driven by the need to maintain the operational readiness of the U.S. fleet, with contracts often awarded through competitive bidding, though sole-source awards occur for unique or urgent requirements.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded sole-source to a large prime contractor. Huntington Ingalls Inc. is a major defense contractor. While the prime contract is not set aside, there may be opportunities for small businesses to participate as subcontractors to Huntington Ingalls, depending on their subcontracting plan and the specific needs of the advanced planning phase.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Given the 'cost plus fixed fee' nature and the sole-source award, rigorous oversight of incurred costs, progress, and adherence to the fixed fee is crucial. Transparency would be facilitated through contract reporting mechanisms and potentially through the Defense Contract Audit Agency (DCAA) for cost audits. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Naval Ship Maintenance and Repair
Aircraft Carrier Overhauls
Nuclear Propulsion Plant Maintenance
Defense Shipbuilding
Shipyard Operations

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Complexity of nuclear aircraft carrier overhaul
Potential for cost overruns
Schedule adherence critical for fleet readiness

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $540.4 million to HUNTINGTON INGALLS INC. CVN 71 RCOH ADVANCED PLANNING.

Who is the contractor on this award?

The obligated recipient is HUNTINGTON INGALLS INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $540.4 million.

What is the period of performance?

Start: 2006-11-16. End: 2009-11-01.

What is the historical spending pattern for USS Enterprise refueling complex overhauls?

The USS Enterprise (CVN 65) was the U.S. Navy's first nuclear-powered aircraft carrier. Its final RCOH was planned and executed over several years. While specific figures for the 'advanced planning' phase of its last RCOH are not readily available in public databases, the full RCOH process for aircraft carriers is exceptionally costly, often running into billions of dollars. For example, the RCOH for the USS Abraham Lincoln (CVN 72) was valued at over $3 billion. The $540 million for 'advanced planning' on the Enterprise suggests a significant scope for this preparatory phase, potentially encompassing detailed engineering, design, and logistical planning for the subsequent major overhaul.

How does the cost of this advanced planning contract compare to similar contracts for other aircraft carrier overhauls?

Direct comparison of 'advanced planning' costs for aircraft carrier refueling complex overhauls (RCOH) is challenging due to the proprietary nature of such data and variations in contract scope. However, the $540 million awarded to Huntington Ingalls Inc. for the USS Enterprise's advanced planning is substantial. RCOH projects are among the most complex and expensive maintenance tasks undertaken by the Navy. While the full RCOH cost runs into billions, the planning phase itself requires extensive engineering, design, and logistical work. Without specific data on the planning phases of other carriers' RCOHs, it's difficult to benchmark definitively, but this figure indicates a significant investment in preparing for a major, multi-year overhaul.

What are the primary risks associated with a sole-source award for a complex naval overhaul?

The primary risk of a sole-source award for a complex naval overhaul like the USS Enterprise's RCOH is the potential for reduced cost-effectiveness. Without competitive bidding, the government may not achieve the lowest possible price. There's also a risk that the sole-source contractor might have less incentive to innovate or improve efficiency compared to a competitive environment. Furthermore, if the sole-source contractor faces unforeseen difficulties, there may be limited alternative options for the government to pivot to without significant delays and costs. Robust contract management and oversight are therefore critical to mitigate these risks.

What is Huntington Ingalls Inc.'s track record with large naval overhaul contracts?

Huntington Ingalls Industries (HII), through its Newport News Shipbuilding division, has an extensive and established track record in constructing and overhauling U.S. Navy aircraft carriers. They are the sole builder of nuclear-powered aircraft carriers and have performed numerous complex maintenance, repair, and overhaul (MRO) projects, including refueling and complex overhauls (RCOH) for various carriers. Their experience includes managing large, multi-billion dollar projects, handling nuclear reactor components, and integrating advanced technologies. This long history and specialized expertise are key reasons why they are often the only viable option for such critical and complex naval maintenance tasks, leading to sole-source awards.

What are the potential performance challenges for the contractor on this advanced planning contract?

The contractor, Huntington Ingalls Inc., faces several potential performance challenges. These include accurately estimating the scope and cost of the advanced planning phase itself, managing the complex engineering and design requirements for a nuclear-powered aircraft carrier's refueling and overhaul, and coordinating with numerous Navy stakeholders and suppliers. Ensuring timely delivery of planning documents and milestones is critical, as delays in this phase can cascade into significant schedule slips for the subsequent, larger overhaul. Furthermore, managing the 'cost plus fixed fee' structure requires diligent cost control to avoid budget overruns while meeting all technical specifications and safety standards.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc

Address: 4101 WASHINGTON AVE, NEWPORT NEWS, VA, 23607

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $558,205,429

Exercised Options: $558,205,429

Current Obligation: $540,372,046

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline