DoD's $518M Submarine Contract Awarded to Huntington Ingalls Inc. Raises Concerns

Contract Overview

Contract Amount: $518,056,845 ($518.1M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2009-10-01

End Date: 2014-10-29

Contract Duration: 1,854 days

Daily Burn Rate: $279.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: SUBMARINE

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $518.1 million to HUNTINGTON INGALLS INC for work described as: SUBMARINE Key points: 1. Significant spending on submarine construction highlights critical defense infrastructure investment. 2. Sole-source award to Huntington Ingalls Inc. limits competitive pricing and innovation. 3. Long contract duration and cost-plus structure introduce potential for cost overruns. 4. The shipbuilding and repair sector is vital but often characterized by high barriers to entry and limited competition.

Value Assessment

Rating: questionable

The contract's cost-plus fixed fee structure, coupled with a lack of competition, makes a direct pricing assessment difficult. Benchmarking against similar submarine contracts is challenging due to the unique nature of these assets and the limited competitive landscape.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating a lack of competition. This significantly impacts price discovery, as the government did not benefit from multiple bids to drive down costs or encourage innovative solutions.

Taxpayer Impact: The absence of competition in this sole-source award likely resulted in a higher price for taxpayers than could have been achieved through a competitive bidding process.

Public Impact

Taxpayers are funding a critical, but expensive, component of national defense. The long-term commitment to a single contractor raises questions about future flexibility and cost control. Dependence on a sole-source provider for such a significant asset could pose strategic risks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award
Cost-plus contract type
Long contract duration
Lack of small business participation

Positive Signals

Essential defense asset acquisition
Experienced prime contractor

Sector Analysis

This contract falls within the shipbuilding and repair sector, a high-cost, specialized industry critical for national defense. Spending benchmarks in this area are difficult to establish due to the unique, large-scale nature of naval vessel construction.

Small Business Impact

The data indicates no specific small business participation in this contract. Given the scale and complexity of submarine construction, opportunities for small businesses are likely limited to subcontracting roles, if any.

Oversight & Accountability

The sole-source nature of this award warrants close oversight to ensure fair pricing and adherence to contract terms. Robust accountability mechanisms are crucial to mitigate risks associated with cost-plus contracts.

Related Government Programs

Ship Building and Repairing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Sole-source award limits competition and price discovery.
Cost-plus contract type increases risk of cost overruns.
Long contract duration (5 years) extends exposure to potential inefficiencies.
No indication of small business participation.
High dollar value ($518M) represents significant taxpayer investment.
Specific submarine class (Virginia) implies complex and costly technology.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $518.1 million to HUNTINGTON INGALLS INC. SUBMARINE

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 $518.1 million.

What is the period of performance?

Start: 2009-10-01. End: 2014-10-29.

What specific factors justified the sole-source award for this submarine contract, and were alternatives thoroughly explored?

Sole-source justifications typically involve unique capabilities, urgent needs, or lack of viable alternatives. For this submarine contract, the justification likely stems from the highly specialized nature of submarine construction and the limited number of entities possessing the required expertise and infrastructure. A thorough review of available documentation would be needed to confirm if alternative approaches were considered and why they were deemed unsuitable.

How does the cost-plus fixed fee structure compare to other contract types for similar large-scale defense procurements in terms of cost control?

Cost-plus fixed fee (CPFF) contracts are often used when project scope is uncertain, but they carry inherent risks of cost overruns as the contractor is reimbursed for actual costs plus a fixed fee. Compared to fixed-price contracts, CPFF offers less incentive for the contractor to control costs. For large-scale procurements, fixed-price incentive fee or other performance-based contracts might offer better cost control if the scope is well-defined.

What are the long-term implications of awarding such a significant contract to a single entity for submarine development and maintenance?

Awarding a major contract solely to one entity can lead to a critical dependency, potentially stifling innovation and reducing bargaining power in future negotiations. It also concentrates risk with that single contractor. While it can foster deep expertise and streamlined execution for the specific project, it limits market competition and could impact the broader industrial base's capacity and technological advancement over the long term.

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

Solicitation ID: N0002409R2102

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 BLDG 520/3, NEWPORT NEWS, VA, 23607

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

Financial Breakdown

Contract Ceiling: $740,667,835

Exercised Options: $740,667,835

Current Obligation: $518,056,845

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline