Navy awards $739M contract for CVN 72 refueling overhaul advance planning, with a significant portion for performance incentives

Contract Overview

Contract Amount: $739,105,644 ($739.1M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2010-03-17

End Date: 2013-03-31

Contract Duration: 1,110 days

Daily Burn Rate: $665.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CVN 72 REFUELING COMPLEX OVERHAUL ADVANCE PLANNING - PERFORMANCE INCENTIVE FEE FOR ITEM 0001.

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $739.1 million to HUNTINGTON INGALLS INC for work described as: CVN 72 REFUELING COMPLEX OVERHAUL ADVANCE PLANNING - PERFORMANCE INCENTIVE FEE FOR ITEM 0001. Key points: 1. The contract's substantial value suggests a complex and critical overhaul for the USS Abraham Lincoln (CVN 72). 2. Advance planning for a refueling complex overhaul is a multi-year endeavor requiring specialized expertise. 3. The 'COST PLUS FIXED FEE' contract type indicates that costs are reimbursed, plus a negotiated fee, with potential for incentives. 4. The performance incentive fee component suggests a focus on achieving specific quality or schedule targets. 5. The contract duration of 1110 days (approx. 3 years) aligns with the typical timeline for such extensive planning and execution. 6. The award to Huntington Ingalls Inc. points to a concentration of large aircraft carrier maintenance capabilities within a few key shipyards.

Value Assessment

Rating: good

The total award amount of $739,105,644.11 for advance planning is significant, reflecting the complexity of a nuclear aircraft carrier refueling complex overhaul. Benchmarking this specific advance planning phase is difficult without more granular data on similar planning efforts. However, the inclusion of a performance incentive fee suggests the Navy is seeking to ensure high-quality execution and potentially cost savings or schedule adherence, which is a positive indicator of value-seeking.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one contractor, Huntington Ingalls Inc., was deemed capable of performing the required services. This is common for highly specialized work like nuclear aircraft carrier maintenance, where facilities, expertise, and security clearances are limited to a few entities. The lack of competition means that price discovery through a competitive bidding process was not utilized.

Taxpayer Impact: Sole-source awards can potentially lead to higher costs for taxpayers as the government does not benefit from competitive pricing pressures. However, for highly specialized and critical national defense assets, ensuring the work is performed by the most qualified entity may outweigh the potential cost savings from competition.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, ensuring the continued operational readiness of the USS Abraham Lincoln (CVN 72). The services delivered include critical advance planning, engineering, and logistical support necessary for a complex refueling and overhaul. The geographic impact is concentrated around the shipyard performing the work, likely Newport News Shipbuilding in Virginia, a major hub for naval shipbuilding and repair. The workforce implications involve highly skilled engineers, technicians, and support staff within the shipbuilding and repair sector, particularly those with experience in nuclear propulsion systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
The complexity of nuclear refueling operations inherently carries risks of schedule delays and cost overruns.
Dependence on a single contractor for such critical infrastructure maintenance can create strategic vulnerabilities.

Positive Signals

Inclusion of a performance incentive fee demonstrates a focus on achieving specific quality and efficiency targets.
The contractor, Huntington Ingalls Inc., has extensive experience with aircraft carrier construction and maintenance, suggesting a high likelihood of successful execution.
Advance planning is a crucial step that can mitigate risks and improve the efficiency of the subsequent overhaul phase.

Sector Analysis

The shipbuilding and repairing industry (NAICS 336611) is a critical sector for national defense, dominated by a few large, specialized companies capable of constructing and maintaining complex naval vessels. This contract falls within the segment of naval ship repair and modernization, specifically focusing on the highly specialized and capital-intensive process of nuclear aircraft carrier refueling and complex overhauls. The market is characterized by high barriers to entry due to specialized infrastructure, workforce skills, and security requirements. Comparable spending benchmarks for such specific advance planning phases are scarce due to the unique nature of aircraft carrier overhauls.

Small Business Impact

This contract was not competed and there is no indication of small business set-asides or subcontracting requirements being a primary focus. Given the specialized nature of nuclear aircraft carrier refueling complex overhauls, the prime contractor, Huntington Ingalls Inc., likely possesses the unique facilities and expertise required. While large prime contractors often engage small businesses for various support services, the direct award structure here does not explicitly highlight small business participation as a strategic element.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the critical nature of naval aviation assets and nuclear propulsion, robust oversight mechanisms are expected, including regular progress reviews, technical inspections, and financial audits. The contract's performance incentive fee suggests that performance metrics will be closely monitored. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Aircraft Carrier Maintenance and Modernization Programs
Naval Shipyard Operations
Nuclear Propulsion Plant Maintenance
Defense Contract Management
Ship Building and Repair Contracts

Risk Flags

Sole-source award
High-value contract for complex defense system
Nuclear-related work

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $739.1 million to HUNTINGTON INGALLS INC. CVN 72 REFUELING COMPLEX OVERHAUL ADVANCE PLANNING - PERFORMANCE INCENTIVE FEE FOR ITEM 0001.

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 $739.1 million.

What is the period of performance?

Start: 2010-03-17. End: 2013-03-31.

What is the historical spending pattern for advance planning for CVN refueling complex overhauls?

Historical spending for advance planning for CVN refueling complex overhauls (RCOH) can vary significantly based on the specific carrier class, its age, and the scope of work defined for the overhaul. These planning phases are critical and often involve substantial engineering, design, and logistical efforts that can span several years and cost tens to hundreds of millions of dollars. For instance, the advance planning for previous RCOHs, such as those for the Nimitz-class carriers, involved extensive work to prepare for the complex tasks of defueling the reactor, replacing the nuclear fuel, and performing extensive structural and systems maintenance. The $739 million figure for CVN 72's advance planning is substantial, suggesting a comprehensive scope that likely includes detailed design, long-lead material procurement planning, and extensive risk mitigation strategies to ensure the subsequent overhaul proceeds efficiently and safely.

How does the performance incentive fee structure compare to similar naval overhaul contracts?

Performance incentive fee (PIF) structures are common in large, complex naval contracts to align contractor performance with government objectives, such as schedule adherence, cost control, or specific quality metrics. For refueling complex overhauls (RCOH), PIFs are particularly relevant due to the high stakes involved in maintaining the operational readiness of these capital-intensive assets. The specific structure and magnitude of the PIF for CVN 72's advance planning would need to be compared against similar RCOH contracts or major modernization efforts. Generally, PIFs can represent a significant portion of the total contract value, motivating contractors to exceed baseline performance expectations. The effectiveness of such incentives depends on clearly defined, measurable, and achievable performance targets that directly contribute to the overall success of the overhaul.

What are the primary risks associated with the advance planning phase of a CVN RCOH?

The primary risks associated with the advance planning phase of a CVN RCOH are multifaceted. Technical risks include unforeseen complexities in the ship's aging systems, particularly the nuclear propulsion plant, which may require more extensive work than initially anticipated. Schedule risks are significant, as delays in planning can cascade into delays for the entire overhaul, impacting fleet readiness. Cost risks arise from inaccurate initial estimates, scope creep, or the need to incorporate new technologies or safety requirements discovered during planning. Logistical risks involve coordinating the availability of specialized labor, materials, and shipyard facilities. Furthermore, regulatory and safety risks related to nuclear materials handling and disposal require meticulous planning and adherence to stringent protocols. Effective risk mitigation strategies, including thorough assessments and contingency planning, are crucial during this phase.

What is Huntington Ingalls Inc.'s track record with nuclear aircraft carrier overhauls?

Huntington Ingalls Industries (HII), through its Newport News Shipbuilding division, has an unparalleled track record with nuclear aircraft carrier construction and overhauls in the United States. Newport News Shipbuilding is the sole builder of U.S. Navy aircraft carriers and has performed all refueling complex overhauls (RCOH) to date. This includes the RCOHs for carriers such as the USS Enterprise (CVN-65), USS Nimitz (CVN-68), USS Dwight D. Eisenhower (CVN-69), USS Carl Vinson (CVN-70), and USS Theodore Roosevelt (CVN-71). Their extensive experience encompasses the complex nuclear refueling process, extensive hull and systems modernization, and project management of these multi-billion dollar, multi-year endeavors. This deep historical expertise makes them the logical, and often sole-source, provider for such critical maintenance.

How does the $739M advance planning cost compare to the total estimated cost of a CVN RCOH?

The $739 million allocated for the advance planning phase of the CVN 72's refueling complex overhaul (RCOH) represents a significant investment, but it is typically a fraction of the total RCOH cost. A full RCOH is a multi-year project that can cost upwards of $3-5 billion, sometimes more, depending on the specific scope, economic conditions, and unforeseen complexities. The advance planning phase is crucial for defining the detailed work scope, identifying long-lead materials, refining cost estimates, and mitigating risks before the major overhaul work begins. Therefore, while substantial, the advance planning cost is a necessary precursor to ensure the efficiency, safety, and ultimate success of the much larger and more expensive overhaul execution phase. It's an investment to control and optimize the larger expenditure.

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: N0002409R2110

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: $759,671,506

Exercised Options: $759,671,506

Current Obligation: $739,105,644

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline