Navy awards $701.5M contract for DDG 51 Class Destroyer construction to Huntington Ingalls Inc

Contract Overview

Contract Amount: $701,510,526 ($701.5M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2011-09-26

End Date: 2018-04-24

Contract Duration: 2,402 days

Daily Burn Rate: $292.1K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: CONSTRUCTION OF DDG 51 CLASS DESTROYER

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $701.5 million to HUNTINGTON INGALLS INCORPORATED for work described as: CONSTRUCTION OF DDG 51 CLASS DESTROYER Key points: 1. Contract awarded via full and open competition after exclusion of sources, indicating a potentially complex procurement process. 2. The fixed-price incentive contract type suggests shared risk between the government and contractor for cost overruns. 3. The contract duration of 2402 days (approx. 6.6 years) points to a long-term, significant shipbuilding project. 4. The North American Industry Classification System (NAICS) code 336611 signifies a focus on ship building and repairing. 5. The contract's value of $701.5 million represents a substantial investment in naval fleet modernization. 6. The award was made by the Department of the Navy, a key component of the Department of Defense.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without detailed cost breakdowns and comparisons to similar destroyer construction projects. The fixed-price incentive structure implies that cost efficiency is a shared goal, but the final price could vary. The raw dollar amount of $701.5 million is significant, reflecting the complexity and scale of building a DDG 51 class destroyer. Further analysis would require comparing unit costs against historical data for similar vessels and assessing the contractor's performance on previous, comparable contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This indicates that while competition was sought, certain sources were excluded, possibly due to specialized capabilities or prior involvement. The number of bidders is not explicitly stated, but the 'exclusion of sources' suggests a limited pool of qualified participants. This procurement approach might be necessary for highly specialized defense contracts but could potentially limit price discovery compared to unrestricted full and open competition.

Taxpayer Impact: The exclusion of certain sources may mean taxpayers did not benefit from the broadest possible competition, potentially leading to higher costs than if all qualified shipbuilders had been allowed to bid.

Public Impact

The primary beneficiaries are the U.S. Navy and national defense, through the acquisition of a modern guided-missile destroyer. The contract delivers a critical naval asset essential for power projection, maritime security, and fleet readiness. The geographic impact is centered around the contractor's facility in Mississippi, supporting regional economic activity and employment. Workforce implications include employment for skilled laborers, engineers, and support staff involved in shipbuilding and repair.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the fixed-price incentive contract type.
Limited competition due to the exclusion of sources could impact final pricing.
Long contract duration increases exposure to market fluctuations and potential delays.

Positive Signals

Award to a known entity (Huntington Ingalls) suggests a degree of confidence in their capabilities.
Fixed-price incentive structure aims to align contractor and government interests on cost control.
The contract supports a critical national defense asset, aligning with strategic military objectives.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive sector critical to national defense and global trade. This contract falls within the broader defense industrial base, specifically focusing on naval vessel construction. The DDG 51 class destroyers are a cornerstone of the U.S. Navy's fleet, representing advanced technology and significant combat capabilities. Spending in this sector is often characterized by long procurement cycles, high unit costs, and a limited number of prime contractors capable of undertaking such complex projects.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this specific contract. This suggests that the prime contract was awarded to a large business, Huntington Ingalls Incorporated. Subcontracting opportunities for small businesses may exist within the supply chain for components and services, but the direct award does not prioritize small business set-asides. The impact on the small business ecosystem would depend on the extent to which the prime contractor engages small businesses for subcontracting.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Defense's contracting and program management offices, with potential involvement from the Naval Sea Systems Command (NAVSEA). Accountability measures are embedded within the fixed-price incentive contract terms, linking contractor performance and cost control to financial outcomes. Transparency is typically managed through contract reporting requirements and oversight by congressional committees. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

DDG 51 Class Destroyer Program
Naval Shipbuilding
Department of Defense Procurement
Ship Building and Repairing (NAICS 336611)

Risk Flags

Potential for cost overruns due to FPI contract type.
Limited competition due to exclusion of sources.
Long contract duration increases risk exposure.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $701.5 million to HUNTINGTON INGALLS INCORPORATED. CONSTRUCTION OF DDG 51 CLASS DESTROYER

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 $701.5 million.

What is the period of performance?

Start: 2011-09-26. End: 2018-04-24.

What is the historical spending trend for DDG 51 Class Destroyer construction contracts awarded by the Department of the Navy?

Analyzing historical spending for the DDG 51 Class Destroyer program reveals a consistent and significant investment by the Department of the Navy over several decades. The program, initiated in the late 1980s, has seen numerous contracts awarded for the construction of these advanced guided-missile destroyers. Spending has fluctuated based on annual appropriations, fleet modernization priorities, and the number of ships being procured in a given fiscal year. Early contracts for the lead ships were in the hundreds of millions of dollars, with costs evolving due to design improvements, technological upgrades, and inflation. The total program cost has amounted to tens of billions of dollars over its lifespan. The contract awarded to Huntington Ingalls Incorporated for $701.5 million in 2011 for construction falls within the expected range for individual ship procurement, reflecting the complexity and advanced capabilities of these vessels. Future spending will depend on the Navy's long-term shipbuilding plans, including potential follow-on orders or upgrades to the class.

How does the fixed-price incentive (FPI) contract type typically affect cost outcomes compared to other contract types for shipbuilding?

The Fixed-Price Incentive (FPI) contract type aims to balance cost control with contractor motivation for efficiency in complex projects like shipbuilding. In an FPI contract, the final price is adjusted based on the contractor's performance against target cost and target profit goals. There is a price ceiling that the contractor cannot exceed, and a sharing formula determines how cost savings or overruns between the target cost and the ceiling are split between the government and the contractor. This structure incentivizes the contractor to manage costs effectively to achieve a higher profit, while the government benefits from a predictable maximum cost. Compared to Firm-Fixed-Price (FFP) contracts, FPI offers more flexibility if unforeseen issues arise, potentially reducing the risk of costly change orders. However, it can be more complex to administer than FFP. Compared to Cost-Plus-Incentive-Fee (CPIF) contracts, FPI places more cost risk on the contractor, which can lead to greater cost consciousness but also potentially higher initial target costs to account for this risk.

What are the key performance indicators (KPIs) typically used to assess the success of a DDG 51 Class Destroyer construction contract?

Key performance indicators (KPIs) for a DDG 51 Class Destroyer construction contract typically revolve around schedule adherence, cost control, quality of construction, and technical performance. Schedule adherence is measured by the contractor's ability to meet key milestones and the final delivery date. Cost control is assessed by comparing actual costs against the target cost and staying within the negotiated price ceiling, especially critical in FPI contracts. Quality of construction is evaluated through rigorous inspections, testing, and adherence to design specifications, ensuring the vessel meets all naval standards and requirements. Technical performance relates to the successful integration and functionality of all onboard systems, including combat systems, propulsion, and habitability features, as per the contract's technical requirements. Meeting these KPIs ensures the Navy receives a capable and reliable warship within the agreed-upon parameters, contributing to fleet readiness and national security.

What is the typical lead time and complexity involved in building a DDG 51 Class Destroyer?

The lead time and complexity involved in building a DDG 51 Class Destroyer are substantial, reflecting the advanced technology and scale of these warships. The construction process typically spans several years, often ranging from 5 to 7 years from contract award to final delivery, as indicated by the 2402-day duration (approximately 6.6 years) of the contract in question. This extended timeline accounts for detailed design finalization, complex systems integration, hull construction, outfitting, rigorous testing, and sea trials. The complexity arises from integrating sophisticated combat systems, advanced propulsion, navigation, and communication equipment, alongside ensuring crew habitability and survivability. Each destroyer is a highly customized platform, requiring specialized engineering, skilled labor, and extensive supply chain management. The sheer number of components and the precision required for their assembly contribute significantly to the overall complexity and duration of the construction project.

What is the strategic importance of the DDG 51 Class Destroyer to the U.S. Navy's fleet modernization efforts?

The DDG 51 Class Destroyer (Arleigh Burke-class) is of paramount strategic importance to the U.S. Navy's fleet modernization efforts. These vessels represent a critical component of the Navy's surface combatant force, designed to operate independently or as part of carrier strike groups, surface action groups, or expeditionary strike groups. Their multi-mission capabilities, including air defense, anti-submarine warfare, surface warfare, and land-attack roles, make them highly versatile and essential for maintaining maritime superiority and projecting power globally. Modernization efforts focus on incorporating advanced technologies, such as improved radar systems (like AEGIS), enhanced weapon systems, and network-centric warfare capabilities, ensuring these destroyers remain relevant and effective against evolving threats. The continued construction and modernization of the DDG 51 class are vital for replacing aging platforms and ensuring the Navy possesses the necessary combat power to meet national security objectives in a complex geopolitical environment.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002411R2305

Offers Received: 2

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: $716,766,890

Exercised Options: $709,665,994

Current Obligation: $701,510,526

Subaward Activity

Number of Subawards: 255

Total Subaward Amount: $27,053,079

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline