DoD's $2.68B RCOH Delivery Performance Incentive Contract with Huntington Ingalls Faces Scrutiny

Contract Overview

Contract Amount: $2,676,691,465 ($2.7B)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2013-03-29

End Date: 2016-11-29

Contract Duration: 1,341 days

Daily Burn Rate: $2.0M/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: RCOH DELIVERY PERFORMANCE INCENTIVE

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $2.68 billion to HUNTINGTON INGALLS INC for work described as: RCOH DELIVERY PERFORMANCE INCENTIVE Key points: 1. Significant contract value of $2.68 billion awarded to a single large business. 2. Lack of competition raises concerns about potential overpricing and value for taxpayer money. 3. Contract type (Cost Plus Incentive Fee) can incentivize cost overruns. 4. Shipbuilding and Repair sector often involves complex, long-term projects with inherent risks.

Value Assessment

Rating: questionable

The contract's Cost Plus Incentive Fee structure, coupled with a lack of competition, makes a definitive value assessment difficult. Without competitive bids, it's challenging to benchmark pricing against similar services, potentially leading to suboptimal value for the government.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This significantly limits price discovery and negotiation leverage for the government, potentially resulting in higher costs than if multiple vendors had competed.

Taxpayer Impact: The absence of competition in a contract of this magnitude raises concerns about taxpayer money being used efficiently. Without competitive pressure, there's a risk of inflated costs that could have been avoided.

Public Impact

Taxpayers may be overpaying for shipbuilding and repair services due to the lack of competitive bidding. The long duration and high value of the contract mean any inefficiencies or overpricing will have a substantial impact. Dependence on a single contractor for critical naval assets could pose a national security risk if performance falters.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Cost Plus Incentive Fee structure
High contract value
Long contract duration

Positive Signals

Potential for performance incentives
Awarded to a known entity in the sector

Sector Analysis

The shipbuilding and repair sector is characterized by high barriers to entry, specialized labor, and significant capital investment. Contracts like this are crucial for maintaining naval fleet readiness, but their complexity and cost necessitate robust oversight.

Small Business Impact

This contract was awarded to Huntington Ingalls Inc., a large business. There is no indication of small business participation or subcontracting in the provided data, suggesting limited opportunities for small businesses in this specific contract.

Oversight & Accountability

The 'sole-source' nature of this contract warrants close oversight to ensure fair pricing and adequate performance. The Department of the Navy must actively monitor costs and delivery against the incentive fee structure to protect taxpayer interests.

Related Government Programs

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

Risk Flags

Lack of competition may lead to inflated prices.
Cost Plus Incentive Fee contracts can incentivize cost overruns.
High contract value increases financial risk.
Long contract duration extends exposure to risks.
Potential for contractor performance issues impacting national security.
Limited transparency into pricing due to sole-source award.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.68 billion to HUNTINGTON INGALLS INC. RCOH DELIVERY PERFORMANCE INCENTIVE

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 $2.68 billion.

What is the period of performance?

Start: 2013-03-29. End: 2016-11-29.

What was the justification for awarding this contract on a sole-source basis, and were alternative competitive strategies considered?

The provided data states the contract was 'NOT COMPETED,' implying a sole-source award. A thorough review would require understanding the specific justification, such as unique capabilities or urgent needs, and whether market research was conducted to explore potential competition or alternative approaches to ensure the best value for the government.

How effectively did the Cost Plus Incentive Fee (CPIF) structure incentivize Huntington Ingalls to control costs and meet delivery schedules?

Assessing the CPIF effectiveness requires analyzing the final cost and delivery performance against the target. If costs significantly exceeded targets or delivery was delayed despite incentives, the structure may not have been optimal. Conversely, achieving targets efficiently would indicate success, but this data lacks that detail.

What is the benchmark cost per unit for similar shipbuilding and repair services, and how does this contract's pricing compare?

Without specific details on the 'units' of service provided (e.g., specific ship class, repair scope), a direct per-unit cost benchmark is difficult. However, the lack of competition suggests a higher likelihood of costs being above market rates. Benchmarking would require comparing against historical data for similar complex naval vessel work.

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: N0002412R2108

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc

Address: 4101 WASHINGTON AVE, 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: $2,738,530,879

Exercised Options: $2,738,530,879

Current Obligation: $2,676,691,465

Subaward Activity

Number of Subawards: 934

Total Subaward Amount: $99,637,516

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline