DoD's $3.34B DDG 51 Class Ship Construction contract awarded to Huntington Ingalls Inc. for 5049 days

Contract Overview

Contract Amount: $3,345,822,881 ($3.3B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2013-06-03

End Date: 2027-03-31

Contract Duration: 5,049 days

Daily Burn Rate: $662.7K/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: FY13-FY17 DDG 51 CLASS SHIP CONSTRUCTION.

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $3.35 billion to HUNTINGTON INGALLS INCORPORATED for work described as: FY13-FY17 DDG 51 CLASS SHIP CONSTRUCTION. Key points: 1. Contract awarded for a significant duration, suggesting a long-term need for naval shipbuilding capabilities. 2. The contract type, Fixed Price Incentive, aims to balance cost control with contractor performance incentives. 3. Awarded by the Department of the Navy, this contract directly supports national defense and naval fleet readiness. 4. The substantial value indicates a major investment in shipbuilding infrastructure and capacity. 5. The use of 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' suggests a complex procurement process. 6. The contract's duration and value point to a critical component of the Navy's shipbuilding strategy.

Value Assessment

Rating: good

Benchmarking the value of this contract is challenging due to its specific nature as a large-scale, long-term shipbuilding program. However, the fixed-price incentive structure suggests an effort to manage costs while encouraging efficient delivery. The total award value of over $3.3 billion over approximately 14 years indicates a significant investment, and the per-unit cost for each DDG 51 class ship would be the key metric for detailed value assessment. Without specific per-ship cost data, a direct comparison to similar contracts is difficult, but the scale implies a substantial commitment to maintaining and expanding the naval fleet.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This designation implies that while the competition was intended to be broad, certain sources were excluded, possibly due to specific technical requirements, security clearances, or prior involvement in the program. The number of bidders is not explicitly stated, but the exclusion of sources suggests a more tailored competition than a completely unrestricted one. This approach can sometimes lead to higher prices if the pool of eligible bidders is significantly reduced.

Taxpayer Impact: For taxpayers, this procurement method means that while competition was sought, the exclusion of certain sources might have limited the potential for the lowest possible price. The government likely aimed to secure specialized capabilities essential for this complex shipbuilding project.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives advanced guided-missile destroyers crucial for national security and power projection. This contract supports the construction and delivery of DDG 51 class ships, enhancing the Navy's combat capabilities. The geographic impact is concentrated in areas where Huntington Ingalls Incorporated operates its shipyards, primarily in Mississippi. Significant workforce implications arise, supporting thousands of jobs in shipbuilding, engineering, and related support industries. The contract contributes to the readiness and modernization of the U.S. naval fleet, ensuring operational superiority.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to cost overruns if not managed effectively.
Fixed-price incentive contracts can sometimes incentivize contractors to cut corners on quality to meet cost targets.
Reliance on a single primary contractor (Huntington Ingalls) for such a critical program poses a risk if performance issues arise.
The 'exclusion of sources' in competition might limit innovation and potentially increase costs.
Delays in shipbuilding can have cascading effects on fleet readiness and future procurement plans.

Positive Signals

The contract aims to ensure a steady supply of modern naval vessels, crucial for national defense.
Fixed-price incentive contracts provide a framework for cost control while rewarding efficient performance.
The long duration allows for program stability and workforce retention within the shipbuilding industry.
Awarding to a known, experienced shipyard like Huntington Ingalls reduces technical risk.
The contract supports a significant industrial base and associated high-skilled jobs.

Sector Analysis

The shipbuilding and repair industry is a critical component of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. This contract falls within the broader Defense Industrial Base sector, specifically focusing on naval vessel construction. The DDG 51 Arleigh Burke class is a cornerstone of the U.S. Navy's surface fleet, and contracts for their construction represent a significant portion of the Navy's shipbuilding budget. Market size for naval shipbuilding is substantial, driven by government procurement needs for fleet modernization and expansion. Comparable spending benchmarks would involve other major naval shipbuilding programs, such as aircraft carriers or submarines, which also involve multi-billion dollar, multi-year contracts.

Small Business Impact

The provided data indicates that small business participation (sb) is false, and there is no mention of small business set-asides. This suggests that the contract was not specifically targeted towards small businesses. Consequently, the primary contractor, Huntington Ingalls Incorporated, would be responsible for subcontracting opportunities. The impact on the small business ecosystem would depend on Huntington Ingalls' subcontracting strategy; they may engage small businesses for specific components or services, or they may rely more heavily on larger, established suppliers. Without explicit subcontracting plans or goals, the direct benefit to the small business sector from this specific contract award is uncertain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Fixed Price Incentive (FPI) contract structure, which links contractor profit to performance against cost, schedule, and technical targets. Transparency is generally maintained through contract awards databases and reporting requirements, although specific performance details may be sensitive. The Inspector General for the Department of Defense would have jurisdiction to investigate any allegations of fraud, waste, or abuse related to this contract.

Related Government Programs

DDG 51 Class Destroyer Program
Naval Ship Production
Department of Defense Shipbuilding Contracts
Arleigh Burke Class Destroyers
U.S. Navy Fleet Modernization

Risk Flags

Limited competition due to source exclusion
Long contract duration increases risk of cost escalation
Potential for schedule delays in complex shipbuilding
Reliance on a single primary contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.35 billion to HUNTINGTON INGALLS INCORPORATED. FY13-FY17 DDG 51 CLASS SHIP CONSTRUCTION.

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 $3.35 billion.

What is the period of performance?

Start: 2013-06-03. End: 2027-03-31.

What is the historical spending trend for DDG 51 class ship construction?

Historical spending on DDG 51 class ship construction has been substantial and consistent over several decades, reflecting the U.S. Navy's commitment to this vital platform. The program began in the late 1980s, and numerous ships have been procured and built since then. Annual spending fluctuates based on the number of ships under construction, the phase of production (e.g., design, hull fabrication, outfitting, testing), and the specific contract types (e.g., fixed-price, cost-plus). Major shipbuilding contracts, like the one awarded to Huntington Ingalls, often span multiple fiscal years and represent significant portions of the Navy's shipbuilding budget. Analyzing historical data reveals a sustained investment in maintaining and expanding the DDG 51 fleet, with total program costs running into the tens of billions of dollars over its lifecycle. This consistent investment underscores the strategic importance of these destroyers to U.S. naval power.

How does the pricing of this contract compare to similar naval shipbuilding contracts?

Directly comparing the pricing of this specific $3.34 billion contract for DDG 51 class ship construction is complex without detailed cost breakdowns per ship and knowledge of the specific configurations and capabilities of the vessels being built. However, the Arleigh Burke class destroyers are known for their advanced capabilities, making them high-value assets. The contract type, Fixed Price Incentive (FPI), suggests a negotiated target cost and fee, with adjustments based on actual costs and performance. Benchmarking would involve comparing the per-ship cost against other DDG 51 class ships procured under similar conditions, as well as against other classes of destroyers or frigates globally, considering differences in size, technology, and mission. Given the scale and complexity, the pricing is expected to be significant, reflecting the advanced technology and long construction period. The 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' aspect also influences price discovery, potentially limiting the number of competitive bids.

What are the key performance indicators (KPIs) for this contract?

Key performance indicators (KPIs) for a contract like the DDG 51 Class Ship Construction are typically tied to the Fixed Price Incentive (FPI) structure and the overall program objectives. These would likely include: 1. **Cost Performance:** Meeting or beating the target cost, with incentives for cost savings and penalties for cost overruns. 2. **Schedule Adherence:** Delivering ships according to the agreed-upon milestones and final delivery dates. Delays can incur penalties or reduce the contractor's incentive fee. 3. **Technical Performance:** Ensuring the ships meet all specified technical requirements, including combat systems integration, survivability, speed, and operational capabilities. 4. **Quality Assurance:** Adherence to stringent quality standards throughout the design, construction, and testing phases, minimizing defects and ensuring long-term reliability. 5. **Safety:** Maintaining a safe working environment during construction. 6. **Small Business Subcontracting:** If applicable, meeting goals for subcontracting with small businesses. The specific KPIs would be detailed in the contract's Statement of Work (SOW) and associated appendices.

What is the track record of Huntington Ingalls Incorporated in delivering similar naval vessels?

Huntington Ingalls Industries (HII), through its Ingalls Shipbuilding division, has a long and extensive track record in building naval vessels, particularly destroyers and amphibious assault ships for the U.S. Navy. They are the sole builder of the Arleigh Burke (DDG 51) class destroyers and have delivered numerous ships in this class, demonstrating significant expertise and capability. HII has also constructed other major warships, including aircraft carriers (though Newport News Shipbuilding, another HII division, is the sole builder of nuclear-powered carriers) and amphibious assault ships. While they possess a strong history, like any large-scale industrial program, the DDG 51 program has experienced its share of challenges, including schedule delays and cost fluctuations on specific ships. However, overall, HII is considered a critical and highly capable partner for the U.S. Navy's shipbuilding needs, possessing the infrastructure, workforce, and experience necessary for these complex, multi-year projects.

What are the potential risks associated with the 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' procurement method?

The 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' procurement method, while aiming for competition, introduces specific risks. The primary risk is a reduction in the number of potential bidders. If the criteria for excluding sources are overly restrictive or if only a few companies possess the highly specialized capabilities required, the competition may not be as robust as intended. This limited competition can potentially lead to higher prices for the government, as the pressure to offer the most competitive bid is lessened. Furthermore, it might stifle innovation if companies outside the excluded pool have potentially better or more cost-effective solutions. There's also a risk that eligible bidders might form alliances or tacitly coordinate, further reducing genuine price discovery. Ensuring that the exclusion criteria are truly justified by necessity and not arbitrary is crucial for mitigating these risks and achieving best value for taxpayers.

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: N0002412R2316

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, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $3,493,596,937

Exercised Options: $3,478,827,210

Current Obligation: $3,345,822,881

Subaward Activity

Number of Subawards: 2284

Total Subaward Amount: $931,422,800

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline