DoD's $56M shipbuilding support contract awarded to Huntington Ingalls Inc. for LX(R) program development

Contract Overview

Contract Amount: $56,101,590 ($56.1M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2013-10-31

End Date: 2019-02-28

Contract Duration: 1,946 days

Daily Burn Rate: $28.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::CT::IGF INDUSTRY SUPPORT OF LX(R) AOA NOTE: THERE WERE TWO LX(R) INDUSTRY SUPPORT CONTRACTS AWARDED. ONE TO HII AND THE OTHER TO NASSCO. NEEDED BOTH INVOLVED IN THE DEVELOPMENT OF THE LX(R) REQUIREMENT SO THAT BOTH ARE KNOWLEDGEABLE OF THE DESIGN AND CAN COMPETE FOR THE LX(R) DD&C RFP ONCE RELEASED.

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $56.1 million to HUNTINGTON INGALLS INCORPORATED for work described as: IGF::CT::IGF INDUSTRY SUPPORT OF LX(R) AOA NOTE: THERE WERE TWO LX(R) INDUSTRY SUPPORT CONTRACTS AWARDED. ONE TO HII AND THE OTHER TO NASSCO. NEEDED BOTH INVOLVED IN THE DEVELOPMENT OF THE LX(R) REQUIREMENT SO THAT BOTH ARE KNOWLEDGEABLE OF THE DESIGN AND CAN COMPETE FOR THE LX… Key points: 1. Contract aimed to foster knowledge for future competition in LX(R) DD&C RFP. 2. Awarded as a sole-source contract, limiting initial competition. 3. Duration of 1946 days indicates a long-term support requirement. 4. The contract type, Cost Plus Fixed Fee, carries inherent cost escalation risks. 5. Focus on industry support suggests a role in program maturation and design. 6. Geographic location in Mississippi may have local economic implications.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging due to its unique nature as an industry support role for a future program. The $56.1 million awarded over its duration represents an investment in ensuring future competition. However, without clear performance metrics or comparison to similar industry support contracts for nascent shipbuilding programs, assessing value-for-money is difficult. The Cost Plus Fixed Fee structure, while common for R&D and support, can lead to costs exceeding initial estimates if not managed tightly.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, specifically to Huntington Ingalls Incorporated (HII). The justification provided was to ensure both HII and NASSCO (the other contractor for a similar LX(R) support contract) were knowledgeable of the LX(R) requirement's development. This approach was intended to enable both companies to compete effectively for the future LX(R) DD&C RFP. While this strategy aims to enhance future competition, the initial award lacked competitive pressure.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from competitive bidding at this stage, potentially leading to a higher initial cost than if multiple firms had competed for the support role.

Public Impact

The primary beneficiaries are Huntington Ingalls Incorporated, which received the contract, and potentially the U.S. Navy through the development of the LX(R) program. The services delivered involve industry support for the development of the LX(R) requirement, likely encompassing design, engineering, and program maturation. The contract's geographic impact is centered in Mississippi, where Huntington Ingalls Incorporated's operations are located. Workforce implications include employment opportunities within Huntington Ingalls Incorporated, particularly in shipbuilding and related engineering fields.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits initial price discovery and competitive pressure.
Cost Plus Fixed Fee contract type can lead to cost overruns if not rigorously managed.
Lack of explicit performance metrics makes value-for-money assessment challenging.
The contract's duration and cost warrant close monitoring for efficiency.

Positive Signals

Intent to foster future competition for the LX(R) DD&C RFP is a positive strategic goal.
Involving multiple key industry players ensures broader knowledge of program requirements.
Support contract aims to mature program requirements, potentially leading to better-executed future phases.

Sector Analysis

The shipbuilding and repair industry is a critical sector for national defense, characterized by high barriers to entry, significant capital investment, and long production cycles. This contract falls within the broader defense industrial base, specifically supporting the development of future naval capabilities. The LX(R) program represents a significant future investment for the Navy, and contracts like this are crucial for laying the groundwork. Comparable spending benchmarks are difficult to establish for such specific, early-stage program support roles, but the overall value reflects the complexity and strategic importance of naval shipbuilding.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses explicitly detailed in the provided data. The focus was on ensuring knowledge transfer between major defense contractors for a future competitive bid. Therefore, the direct impact on the small business ecosystem is likely minimal, though any prime contractor is generally encouraged to utilize small business subcontractors where feasible.

Oversight & Accountability

Oversight for this contract would fall under the Department of the Navy's contracting and program management offices. Given its Cost Plus Fixed Fee structure, rigorous financial oversight and auditing would be expected to ensure costs are reasonable and allocable. Transparency regarding the specific deliverables and progress would be managed through contract reporting requirements. The Inspector General for the Department of Defense would have jurisdiction for audits and investigations if any issues of fraud, waste, or abuse arose.

Related Government Programs

Naval Shipbuilding Programs
Littoral Combat Ship (LCS) Program
Future Surface Combatants
Defense Industrial Base Support Contracts

Risk Flags

Sole-source award may limit competitive pricing.
Cost Plus Fixed Fee contract type carries inherent cost risk.
Lack of detailed performance metrics hinders value assessment.
Contract duration suggests long-term commitment and potential for cost escalation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $56.1 million to HUNTINGTON INGALLS INCORPORATED. IGF::CT::IGF INDUSTRY SUPPORT OF LX(R) AOA NOTE: THERE WERE TWO LX(R) INDUSTRY SUPPORT CONTRACTS AWARDED. ONE TO HII AND THE OTHER TO NASSCO. NEEDED BOTH INVOLVED IN THE DEVELOPMENT OF THE LX(R) REQUIREMENT SO THAT BOTH ARE KNOWLEDGEABLE OF THE DESIGN AND CAN COMPETE FOR THE LX(R) DD&C RFP ONCE RELEASED.

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 $56.1 million.

What is the period of performance?

Start: 2013-10-31. End: 2019-02-28.

What was the specific rationale for awarding this contract on a sole-source basis to Huntington Ingalls Inc. and a similar one to NASSCO?

The rationale for the sole-source awards to both Huntington Ingalls Incorporated (HII) and NASSCO for LX(R) industry support was to ensure that both major shipbuilders possessed a comprehensive understanding of the LX(R) program's evolving requirements. The Department of the Navy's objective was to foster a competitive environment for the subsequent LX(R) DD&C (Design, Development, and Construction) Request for Proposal (RFP). By having both entities involved in the early development and knowledge acquisition phases, the Navy aimed to create a more robust and informed competition when the formal DD&C contract was to be awarded. This approach sought to mitigate risks associated with a single bidder lacking sufficient design knowledge and to encourage innovation by leveraging the insights of multiple experienced shipbuilders.

How does the Cost Plus Fixed Fee (CPFF) contract type potentially impact the final cost to taxpayers compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract type, used here, reimburses the contractor for allowable costs incurred plus a predetermined fixed fee representing profit. While it allows flexibility for contracts with uncertain scope, it shifts much of the cost risk to the government. If the contractor's costs exceed estimates, the government pays the difference. The fixed fee, however, is not subject to increase. This contrasts with Fixed Price contracts, where the contractor bears the risk of cost overruns. For taxpayers, CPFF can lead to higher final costs if the contractor's actual costs are significantly higher than anticipated, as the government absorbs these overruns. Effective oversight is crucial to manage allowable costs and ensure the fixed fee remains appropriate for the work performed.

What are the key performance indicators (KPIs) or deliverables expected under this industry support contract?

The provided data does not explicitly detail the key performance indicators (KPIs) or specific deliverables for this industry support contract. However, based on the contract's objective – to support the development of the LX(R) requirement and ensure knowledge for future competition – typical deliverables would likely include design documentation, technical data packages, feasibility studies, risk assessments, and participation in program reviews. Performance would likely be assessed based on the timely and quality submission of these outputs, adherence to program milestones, and the successful transfer of knowledge to enable future competitive bidding. The absence of explicit KPIs in the summary data makes a precise assessment of performance difficult.

Can we compare the spending on this LX(R) support contract to similar shipbuilding support contracts awarded by the Navy in recent years?

Direct comparison of this $56.1 million contract to similar shipbuilding support contracts is challenging without more specific data on the scope and nature of those other contracts. The LX(R) program is a specific initiative with unique requirements. However, the value appears substantial for an industry support role, reflecting the complexity of naval shipbuilding programs. The Navy frequently awards various types of contracts for ship design, modernization, and sustainment, which can range from millions to billions of dollars. This particular contract's value should be viewed in the context of its strategic goal: enabling future competition for a major new class of vessels, which is a significant investment in itself.

What is the historical spending trend for shipbuilding and repair contracts within the Department of the Navy?

The Department of the Navy consistently allocates significant portions of its budget to shipbuilding and repair, reflecting its role in maintaining a robust naval fleet. Historical spending trends show a multi-billion dollar annual expenditure in this category, encompassing new vessel construction, modernization programs, and ongoing maintenance and repair services. Factors influencing these trends include geopolitical conditions, fleet readiness requirements, and the introduction of new ship classes like the LX(R). While specific figures fluctuate year-to-year based on program cycles and appropriations, shipbuilding and repair remains a core and substantial component of the Navy's overall procurement and sustainment strategy.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002413R2409

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $69,727,427

Exercised Options: $69,727,427

Current Obligation: $56,101,590

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline