Navy awards $4.48B for detail design and construction of CVN 79, a sole-source contract to Huntington Ingalls Inc

Contract Overview

Contract Amount: $4,482,803,729 ($4.5B)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2015-06-05

End Date: 2029-09-30

Contract Duration: 5,231 days

Daily Burn Rate: $857.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: DETAIL DESIGN AND CONSTRUCTION CVN 79

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $4.48 billion to HUNTINGTON INGALLS INC for work described as: DETAIL DESIGN AND CONSTRUCTION CVN 79 Key points: 1. This contract represents a significant investment in naval shipbuilding capabilities. 2. The fixed-price incentive contract structure aims to balance cost control with performance incentives. 3. The long duration suggests a complex, multi-year project with substantial resource allocation. 4. The sole-source nature raises questions about potential cost efficiencies and market competition. 5. The shipbuilding sector is characterized by high barriers to entry and specialized expertise. 6. Performance context is critical given the scale and strategic importance of aircraft carrier construction.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and the unique complexity of aircraft carrier construction. However, the fixed-price incentive (FPI) contract type suggests an attempt to manage costs by incentivizing the contractor to stay within target costs. The total obligated amount of $4.48 billion over several years indicates a substantial financial commitment. Without comparable sole-source contracts for similar vessels or detailed cost breakdowns, a precise value-for-money assessment is difficult, but the FPI structure offers some level of cost control compared to cost-plus contracts.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis to Huntington Ingalls Inc. This indicates that the Department of the Navy identified Huntington Ingalls as the only responsible source capable of performing the required work. Sole-source procurements typically occur when there is a lack of competition due to specialized capabilities, urgent needs, or specific circumstances where only one contractor can fulfill the requirement. The absence of a competitive bidding process means that price discovery through market forces was not utilized.

Taxpayer Impact: For taxpayers, a sole-source award means that the government did not benefit from competitive pricing that could potentially drive down costs. While the FPI contract type aims to control costs, the lack of competition removes the pressure that multiple bidders would typically exert on pricing.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives a critical asset for national defense, and Huntington Ingalls Inc., which secures a major, long-term construction contract. The services delivered include the detailed design and construction of a new aircraft carrier (CVN 79), a highly complex and technologically advanced vessel. The geographic impact is concentrated in the shipyard locations where Huntington Ingalls operates, primarily Newport News, Virginia. Workforce implications include the creation and sustainment of thousands of highly skilled jobs in shipbuilding, engineering, and related trades.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Long contract duration increases exposure to potential cost overruns if not managed effectively.
Complexity of aircraft carrier construction inherently carries significant technical and schedule risks.

Positive Signals

Fixed-price incentive contract type provides cost controls and performance incentives.
Award to an established, experienced shipyard (Huntington Ingalls) suggests a focus on capability and reliability.
Long-term nature of the contract supports workforce stability and specialized skill development.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive sector dominated by a few large, specialized firms. Aircraft carrier construction represents the pinnacle of this industry, requiring immense technical expertise, advanced manufacturing capabilities, and significant infrastructure. The market is highly concentrated, with limited players capable of undertaking such massive projects. This contract fits within the defense sector's strategic shipbuilding programs, which are critical for maintaining naval power projection capabilities. Comparable spending benchmarks are difficult to establish due to the unique nature of each carrier class and build.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it is a sole-source award to a large prime contractor. Huntington Ingalls Inc. is expected to utilize a supply chain that likely includes small businesses for various components and services. However, the direct impact on small business set-asides is minimal. The subcontracting plan, if any, would be crucial for understanding the extent to which small businesses will participate in the execution of this contract.

Oversight & Accountability

Oversight for this contract will be primarily managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the fixed-price incentive contract terms, linking payment to performance and cost targets. Transparency is facilitated through contract awards databases and potential reporting requirements. 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

CVN 78 Ford Class Aircraft Carrier Program
Naval Shipbuilding Industrial Base
Department of Defense Major Defense Acquisition Programs
Shipbuilding and Repair Contracts

Risk Flags

Sole-source procurement
Potential for cost overruns on complex, long-duration projects
Reliance on a single contractor for critical defense capability

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.48 billion to HUNTINGTON INGALLS INC. DETAIL DESIGN AND CONSTRUCTION CVN 79

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 $4.48 billion.

What is the period of performance?

Start: 2015-06-05. End: 2029-09-30.

What is the historical spending trend for the CVN 79 program and similar aircraft carrier constructions?

The CVN 79, the second Ford-class aircraft carrier, follows the CVN 78, which experienced significant cost growth and schedule delays. Historical data for Ford-class carriers indicates substantial investments, with the CVN 78's cost exceeding initial estimates. The CVN 79 contract, valued at $4.48 billion for its detail design and construction phase, represents a significant portion of the overall program cost. While this specific award is for a defined scope, the broader Ford-class program has seen cumulative spending in the tens of billions of dollars. Comparing this to previous carrier classes (like Nimitz) shows a trend of increasing complexity and cost per vessel, driven by technological advancements and evolving military requirements. The long-term nature of these programs means that final costs can fluctuate significantly from initial projections.

How does the fixed-price incentive (FPI) contract structure compare to other contract types for large shipbuilding projects?

The Fixed-Price Incentive (FPI) contract is a hybrid type designed to provide the contractor with an incentive to control costs while sharing the risks and benefits of cost savings or overruns with the government. In an FPI contract, a target cost, target profit, and a price ceiling are established. If the final cost is below the target cost, both the contractor and the government share in the savings according to a pre-negotiated formula. If the final cost exceeds the target cost but remains below the ceiling, the contractor's profit is reduced, and the government pays the final cost plus the reduced profit. If the final cost exceeds the ceiling, the contractor is responsible for the amount over the ceiling. This contrasts with Firm-Fixed-Price (FFP) contracts, where the contractor bears all cost risk, and Cost-Plus-Fixed-Fee (CPFF) or Cost-Plus-Incentive-Fee (CPIF) contracts, which place more cost risk on the government. For complex, long-duration projects like aircraft carriers, FPI aims to strike a balance, encouraging efficiency without exposing the government to unlimited cost increases.

What are the key performance indicators (KPIs) and risk mitigation strategies associated with this CVN 79 contract?

Key performance indicators for the CVN 79 contract would likely revolve around schedule adherence (milestone completion dates), cost control (staying within target cost and below the price ceiling), quality of workmanship (meeting stringent naval standards), and technical performance of systems integrated into the carrier. Risk mitigation strategies are inherent in the FPI contract structure itself, which incentivizes cost control. Additionally, the Navy would employ robust program management, independent cost reviews, rigorous testing and evaluation protocols, and close oversight of the contractor's processes. Specific risks include potential design changes, supply chain disruptions, labor availability issues, and integration challenges with new technologies. The contractor, Huntington Ingalls, would have its own internal risk management processes focused on production efficiency, safety, and quality assurance.

What is Huntington Ingalls Inc.'s track record with previous aircraft carrier construction contracts?

Huntington Ingalls Industries (HII), through its Newport News Shipbuilding division, has an extensive and largely unparalleled track record in constructing U.S. Navy aircraft carriers. They have built all nuclear-powered carriers for the U.S. Navy since the USS Enterprise (CVN-65). This includes the Nimitz-class carriers and the lead ship of the Ford class, CVN-78. While the construction of these complex vessels is always challenging, and the Ford-class program, in particular, has faced cost and schedule hurdles, HII has consistently demonstrated the capability to deliver these highly sophisticated warships. Their experience provides a deep institutional knowledge base regarding design, engineering, manufacturing processes, and workforce management specific to aircraft carrier construction, making them the sole-source provider for such critical assets.

What are the potential long-term implications of this sole-source award on the broader shipbuilding industrial base?

The sole-source nature of this contract for CVN 79 reinforces the existing consolidation within the U.S. naval shipbuilding industrial base. Huntington Ingalls Industries is one of only two companies capable of building large surface combatants and the only one capable of building aircraft carriers. While this ensures the delivery of a critical national asset, it limits competitive dynamics that could otherwise spur innovation or drive down costs across the sector. It also places significant reliance on a single entity for a vital defense capability. The long-term implications include maintaining a highly specialized workforce and infrastructure within HII, but potentially at the expense of broader market competition and the development of alternative capabilities. Government policy often aims to maintain this industrial base through such contracts, recognizing its strategic importance.

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: N0002412R2114

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

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: $4,521,255,600

Exercised Options: $4,521,255,600

Current Obligation: $4,482,803,729

Subaward Activity

Number of Subawards: 2976

Total Subaward Amount: $402,224,049

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline