Navy awards $79.9M contract for CVN 78 Class HPY Core, shipbuilding and repair services

Contract Overview

Contract Amount: $79,889,509 ($79.9M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2015-04-20

End Date: 2019-09-26

Contract Duration: 1,620 days

Daily Burn Rate: $49.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CVN 78 CLASS HPY CORE FY15

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $79.9 million to HUNTINGTON INGALLS INC for work described as: CVN 78 CLASS HPY CORE FY15 Key points: 1. Contract awarded to Huntington Ingalls Inc. for shipbuilding and repair. 2. This contract is for the CVN 78 Class HPY Core, indicating a focus on a specific naval vessel class. 3. The contract duration is 1620 days, suggesting a significant, long-term project. 4. The contract type is Cost Plus Fixed Fee, which can lead to cost overruns if not managed carefully. 5. The award was not competed, raising questions about potential cost savings and best value. 6. The North American Industry Classification System (NAICS) code 336611 points to shipbuilding and repairing. 7. The contract was awarded by the Department of the Navy, a major defense spender.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging without more specific details on the 'HPY Core' components and services. However, the Cost Plus Fixed Fee (CPFF) contract type, while common in complex shipbuilding, carries inherent risks of cost escalation. Without a competitive bidding process, it's difficult to definitively assess if the fixed fee represents fair value or if alternative pricing structures could have yielded better results for the government. The obligated amount of $79.9 million is substantial, underscoring the need for rigorous oversight to ensure efficient use of taxpayer funds.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was not competed, indicating a sole-source award. This typically occurs when only one responsible source can provide the required goods or services, or in situations where the government has a compelling justification for not seeking competition. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs than if multiple bidders had vied for the contract. The justification for this sole-source award would need to be thoroughly documented to ensure it aligns with federal procurement regulations.

Taxpayer Impact: The absence of competition means taxpayers may not have benefited from the cost efficiencies that can arise from a competitive bidding process. This could translate to a higher overall expenditure for the government compared to a scenario with multiple bids.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives critical components and services for the CVN 78 class aircraft carriers. The contract supports the maintenance and enhancement of advanced naval capabilities, crucial for national defense. The geographic impact is likely concentrated around Huntington Ingalls' shipbuilding facilities, contributing to regional economies. This contract supports a specialized workforce in the shipbuilding and repair industry, including engineers, technicians, and skilled laborers.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to higher costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize cost overruns if not closely monitored.
Specific details of 'HPY Core' are not provided, making it difficult to assess the scope and necessity of the work.
Long contract duration increases the risk of scope creep and unforeseen cost increases.

Positive Signals

Awarded to a known entity in shipbuilding, Huntington Ingalls Inc., suggesting potential for expertise.
Focus on a specific, high-value naval asset (CVN 78 Class) indicates strategic importance.
Contract duration suggests a commitment to long-term naval readiness.

Sector Analysis

The shipbuilding and repair sector is a critical component of the U.S. industrial base, particularly for national defense. This contract falls within the broader defense industrial base, specifically supporting the construction and maintenance of capital-intensive naval assets. The CVN 78 class represents the next generation of aircraft carriers, requiring highly specialized components and services. Spending in this sector is often characterized by large, long-term contracts awarded to a limited number of prime contractors due to the complexity and scale of the projects. Comparable spending benchmarks would typically involve other major naval shipbuilding programs.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' flag is also false, suggesting no specific small business subcontracting goals were explicitly stated or tracked in this data snippet. Given the nature of large-scale naval shipbuilding, prime contractors like Huntington Ingalls Inc. are typically expected to engage small businesses for specialized components or services, but the direct impact and specific subcontracting plans are not detailed here. The absence of explicit set-asides or goals might mean that opportunities for small businesses are less structured or dependent on the prime contractor's internal subcontracting strategy.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the Cost Plus Fixed Fee structure and the sole-source nature, rigorous oversight is crucial to manage costs, ensure performance, and verify the necessity of expenditures. The Inspector General for the Department of Defense would likely have jurisdiction for audits and investigations related to potential fraud, waste, or abuse. Transparency regarding the justification for the sole-source award and detailed cost breakdowns would be key accountability measures.

Related Government Programs

CVN 78 Class Aircraft Carrier Program
Naval Shipbuilding and Repair Contracts
Defense Department Major Weapons Systems Procurement
Shipbuilding and Repair NAICS 336611

Risk Flags

Sole-source award bypasses competitive pricing.
Cost Plus Fixed Fee contract type carries risk of cost escalation.
Lack of detailed scope for 'HPY CORE' hinders value assessment.
Long contract duration increases exposure to unforeseen issues.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $79.9 million to HUNTINGTON INGALLS INC. CVN 78 CLASS HPY CORE FY15

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 $79.9 million.

What is the period of performance?

Start: 2015-04-20. End: 2019-09-26.

What specific components or services does the 'CVN 78 CLASS HPY CORE' entail, and how does this contribute to the overall functionality of the aircraft carrier?

The 'CVN 78 CLASS HPY CORE' likely refers to a critical system or set of components essential for the operation of the Gerald R. Ford-class (CVN 78) aircraft carriers. While the provided data does not detail the exact nature of the 'HPY CORE,' in naval shipbuilding, 'core' components often relate to propulsion, power generation, or essential operational systems. For the CVN 78 class, these carriers feature advanced technologies such as the Electromagnetic Aircraft Launch System (EMALS) and Advanced Arresting Gear (AAG), as well as a new nuclear power plant. This contract could be for the fabrication, integration, or testing of a specific module or system related to these advanced capabilities, ensuring the carrier's readiness and operational effectiveness. The $79.9 million award suggests a significant subsystem or a complex integration effort.

What is the justification for awarding this contract on a sole-source basis, and what due diligence was performed to ensure no other sources could meet the requirement?

The justification for a sole-source award typically stems from specific circumstances outlined in federal acquisition regulations, such as the uniqueness of the technology or capability, the need for compatibility with existing systems, or a lack of available sources. For a complex defense platform like the CVN 78 class, it's possible that Huntington Ingalls Inc. is the only entity with the proprietary knowledge, specialized facilities, or existing production line necessary to provide the 'HPY CORE' without significant delays or cost increases. Federal regulations (e.g., FAR Part 6) require agencies to document the justification for other than full and open competition. This documentation would detail why competition is not feasible and outline any market research conducted to confirm the lack of alternative sources. Without access to this justification document, it is difficult to ascertain the precise reasons and the extent of due diligence.

How does the Cost Plus Fixed Fee (CPFF) contract structure for this $79.9 million award manage the inherent risks of cost overruns in shipbuilding?

The Cost Plus Fixed Fee (CPFF) contract structure involves the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. While the fixed fee provides the contractor with an incentive to control costs (as their profit is capped), the government bears the risk of cost overruns if actual costs exceed the estimated costs. For a contract of this magnitude in shipbuilding, effective management relies heavily on robust government oversight. This includes detailed cost monitoring, regular audits of incurred costs, strict adherence to the contract's scope of work, and proactive identification of potential issues that could drive up expenses. The Department of the Navy would need to employ experienced contract specialists and technical representatives to scrutinize contractor expenditures and ensure that all costs are reasonable, allocable, and necessary for the contract's completion.

What is the historical spending pattern for the CVN 78 Class HPY CORE or similar components, and how does this $79.9 million award compare?

Historical spending data for the specific 'CVN 78 CLASS HPY CORE' is not readily available in the provided snippet, making a direct comparison difficult. However, the CVN 78 class itself represents a significant investment, with the lead ship costing upwards of $13 billion. Contracts for major components and systems for this class are typically in the tens to hundreds of millions of dollars. Given that this is a 'core' component, it is likely a substantial piece of the ship's overall construction. Without prior awards for the exact same 'HPY CORE' or comparable systems on previous Ford-class carriers, it's hard to benchmark precisely. However, the $79.9 million figure is consistent with the scale of funding required for major subsystems in advanced naval platforms. Future awards for subsequent Ford-class carriers or different 'core' components would provide better comparative data points.

What are the potential performance risks associated with this contract, considering it's a sole-source award for a critical naval component?

Performance risks for a sole-source contract on a critical naval component like the 'CVN 78 CLASS HPY CORE' are significant. Without competition, there's less external pressure on the contractor to innovate or optimize performance beyond contractual requirements. If Huntington Ingalls Inc. encounters unforeseen technical challenges, delays in material procurement, or labor issues, the government has limited recourse beyond contract negotiation or termination, which can be costly and time-consuming. Furthermore, the CPFF structure, while covering costs, doesn't inherently guarantee superior performance. The government's ability to define clear performance metrics, conduct rigorous testing, and maintain strong oversight is paramount to mitigating these risks and ensuring the 'HPY CORE' meets the demanding operational standards of a modern aircraft carrier.

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: N0002414R2121

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

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: $95,298,311

Exercised Options: $94,817,964

Current Obligation: $79,889,509

Actual Outlays: $-3,403

Subaward Activity

Number of Subawards: 28

Total Subaward Amount: $3,173,447

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline