DoD's $42.8M contract for nuclear propulsion modernization on USS George H.W. Bush awarded to Huntington Ingalls Inc

Contract Overview

Contract Amount: $42,765,178 ($42.8M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2015-06-22

End Date: 2016-06-05

Contract Duration: 349 days

Daily Burn Rate: $122.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: IGF::CL::IGF NUCLEAR PROPULSION AND COMPLEX MODERNIZATION WORK ON USS GEORGE H W BUSH (CVN 77) PLANNED INCREMENTAL AVAILABILITY.

Place of Performance

Location: PORTSMOUTH, PORTSMOUTH CITY County, VIRGINIA, 23709

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $42.8 million to HUNTINGTON INGALLS INC for work described as: IGF::CL::IGF NUCLEAR PROPULSION AND COMPLEX MODERNIZATION WORK ON USS GEORGE H W BUSH (CVN 77) PLANNED INCREMENTAL AVAILABILITY. Key points: 1. Contract awarded for complex modernization of nuclear propulsion systems, indicating specialized technical requirements. 2. The sole-source nature of the award warrants scrutiny regarding potential cost efficiencies and market alternatives. 3. A Cost Plus Fixed Fee (CPFF) contract type suggests potential for cost overruns if not closely managed. 4. The contract duration of 349 days points to a significant, albeit defined, scope of work. 5. The absence of small business involvement may limit opportunities for smaller firms in this specialized sector. 6. This contract falls within the broader category of shipbuilding and repair, a critical component of naval readiness.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its specialized nature and sole-source award. The CPFF structure means the final cost is not fixed upfront, making direct comparisons difficult without detailed cost breakdowns. However, the award amount of $42.8 million for modernization of nuclear propulsion systems on a specific carrier suggests a significant investment in maintaining critical naval assets. Further analysis would require access to detailed cost proposals and historical data for similar modernization efforts on other carriers.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Huntington Ingalls Inc., was solicited. This approach is typically justified when a unique capability or specialized knowledge is required, or in cases of urgent and compelling need. The lack of competition means that the government did not benefit from a bidding process that could drive down prices through market forces. This raises questions about whether alternative solutions or contractors were thoroughly explored.

Taxpayer Impact: The sole-source award means taxpayers may not have received the most competitive pricing available. Without a competitive bidding process, there is a risk that the awarded price is higher than it might have been if multiple firms had vied for the contract.

Public Impact

The primary beneficiaries are the U.S. Navy and national security, through the enhanced operational readiness of the USS George H.W. Bush. The contract delivers critical services related to the maintenance and modernization of nuclear propulsion systems, ensuring the carrier's long-term functionality. The geographic impact is centered around the naval shipyard where the work is performed, likely in Virginia given the 'VA' state code. The contract supports a highly skilled workforce specializing in nuclear engineering, shipbuilding, and complex mechanical systems.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee (CPFF) contract type can lead to cost overruns if not rigorously managed.
Lack of transparency in the sole-source justification process.
Specialized nature of nuclear propulsion work may limit the pool of qualified contractors, reducing competition.
Potential for scope creep in complex modernization projects under CPFF.

Positive Signals

Addresses critical need for nuclear propulsion modernization, ensuring naval asset readiness.
Awarded to a known entity (Huntington Ingalls Inc.) with presumed expertise in shipbuilding and carrier maintenance.
Contract duration is defined, providing a clear timeline for the modernization effort.
Focus on a specific, high-value asset (USS George H.W. Bush) indicates strategic investment.

Sector Analysis

The shipbuilding and repair sector is a vital component of the defense industrial base, characterized by high capital investment, specialized labor, and long contract cycles. Major naval contracts often involve complex systems integration and require extensive facilities. Spending in this sector is heavily influenced by geopolitical factors and defense budgets. Comparable spending benchmarks would typically involve other major overhauls or modernization efforts on aircraft carriers or other large naval vessels.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the highly specialized nature of nuclear propulsion modernization, it is likely that the prime contractor, Huntington Ingalls Inc., possesses unique capabilities and facilities. There is no explicit information on subcontracting plans for small businesses, but the complexity of the work might necessitate large, specialized subcontractors rather than a broad distribution to the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and potentially the Department of Defense's Inspector General. The CPFF contract type necessitates robust financial oversight to monitor costs and ensure they align with the fixed fee and the scope of work. Transparency regarding the justification for the sole-source award and detailed cost reporting would be key accountability measures. The effectiveness of oversight will depend on the rigor of audits and performance reviews conducted.

Related Government Programs

Naval Ship Modernization Programs
Aircraft Carrier Maintenance and Repair
Nuclear Propulsion Systems Maintenance
Defense Shipbuilding Contracts
Department of the Navy Shipyard Operations

Risk Flags

Sole Source Award
Cost Plus Fixed Fee Contract Type
Potential for Cost Overruns
Lack of Competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $42.8 million to HUNTINGTON INGALLS INC. IGF::CL::IGF NUCLEAR PROPULSION AND COMPLEX MODERNIZATION WORK ON USS GEORGE H W BUSH (CVN 77) PLANNED INCREMENTAL AVAILABILITY.

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 $42.8 million.

What is the period of performance?

Start: 2015-06-22. End: 2016-06-05.

What is Huntington Ingalls Inc.'s track record with similar nuclear propulsion modernization contracts?

Huntington Ingalls Industries (HII), the parent company of Huntington Ingalls Inc., has a long and extensive history with the U.S. Navy, particularly in the construction and maintenance of aircraft carriers, including those with nuclear propulsion. They are the sole builder of nuclear-powered aircraft carriers for the U.S. Navy. Their Newport News Shipbuilding division is responsible for the construction, repair, and overhaul of these complex vessels. Therefore, HII possesses significant, arguably unparalleled, experience with nuclear propulsion systems and carrier modernization. Specific details on past modernization contracts, including cost performance and schedule adherence, would require deeper access to contract databases and performance reports, but their overall position as the primary provider suggests a substantial track record.

How does the $42.8 million cost compare to similar nuclear propulsion modernization efforts on other carriers?

Directly comparing the $42.8 million cost is difficult without knowing the specific scope of modernization for the USS George H.W. Bush (CVN 77) and comparing it to identical modernization packages on other carriers. Nuclear propulsion modernization is a highly complex and variable undertaking, dependent on the specific systems being upgraded, the extent of overhaul required, and the overall condition of the vessel. Contracts for major refuelings and complex overhauls (like the Planned Incremental Availability - PIA) on Nimitz-class carriers can range from tens to hundreds of millions of dollars. The $42.8 million figure appears to be for a specific PIA, which is a planned maintenance period, rather than a full refueling and complex overhaul (RCOH). Therefore, it might represent a segment of the total lifecycle cost for nuclear propulsion maintenance.

What are the primary risks associated with a sole-source award for this type of contract?

The primary risks associated with a sole-source award for nuclear propulsion modernization include: 1. **Higher Costs:** Without competition, the contractor may not be incentivized to offer the lowest possible price, potentially leading to higher costs for taxpayers. 2. **Reduced Innovation:** A lack of competitive pressure can stifle innovation, as the contractor may not feel compelled to explore more efficient or advanced solutions. 3. **Contractor Lock-in:** The government becomes dependent on a single provider, potentially limiting future flexibility and negotiation leverage. 4. **Potential for Complacency:** The absence of competitive threats could lead to complacency in performance or quality control. 5. **Justification Scrutiny:** Sole-source awards often face increased scrutiny regarding the justification for not competing the contract, requiring robust documentation of unique capabilities or urgent needs.

How effective are Cost Plus Fixed Fee (CPFF) contracts in managing costs for complex defense projects?

Cost Plus Fixed Fee (CPFF) contracts are used when the scope of work is well-defined but the exact costs are uncertain, such as in research, development, or complex engineering projects. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This structure aims to incentivize the contractor to control costs, as the fee remains constant regardless of the final cost. However, effectiveness hinges on robust government oversight. Risks include potential cost overruns if initial estimates are inaccurate or if scope changes occur. The government must diligently monitor costs and performance to ensure the contractor is managing the project efficiently. While CPFF can be suitable for complex projects, it requires significant oversight to mitigate the risk of cost escalation compared to fixed-price contracts.

What is the historical spending pattern for nuclear propulsion maintenance on USS George H.W. Bush (CVN 77)?

Historical spending data specifically isolated for nuclear propulsion maintenance on the USS George H.W. Bush (CVN 77) is not readily available in public databases. However, as a Nimitz-class aircraft carrier, its maintenance lifecycle involves periodic Planned Incremental Availabilities (PIAs) and a major Refueling and Complex Overhaul (RCOH). These events, which include significant nuclear propulsion work, are substantial investments. For example, RCOHs for Nimitz-class carriers have historically cost upwards of $1 billion. PIAs, like the one potentially represented by this $42.8 million contract, are less extensive but still represent significant, recurring costs for maintaining the nuclear propulsion plant's readiness over the ship's multi-decade service life. Tracking these specific costs would require detailed analysis of Navy budget allocations and contract awards over time.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › NON-NUCLEAR SHIP REPAIR

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002415R4304

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc (UEI: 967362331)

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: $42,765,178

Exercised Options: $42,765,178

Current Obligation: $42,765,178

Subaward Activity

Number of Subawards: 5

Total Subaward Amount: $241,258

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline