Navy awards $3B for LPD 28 long lead time material, with limited competition

Contract Overview

Contract Amount: $2,997,306,666 ($3.0B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2015-12-04

End Date: 2025-12-30

Contract Duration: 3,679 days

Daily Burn Rate: $814.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: LPD 28 LONG LEAD TIME MATERIAL

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $3.00 billion to HUNTINGTON INGALLS INCORPORATED for work described as: LPD 28 LONG LEAD TIME MATERIAL Key points: 1. Significant investment in shipbuilding capacity, supporting national defense objectives. 2. Contract awarded to a single, established prime contractor, indicating specialized capabilities. 3. Long contract duration suggests a complex, multi-year project requiring sustained effort. 4. Fixed Price Incentive contract type aims to balance cost control with performance incentives. 5. Focus on long lead time material highlights proactive planning for future shipbuilding needs. 6. Potential for cost overruns exists given the fixed-price nature and long timeline.

Value Assessment

Rating: fair

The contract value of approximately $3 billion for long lead time material is substantial, reflecting the complexity and scale of modern naval shipbuilding. Benchmarking this specific award is challenging without detailed cost breakdowns, but it aligns with the high costs associated with advanced naval platforms. The fixed-price incentive structure suggests an attempt to manage costs, but the long duration and specialized nature of the work introduce inherent risks that could impact overall value for money if not closely managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one contractor, Huntington Ingalls Incorporated, was deemed capable of performing the required work. This approach is often taken for highly specialized or technologically advanced projects where competition is limited due to unique expertise, existing infrastructure, or security requirements. The lack of competition means that price discovery through a competitive bidding process was not utilized, potentially leading to higher costs than if multiple bidders had vied for the contract.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from the cost savings that typically arise from a competitive bidding process. This could result in a higher overall expenditure for the government compared to a scenario with multiple qualified bidders.

Public Impact

The U.S. Navy benefits directly through the procurement of critical components for future amphibious assault ships. This contract supports the construction of San Antonio-class amphibious transport dock ships, essential for projecting U.S. military power. The primary geographic impact is in Mississippi, where Huntington Ingalls Incorporated's shipyard is located, supporting regional economic activity. Significant workforce implications are expected at the contractor's facility, requiring skilled labor in shipbuilding and advanced manufacturing.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration (over 10 years) increases the risk of cost escalation and scope creep.
Fixed Price Incentive (FPI) contracts can lead to cost overruns if target costs are not accurately estimated or if performance incentives are not well-defined.
Reliance on a single contractor for critical long lead time material could create supply chain vulnerabilities.

Positive Signals

Awarding long lead time material proactively ensures timely delivery of essential components for future ship construction.
The FPI contract structure incentivizes the contractor to meet performance targets while managing costs.
The contractor, Huntington Ingalls Incorporated, has extensive experience in naval shipbuilding, suggesting a high likelihood of successful execution.
This contract supports the modernization and expansion of the U.S. Navy's amphibious fleet, a key national security capability.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the U.S. defense industrial base. The market is highly concentrated, with a few large, specialized firms dominating major naval construction. Spending in this sector is driven by defense appropriations and strategic shipbuilding plans. Comparable spending benchmarks are difficult to establish precisely due to the unique nature of each vessel and its components, but multi-billion dollar awards for major platforms are typical for the prime contractors in this industry.

Small Business Impact

This contract does not appear to have a specific small business set-aside component, as it was awarded sole-source to a large prime contractor. However, Huntington Ingalls Incorporated is expected to utilize a broad supply chain, which may include opportunities for small businesses as subcontractors. The extent of small business participation will depend on the prime contractor's subcontracting plan and the availability of qualified small business suppliers for specialized components and services.

Oversight & Accountability

Oversight for this contract will primarily be conducted by the Department of the Navy's contracting and program management offices. The fixed-price incentive structure requires careful monitoring of cost performance against targets and evaluation of incentive fee achievement. Transparency may be limited due to the sole-source nature and the classified aspects often associated with defense procurement. Inspector General involvement would typically be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Amphibious Assault Ships
San Antonio-class LPDs
Naval Shipbuilding Programs
Long Lead Time Material Procurement
Defense Industrial Base Support

Risk Flags

Sole-source award
Long contract duration
Fixed Price Incentive contract type
Potential for cost overruns
Critical long lead time material

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.00 billion to HUNTINGTON INGALLS INCORPORATED. LPD 28 LONG LEAD TIME MATERIAL

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 $3.00 billion.

What is the period of performance?

Start: 2015-12-04. End: 2025-12-30.

What is the historical spending trend for LPD 28 long lead time material?

The provided data indicates a single award of $2,997,306,665.94 for LPD 28 long lead time material, awarded on December 4, 2015, with an estimated completion date of December 30, 2025. This suggests that this specific award represents the entirety of the funding allocated for this particular phase of the LPD 28 program within the given timeframe. Without access to broader contract modification history or related contract line item numbers (CLINs), it's difficult to establish a 'trend' in the traditional sense of year-over-year spending. However, the substantial value and long duration point to a significant, multi-year investment in a critical shipbuilding component. Future spending related to LPD 28 would likely involve subsequent contracts for construction, outfitting, and testing, or modifications to this existing contract.

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

Direct cost comparisons for long lead time material in shipbuilding are challenging due to the unique specifications of each vessel and the varying stages of procurement. However, the approximately $3 billion awarded for LPD 28's long lead time material is consistent with the high costs associated with advanced naval platforms. For context, the total acquisition cost for a Flight II San Antonio-class LPD (the class to which LPD 28 belongs) has historically ranged from $1.5 billion to over $2 billion per ship. This award for long lead time material represents a significant portion of the overall vessel cost, reflecting the specialized components and extensive planning required well before hull construction begins. The sole-source nature, however, means a direct value-for-money comparison against competitive bids is not possible.

What are the primary risks associated with this contract?

The primary risks associated with this contract include: 1. **Cost Overruns:** The Fixed Price Incentive (FPI) contract type, while aiming for cost control, carries the risk of exceeding target costs, especially given the long duration and complexity. If the contractor's actual costs exceed the target cost, the government shares in the excess, up to a ceiling. 2. **Schedule Delays:** Long lead time material procurement is critical for subsequent construction phases. Any delays in delivering these components could cascade and impact the overall delivery schedule of the LPD 28. 3. **Technical Obsolescence:** Given the long lead time and the potential for technological advancements during the contract period, there's a risk that some procured materials could become less relevant or require costly modifications. 4. **Sole-Source Dependency:** Relying on a single supplier for critical components increases vulnerability to supply chain disruptions, quality issues, or the contractor's financial instability.

What is the track record of Huntington Ingalls Incorporated in executing similar contracts?

Huntington Ingalls Industries (HII), the parent company of Huntington Ingalls Incorporated, has a long and extensive track record in naval shipbuilding, particularly with the San Antonio-class of amphibious transport dock ships. They are the sole builder of these vessels for the U.S. Navy. HII has successfully delivered numerous ships within this class and other major naval platforms, demonstrating significant expertise in complex shipbuilding programs. While specific performance metrics for every contract are not publicly detailed, HII is generally regarded as a capable and experienced prime contractor for large-scale naval construction. However, like any major defense contractor involved in long-term, complex projects, they have likely encountered challenges related to cost, schedule, and technical execution on various programs over the years.

How does this contract fit into the broader context of U.S. Navy shipbuilding goals?

This contract is integral to the U.S. Navy's long-term shipbuilding strategy, specifically focusing on maintaining and expanding its amphibious assault capabilities. The San Antonio-class (LPD 17 class) ships are crucial for transporting Marines and their equipment, supporting a wide range of military operations, from humanitarian assistance to full-scale combat. Procuring long lead time material ensures that the construction pipeline for these vital assets remains robust and that the Navy can meet its force structure goals. The emphasis on long lead time items reflects a strategic approach to mitigate risks associated with complex supply chains and specialized manufacturing processes inherent in modern warship construction, aiming to ensure timely delivery of new platforms.

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: N0002415R2431

Offers Received: 1

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: $3,263,832,994

Exercised Options: $3,191,898,641

Current Obligation: $2,997,306,666

Subaward Activity

Number of Subawards: 1030

Total Subaward Amount: $489,633,239

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline