HII Awarded $353.7M for Ship Building and Repair, a Sole-Source Contract

Contract Overview

Contract Amount: $353,730,963 ($353.7M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2016-09-29

End Date: 2024-09-30

Contract Duration: 2,923 days

Daily Burn Rate: $121.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: PLANNING FOR EXECUTION

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $353.7 million to HUNTINGTON INGALLS INC for work described as: PLANNING FOR EXECUTION Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Long contract duration of over 8 years suggests a significant, ongoing need. 3. Cost-plus-fixed-fee structure may incentivize cost increases. 4. The contract is for ship building and repair, a critical defense capability. 5. No small business set-aside noted, potentially impacting small business participation.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging due to its sole-source nature and specific focus on ship building and repair. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex projects where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts if not managed tightly. Without comparable sole-source contracts for similar scope and duration, assessing the precise value-for-money is difficult. However, the significant dollar amount indicates a substantial investment in naval capabilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This approach is typically used when only one source is capable of meeting the requirement, often due to specialized expertise, proprietary technology, or urgent needs. The lack of competition means that price discovery through market forces was not a factor in this award, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may face higher costs due to the absence of competitive bidding, as the government did not benefit from potential price reductions that competition can drive.

Public Impact

The primary beneficiaries are the U.S. Navy, receiving critical shipbuilding and repair services. Services delivered include the maintenance, modernization, and potentially construction of naval vessels. The geographic impact is likely concentrated around naval shipyards and bases where Huntington Ingalls operates. Workforce implications include the employment of skilled tradespeople, engineers, and support staff at the contractor's facilities.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract type can lead to cost overruns if not closely monitored.
Long contract duration may obscure potential inefficiencies over time.

Positive Signals

Addresses a critical national defense need for naval vessel maintenance and construction.
Long-term award provides stability for essential defense industrial base capabilities.
Contractor is a major player in the defense shipbuilding sector, suggesting capability.

Sector Analysis

The shipbuilding and repair sector is a vital component of the defense industrial base, characterized by high barriers to entry, significant capital investment, and specialized labor requirements. This contract falls within the broader defense sector, specifically supporting naval operations. Comparable spending in this area is substantial, reflecting the ongoing need for maintaining and modernizing a large fleet. The market is dominated by a few large prime contractors capable of handling complex naval construction and repair projects.

Small Business Impact

This contract does not appear to have a small business set-aside component. Given the nature of large-scale shipbuilding and repair, prime contractors like Huntington Ingalls often utilize a supply chain that includes small businesses for specialized components or services. However, the direct award to a large prime without a specific set-aside means that opportunities for direct contracting with small businesses under this specific award are limited. Subcontracting plans would be crucial for ensuring small business participation.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures would be embedded in the contract terms, including performance metrics, delivery schedules, and financial reporting requirements. Transparency may be limited due to the sole-source nature and defense classification of some aspects of shipbuilding. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Ship Maintenance
Shipbuilding Contracts
Defense Procurement
Fleet Readiness
Military Sealift Command Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $353.7 million to HUNTINGTON INGALLS INC. PLANNING FOR EXECUTION

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 $353.7 million.

What is the period of performance?

Start: 2016-09-29. End: 2024-09-30.

What is Huntington Ingalls Inc.'s track record with the Department of Defense, particularly in shipbuilding and repair contracts?

Huntington Ingalls Industries (HII) is a major U.S. defense contractor and the sole designer, builder, and refueler of nuclear-powered aircraft carriers and one of two providers of surface combatants and multi-mission ships for the U.S. Navy. Their track record with the Department of Defense is extensive, spanning decades and encompassing numerous large-scale shipbuilding and repair programs. They have a history of delivering complex vessels, including aircraft carriers, submarines, destroyers, and amphibious assault ships. While generally recognized for their capability in these highly specialized areas, like any large contractor, they have faced scrutiny over cost and schedule performance on specific programs. Their performance on this particular contract, given its long duration and sole-source nature, would require detailed review of specific delivery milestones, cost performance reports, and any associated contract modifications or claims.

How does the $353.7 million value of this contract compare to similar sole-source shipbuilding and repair contracts awarded by the Navy?

The $353.7 million value for this definitive contract, spanning nearly eight years, is substantial but falls within the typical range for major shipbuilding and repair efforts. Sole-source awards in this domain are common due to the highly specialized nature of naval vessel construction and maintenance, often requiring unique facilities, expertise, and security clearances possessed by only a few entities. For instance, the construction of a new aircraft carrier can cost billions, while major refits or modernization programs for existing vessels can also run into hundreds of millions. Without knowing the specific scope of work (e.g., routine maintenance, major overhaul, specific class of vessel), a precise comparison is difficult. However, the amount reflects a significant investment in maintaining or enhancing naval fleet readiness, consistent with the scale of other large, sole-source defense industrial base contracts.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract for shipbuilding and repair?

The primary risks associated with a sole-source, cost-plus-fixed-fee (CPFF) contract for shipbuilding and repair are twofold. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in a competitive environment. The government does not benefit from market forces driving down costs. Secondly, the CPFF structure, while providing flexibility for uncertain project costs, carries inherent risks of cost escalation. The contractor is reimbursed for allowable costs plus a fixed fee, which can incentivize cost-plus behavior if oversight is not rigorous. This means the government bears a significant portion of the cost risk. For shipbuilding, risks also include potential schedule delays, technical challenges in complex construction or repair, and the long-term nature of the contract, which can obscure performance issues over time if not actively managed.

What is the expected program effectiveness and impact of this contract on the Navy's operational capabilities?

The expected program effectiveness hinges on the successful execution of shipbuilding and repair services by Huntington Ingalls Inc. This contract is critical for maintaining and potentially expanding the U.S. Navy's fleet readiness and operational capabilities. Effective execution means ensuring vessels are available, mission-capable, and technologically updated to meet evolving threats and strategic requirements. The impact on operational capabilities is direct: a well-maintained and modernized fleet enhances the Navy's ability to project power, conduct sustained operations globally, and respond to crises. Conversely, any significant delays, cost overruns, or quality issues could degrade these capabilities, impacting national security. The long duration suggests a focus on sustained fleet support rather than a single project, aiming for continuous operational readiness.

How has federal spending on shipbuilding and repair, specifically for the Department of the Navy, trended over the past five years?

Federal spending on shipbuilding and repair for the Department of the Navy has historically been substantial and tends to fluctuate based on strategic priorities, fleet modernization plans, and budget allocations. Over the past five years, the Navy's shipbuilding budget has generally remained in the tens of billions of dollars annually, with specific allocations for new construction, conversion, and extensive repair/modernization programs. While exact figures vary year-to-year, there has been a consistent emphasis on recapitalizing aging platforms and investing in new capabilities, such as advanced combatants and unmanned systems. Factors influencing spending include geopolitical tensions, the need to replace retiring vessels, and the development of new technologies. This $353.7 million contract represents a portion of that larger, ongoing investment in maintaining and growing the naval fleet.

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: N0002416R4309

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: $360,326,580

Exercised Options: $360,326,580

Current Obligation: $353,730,963

Actual Outlays: $2,362,129

Subaward Activity

Number of Subawards: 1219

Total Subaward Amount: $97,363,924

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline