Navy awards $49.2M for CVN 75 execution, a sole-source contract for shipbuilding and repair

Contract Overview

Contract Amount: $49,247,894 ($49.2M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2016-08-19

End Date: 2017-05-31

Contract Duration: 285 days

Daily Burn Rate: $172.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CVN 75 EXECUTION

Place of Performance

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

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $49.2 million to HUNTINGTON INGALLS INC for work described as: CVN 75 EXECUTION Key points: 1. The contract's value of $49.2 million represents a significant investment in naval asset maintenance. 2. As a sole-source award, the absence of competition may limit price negotiation advantages. 3. The cost-plus-fixed-fee structure necessitates close monitoring to ensure cost containment. 4. The contract duration of 285 days indicates a focused scope of work for the specified period. 5. The shipbuilding and repair sector is critical for maintaining the fleet's operational readiness.

Value Assessment

Rating: fair

Benchmarking the value of this specific contract is challenging without comparable sole-source awards for the CVN 75 execution. However, the cost-plus-fixed-fee (CPFF) pricing structure, while common for complex projects, carries inherent risks of cost overruns if not rigorously managed. The fixed fee component provides some predictability for the contractor's profit, but the overall cost is variable. Further analysis would require access to detailed cost breakdowns and historical performance data for similar maintenance or execution contracts on aircraft carriers.

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 employed when a specific contractor possesses unique capabilities, intellectual property, or is the only source capable of performing the required work, often due to specialized knowledge or existing infrastructure related to the asset. The lack of competition means that price discovery through market forces was not utilized, potentially leading to higher costs than if multiple bids had been solicited.

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 could arise from a competitive procurement process.

Public Impact

The primary beneficiary is the U.S. Navy, ensuring the continued operational readiness and maintenance of the aircraft carrier USS Harry S. Truman (CVN 75). The services delivered include the execution of tasks related to the ship's operational status, likely encompassing maintenance, repair, or specific project execution phases. The geographic impact is centered around naval shipyards and operational bases where the CVN 75 is stationed or undergoing maintenance. Workforce implications include employment for skilled labor in shipbuilding and repair trades, such as welders, pipefitters, electricians, and project managers, employed by Huntington Ingalls Inc.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus-fixed-fee contract requires diligent oversight to manage cost escalations.
Contract duration may not align with long-term strategic maintenance needs if not managed proactively.

Positive Signals

Award to a known entity (Huntington Ingalls Inc.) suggests a reliance on established expertise for critical naval assets.
Focus on execution for a specific hull (CVN 75) indicates targeted and necessary maintenance.
Definitive contract type provides a framework for a defined period of work.

Sector Analysis

The shipbuilding and repair sector is a vital component of the U.S. defense industrial base, supporting the maintenance, modernization, and construction of naval vessels. This contract falls within the broader category of defense contracting, specifically focusing on the sustainment of a major naval asset. The market is characterized by high barriers to entry due to specialized facilities, skilled labor requirements, and stringent regulatory oversight. Comparable spending benchmarks would typically involve other major maintenance availabilities or modernization efforts for aircraft carriers or other large naval platforms.

Small Business Impact

This contract was awarded to Huntington Ingalls Inc. and does not appear to have a small business set-aside component. As a sole-source award to a large prime contractor, the direct impact on small businesses is likely limited unless Huntington Ingalls Inc. actively subcontracts portions of the work to small business entities. The subcontracting plan, if any, would determine the extent to which small businesses participate in fulfilling the contract requirements. Without specific subcontracting data, it's difficult to assess the broader impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a cost-plus-fixed-fee contract, rigorous financial oversight is crucial to monitor expenditures against the estimated cost and ensure the fixed fee is earned appropriately. Transparency is facilitated through contract reporting mechanisms, though detailed cost breakdowns may be proprietary. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this award.

Related Government Programs

Naval Ship Maintenance Contracts
Aircraft Carrier Sustainment Programs
Defense Shipbuilding and Repair Contracts
Department of the Navy Ship Operations

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Potential for cost overruns without strong oversight

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $49.2 million to HUNTINGTON INGALLS INC. CVN 75 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 $49.2 million.

What is the period of performance?

Start: 2016-08-19. End: 2017-05-31.

What is the historical spending pattern for CVN 75 execution and maintenance by Huntington Ingalls Inc.?

Analyzing the historical spending for CVN 75 execution and maintenance by Huntington Ingalls Inc. requires access to detailed contract databases and historical award data. Without specific historical data for this exact contract line item or project code, it's difficult to provide precise figures. However, aircraft carriers like the CVN 75 undergo regular maintenance, modernization, and repair cycles throughout their operational lifespan, often involving multi-year contracts. Huntington Ingalls Inc., as a major shipbuilder and repairer, is a frequent recipient of such contracts. Past awards for similar large-scale maintenance availabilities on aircraft carriers have often been in the tens to hundreds of millions of dollars, reflecting the complexity and scope of work. A trend analysis would likely show cyclical spending tied to planned maintenance periods and potential upgrades.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar naval repair work?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used for complex, research and development, or specialized services where the scope of work is not precisely defined at the outset, or where significant uncertainties exist. For naval repair work, especially for large and complex platforms like aircraft carriers, CPFF can be advantageous when the exact nature and extent of repairs or execution tasks are difficult to predict before work begins. It allows the contractor to incur costs necessary to perform the work, and the government pays these costs plus a predetermined fixed fee representing the contractor's profit. However, this structure places a greater burden on the government to monitor costs closely to prevent overruns. Other contract types, such as Firm-Fixed-Price (FFP), offer more cost certainty for the government but require a very well-defined scope of work and may not be suitable for unpredictable repair scenarios. Cost-Plus-Incentive-Fee (CPIF) or Cost-Plus-Award-Fee (CPAF) contracts introduce performance incentives that can align contractor and government interests more closely than CPFF.

What are the key performance indicators (KPIs) typically monitored for a contract of this nature?

For a contract focused on the execution and repair of a naval vessel like the CVN 75, key performance indicators (KPIs) would typically revolve around schedule adherence, cost control, quality of work, and safety. Schedule adherence would involve meeting milestones for specific repair tasks, docking periods, and overall project completion within the contract duration. Cost control is paramount in a CPFF contract, focusing on managing actual costs against the estimated cost base and ensuring the fixed fee is justified by the work performed. Quality of work would be assessed through inspections, testing, and adherence to naval specifications and standards, ensuring the repairs and execution meet stringent operational requirements. Safety KPIs would track incident rates and compliance with safety protocols in a high-risk industrial environment. Additionally, technical performance metrics related to the successful completion of specific repair or upgrade tasks would be critical.

What is the typical lead time and complexity involved in preparing for a sole-source award for major ship maintenance?

Preparing for a sole-source award for major ship maintenance, particularly for a capital asset like an aircraft carrier, involves a significant lead time and considerable complexity. The process typically begins with extensive planning by the naval command to define the scope of work, estimated costs, and required expertise. Since it's a sole-source award, justification is critical and must demonstrate why only one contractor can perform the work, often involving technical expertise, unique facilities, or proprietary knowledge. This justification process itself can be lengthy and requires thorough documentation. The complexity arises from the intricate nature of naval vessel maintenance, which can involve hundreds of thousands of man-hours, specialized equipment, and coordination with numerous stakeholders. Lead times can range from several months to over a year, encompassing planning, justification, negotiation, and final award, especially for contracts valued in the tens of millions of dollars.

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

Sole-source, cost-plus-fixed-fee (CPFF) contracts for naval shipbuilding and repair present several potential risks. The primary risk of a sole-source award is the lack of competitive pressure, which can lead to higher prices than might be achieved in a competitive environment. The government does not benefit from the price discovery mechanisms inherent in bidding. For CPFF contracts, the risk lies in cost overruns. While the contractor's profit is fixed, the government bears the risk of increased costs if the project takes longer or requires more resources than initially estimated. This necessitates robust government oversight to scrutinize costs, prevent inefficiencies, and ensure the contractor is performing diligently. There's also a risk that without competitive pressure, the contractor may have less incentive to innovate or find cost-saving efficiencies beyond what is contractually required. Finally, reliance on a single source can create vulnerability if that contractor faces financial difficulties or operational disruptions.

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: N0002416R4327

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: $55,608,224

Exercised Options: $55,608,224

Current Obligation: $49,247,894

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline