DoD's $6.7B DDG 51 Class Ship Construction contract with Huntington Ingalls faces cost scrutiny

Contract Overview

Contract Amount: $6,722,004,636 ($6.7B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2018-09-27

End Date: 2032-07-09

Contract Duration: 5,034 days

Daily Burn Rate: $1.3M/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: FY18-FY22 DDG 51 CLASS SHIP CONSTRUCTION

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $6.72 billion to HUNTINGTON INGALLS INCORPORATED for work described as: FY18-FY22 DDG 51 CLASS SHIP CONSTRUCTION Key points: 1. The contract value of $6.72 billion over five years highlights significant investment in naval shipbuilding. 2. Huntington Ingalls Incorporated is the sole awardee, raising questions about competition. 3. The fixed-price incentive contract type suggests efforts to control costs, but performance risks remain. 4. This spending falls within the broader Defense sector, specifically naval shipbuilding and repair.

Value Assessment

Rating: questionable

The total award of $6.72 billion for 2 DDG 51 class ships over 5 years suggests a high per-ship cost. Benchmarking against similar naval vessel contracts is crucial to assess value for money, especially given the fixed-price incentive structure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' indicating a limited competition scenario. This approach may restrict price discovery and potentially lead to higher costs compared to full and open competition.

Taxpayer Impact: The limited competition and significant contract value raise concerns about taxpayer impact, as optimal pricing may not have been achieved.

Public Impact

Significant taxpayer funds allocated to naval defense infrastructure. Impacts the shipbuilding and repair industry, potentially affecting jobs and supply chains. Ensures the continued modernization and readiness of the U.S. Navy's fleet. Potential for cost overruns or schedule delays in a complex, long-term project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition
High contract value
Long contract duration
Fixed-price incentive contract risks

Positive Signals

Supports critical defense capabilities
Investment in advanced shipbuilding technology
Potential for economic stimulus in the sector

Sector Analysis

This contract falls under the Defense sector, specifically naval shipbuilding. The $6.72 billion award for two DDG 51 class destroyers represents a substantial portion of the Navy's shipbuilding budget, requiring careful oversight to ensure cost-effectiveness and timely delivery.

Small Business Impact

The data does not indicate specific subcontracting opportunities for small businesses. Further analysis is needed to determine the extent of small business participation in this large shipbuilding contract.

Oversight & Accountability

The long duration and high value of this contract necessitate robust oversight from the Department of the Navy to monitor performance, manage risks, and ensure adherence to contract terms and taxpayer interests.

Related Government Programs

Ship Building and Repairing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Limited competition may lead to higher costs.
Long contract duration increases exposure to economic and technical risks.
Complexity of warship construction presents inherent schedule and performance challenges.
Reliance on a single prime contractor for critical defense assets.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $6.72 billion to HUNTINGTON INGALLS INCORPORATED. FY18-FY22 DDG 51 CLASS SHIP CONSTRUCTION

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 $6.72 billion.

What is the period of performance?

Start: 2018-09-27. End: 2032-07-09.

What is the projected cost per ship, and how does it compare to historical data or industry benchmarks for similar vessels?

The total award of $6.72 billion for two DDG 51 class ships over approximately five years suggests a significant cost per vessel. A detailed cost breakdown and comparison with previous DDG 51 constructions or comparable naval shipbuilding projects are essential to determine if this represents good value for the taxpayer. Benchmarking against industry standards for complex warships is critical for a comprehensive value assessment.

What specific factors led to the 'exclusion of sources' in the competition, and what are the associated risks to cost and schedule?

The exclusion of sources suggests that only specific contractors were considered eligible, potentially due to specialized capabilities or prior work. This limited competition increases the risk of higher prices and reduced innovation. The Department of the Navy must ensure that the chosen contractor can meet all requirements efficiently and that robust performance metrics are in place to mitigate schedule and cost risks.

How effectively does the 'fixed-price incentive' contract structure mitigate cost overruns given the complexity and long duration of the project?

A fixed-price incentive contract aims to share cost savings and overruns between the government and contractor, incentivizing efficiency. However, for a complex, multi-year project like warship construction, the initial cost estimates are critical. The effectiveness hinges on accurate baseline cost projections and the contractor's ability to manage technical and production challenges without exceeding target costs, requiring diligent government oversight.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N0002418R2302

Offers Received: 2

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: $6,821,671,839

Exercised Options: $6,725,388,348

Current Obligation: $6,722,004,636

Subaward Activity

Number of Subawards: 2192

Total Subaward Amount: $1,148,314,583

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline