Navy awards $72.6M contract for DDG(X) shipbuilder design, with Huntington Ingalls Inc. as sole source

Contract Overview

Contract Amount: $72,621,719 ($72.6M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2022-07-22

End Date: 2028-07-21

Contract Duration: 2,191 days

Daily Burn Rate: $33.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: DDG(X) SHIPBUILDER DESIGN ENGINEERING

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $72.6 million to HUNTINGTON INGALLS INCORPORATED for work described as: DDG(X) SHIPBUILDER DESIGN ENGINEERING Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Significant investment in future naval capabilities, specifically the DDG(X) program. 3. Cost-plus award fee structure incentivizes performance but can lead to higher final costs. 4. Long contract duration of approximately 6 years suggests a complex, multi-phase project. 5. Focus on design engineering indicates early-stage development for a major shipbuilding program. 6. Potential for cost overruns due to the nature of cost-plus contracts.

Value Assessment

Rating: fair

The contract value of $72.6 million for design engineering is substantial, but without comparable sole-source contracts for similar early-stage naval vessel design, a direct value-for-money assessment is challenging. The cost-plus award fee (CPAF) pricing structure allows for cost reimbursement plus an additional fee based on performance, which can be effective for complex projects where costs are uncertain. However, CPAF contracts historically carry a higher risk of cost growth compared to fixed-price contracts. Benchmarking against industry standards for ship design services would be necessary for a more precise valuation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one bidder, Huntington Ingalls Incorporated, was solicited. This approach is typically used when a unique capability or specialized expertise is required, or in situations where competition is deemed impractical or not in the government's best interest. The lack of competition means that the government did not benefit from a range of proposals and pricing strategies that could have emerged from a competitive bidding process, potentially impacting the final price.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage competition to secure the best possible pricing for taxpayers. This can result in higher costs than might be achieved through a fully competed process.

Public Impact

The primary beneficiary is the U.S. Navy, which will receive critical design engineering services for the next-generation DDG(X) destroyer. This contract supports the development of advanced naval combat capabilities, enhancing national security. The contract is geographically focused on Mississippi, where Huntington Ingalls Incorporated's shipbuilding facilities are located. It will likely sustain or create high-skilled jobs in naval architecture, engineering, and related fields within the shipbuilding industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus award fee structure introduces risk of cost overruns.
Long contract duration may obscure performance issues if not closely monitored.
Dependence on a single contractor for critical design phase.

Positive Signals

Award to an experienced, established shipbuilder with a track record in naval vessel construction.
Focus on a critical future capability (DDG(X)) aligns with long-term defense strategy.
Cost-plus award fee structure can incentivize contractor performance and innovation.
Long-term contract provides stability for program development and execution.

Sector Analysis

The shipbuilding and repair industry (NAICS 336611) is a capital-intensive sector critical to national defense. This contract falls within the defense sector, specifically focusing on the design phase of a major naval platform. The DDG(X) program represents a significant investment in modernizing the fleet, and contracts for its development are typically awarded to large, established shipbuilders with the necessary infrastructure and expertise. Spending in this area is driven by defense modernization priorities and the need to replace aging vessels with advanced capabilities.

Small Business Impact

This contract was awarded directly to Huntington Ingalls Incorporated and does not appear to include specific small business set-aside provisions. As a sole-source award to a large prime contractor, the primary impact on small businesses would be through potential subcontracting opportunities. The extent to which small businesses will participate depends on Huntington Ingalls' subcontracting plan and the availability of specialized services or components that can be sourced from small businesses within the shipbuilding supply chain.

Oversight & Accountability

Oversight for this contract will primarily reside with the Department of the Navy, specifically the Naval Sea Systems Command (NAVSEA). The cost-plus award fee structure necessitates robust financial and performance monitoring to ensure costs are reasonable and performance targets are met. Transparency will be facilitated through regular reporting requirements from the contractor. The Inspector General of the Department of Defense may also conduct audits or investigations as deemed necessary to ensure accountability and prevent fraud, waste, and abuse.

Related Government Programs

DDG-51 Arleigh Burke-class Destroyer Program
Littoral Combat Ship (LCS) Program
Constellation-class Frigate Program
Naval Ship Design Bureau Services
Future Surface Combatant Programs

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $72.6 million to HUNTINGTON INGALLS INCORPORATED. DDG(X) SHIPBUILDER DESIGN ENGINEERING

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 $72.6 million.

What is the period of performance?

Start: 2022-07-22. End: 2028-07-21.

What is Huntington Ingalls Incorporated's track record with large, sole-source naval shipbuilding design contracts?

Huntington Ingalls Incorporated (HII) has a long and extensive history in naval shipbuilding, including significant roles in the design and construction of major surface combatants for the U.S. Navy. While specific details on past sole-source design contracts for entirely new classes of vessels are often proprietary or embedded within larger program awards, HII has been the prime contractor for the Arleigh Burke-class destroyers (DDG-51) and has been involved in the design and construction of aircraft carriers and amphibious assault ships. Their experience spans decades, encompassing complex engineering challenges and large-scale production. The DDG(X) program leverages this deep institutional knowledge and established infrastructure, making them a logical, albeit sole-source, choice for critical design phases where continuity and specialized expertise are paramount.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for this stage of a shipbuilding program?

For the early design and engineering phases of complex platforms like the DDG(X), a Cost Plus Award Fee (CPAF) contract is often chosen when the scope of work and associated costs cannot be precisely defined upfront. Unlike fixed-price contracts, which offer cost certainty but can stifle innovation or lead to contractor disputes over scope changes, CPAF allows the government to reimburse the contractor for allowable costs while providing an incentive fee for achieving specific performance objectives. This structure is generally considered more flexible than fixed-price for R&D-intensive or design-heavy efforts where requirements may evolve. However, it carries a higher risk of cost growth compared to fixed-price contracts because the government bears more of the cost uncertainty. It requires diligent oversight to manage costs and ensure the award fee effectively drives desired outcomes.

What are the primary risks associated with a sole-source award for a critical shipbuilding design contract?

The primary risk associated with a sole-source award for a critical shipbuilding design contract is the lack of competitive pressure, which can lead to suboptimal pricing and potentially less innovation. Without competing bids, the government may pay a higher price than if multiple contractors had vied for the work. Furthermore, a sole-source award can reduce the incentive for the contractor to be highly efficient or cost-conscious, as there is no direct competitor to benchmark against. There's also a risk that the government might overlook alternative design approaches or technologies that a more competitive process could have surfaced. This necessitates a strong government oversight team to ensure the contractor is performing diligently and that costs remain reasonable.

What is the historical spending pattern for DDG-class ship design and engineering within the Department of the Navy?

Historical spending on DDG-class ship design and engineering, particularly for the Arleigh Burke (DDG-51) class, has been substantial over several decades. While exact figures for design phases of individual ships are often bundled into larger construction contracts or program-level funding, the initial design and development of new classes represent significant upfront investments. For instance, the original DDG-51 program involved extensive design work. Subsequent upgrades and modernization efforts also incur design costs. The DDG(X) program is intended to be the successor to the DDG-51 class, implying a similar scale of investment in its foundational design and engineering. Annual spending on naval shipbuilding design can fluctuate based on program starts and milestones, but it consistently represents a critical component of the Navy's shipbuilding budget, often running into hundreds of millions of dollars over the lifecycle of a new platform's development.

How does the geographic location of the contractor (Mississippi) impact the execution of this design engineering contract?

The geographic location of Huntington Ingalls Incorporated in Mississippi is highly relevant to this contract, as it is home to their Ingalls Shipbuilding division, a major U.S. naval shipyard. This proximity ensures that the design engineering efforts are closely integrated with the practicalities of shipbuilding and construction. Having the design team and the future construction facility in the same general region facilitates collaboration, reduces logistical challenges, and allows for rapid feedback loops between designers and builders. This can be particularly advantageous during the early stages of a complex program like DDG(X), where design iterations and constructability reviews are crucial. It also means that the economic benefits of this contract, such as job creation and supplier engagement, are concentrated within Mississippi's industrial base.

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: N0002422R2319

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

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: $136,499,999

Exercised Options: $110,118,073

Current Obligation: $72,621,719

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline