DoD awards $6.9B for DDG 51 Ship Construction, with Huntington Ingalls as prime contractor

Contract Overview

Contract Amount: $6,947,319,040 ($6.9B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2023-08-01

End Date: 2034-02-28

Contract Duration: 3,864 days

Daily Burn Rate: $1.8M/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: CONSTRUCTION OF DDG 51 SHIPS FY23-27

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $6.95 billion to HUNTINGTON INGALLS INCORPORATED for work described as: CONSTRUCTION OF DDG 51 SHIPS FY23-27 Key points: 1. Significant investment in naval shipbuilding capacity. 2. Long-term contract spanning multiple fiscal years. 3. Focus on advanced warship platforms. 4. Potential for follow-on work and sustainment. 5. Contract type suggests performance incentives. 6. Geographic concentration of work in Mississippi.

Value Assessment

Rating: good

The contract value of $6.9 billion for DDG 51 ship construction over a 10-year period appears to be within the expected range for major naval platforms. Benchmarking against similar shipbuilding contracts for destroyers and cruisers would provide a more precise value-for-money assessment. The fixed-price incentive structure aims to control costs while encouraging contractor efficiency. However, without detailed cost breakdowns and comparisons to industry standards for specific components and labor, a definitive value assessment is challenging.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' indicating a competitive process but with specific limitations. While not a sole-source award, the exclusion of certain sources suggests a pre-qualification or specific capability requirement. The presence of two bidders (implied by 'no': 2) indicates some level of competition, but the exact nature of the exclusion and the limited number of bidders may impact the full benefits of open competition in driving down prices.

Taxpayer Impact: The limited competition, while potentially necessary for specialized shipbuilding, may result in higher costs for taxpayers compared to a scenario with broader participation. The government must ensure the pricing reflects fair market value despite the restricted bidder pool.

Public Impact

Enhances U.S. Navy's surface combatant fleet capabilities. Supports national defense objectives and maritime security. Creates and sustains high-skilled jobs in shipbuilding and related industries. Economic impact on the Gulf Coast region of Mississippi. Delivers advanced guided-missile destroyers crucial for fleet readiness.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in long-term, complex shipbuilding projects.
Dependence on a limited number of bidders could affect future pricing leverage.
Risk of schedule delays in complex construction and integration.
Supply chain vulnerabilities for specialized components.

Positive Signals

Fixed-price incentive contract structure encourages cost control and performance.
Long-term award provides stability for contractor planning and workforce retention.
Focus on advanced DDG 51 class ships ensures modernization of naval assets.
Experienced prime contractor with a track record in naval shipbuilding.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the defense industrial base. The DDG 51 Arleigh Burke-class destroyer is a cornerstone of the U.S. Navy's fleet, representing significant technological advancement in naval warfare. The market for large naval vessel construction is highly specialized, with a limited number of domestic shipyards possessing the necessary infrastructure and expertise. Spending in this sector is driven by national security requirements and fleet modernization plans.

Small Business Impact

The data indicates that small business participation is not a primary focus for this specific contract award, as 'sb' is false. While the prime contractor, Huntington Ingalls, is a large entity, there may be opportunities for small businesses to participate as subcontractors in the supply chain for components, materials, or specialized services. The government should monitor subcontracting plans to ensure small business utilization where feasible.

Oversight & Accountability

Oversight for this contract will likely be managed by the Department of the Navy's acquisition and program management offices. The fixed-price incentive contract type necessitates close monitoring of cost performance and schedule adherence. Transparency will be maintained through regular reporting requirements from the contractor. The Inspector General of the Department of Defense may conduct audits and investigations to ensure proper use of funds and prevent fraud, waste, and abuse.

Related Government Programs

DDG 51 Arleigh Burke-class Destroyer Program
Naval Shipbuilding and Conversion Act Programs
Department of Defense Shipbuilding Contracts
U.S. Navy Fleet Modernization Initiatives

Risk Flags

Limited competition may impact price discovery.
Long contract duration increases risk of cost escalation.
Dependence on a single prime contractor location.
Potential for supply chain disruptions in specialized manufacturing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $6.95 billion to HUNTINGTON INGALLS INCORPORATED. CONSTRUCTION OF DDG 51 SHIPS FY23-27

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 $6.95 billion.

What is the period of performance?

Start: 2023-08-01. End: 2034-02-28.

What is Huntington Ingalls Incorporated's track record with DDG 51 class construction?

Huntington Ingalls Industries (HII), through its Ingalls Shipbuilding division, has a long and established history as the primary builder of the Arleigh Burke-class (DDG 51) destroyers. They have delivered numerous ships in this class to the U.S. Navy, often serving as the sole or lead builder for many hulls. Their experience encompasses the full lifecycle of construction, from initial design integration and fabrication to outfitting, testing, and delivery. HII has consistently met or exceeded Navy requirements for these complex vessels, demonstrating significant expertise in managing the intricate processes involved in modern warship construction. Their performance on previous DDG 51 contracts provides a strong basis for confidence in their ability to execute this new award, though ongoing performance monitoring remains crucial.

How does the $6.9 billion contract value compare to historical spending on DDG 51 ships?

The $6.9 billion figure represents the total anticipated cost for DDG 51 ship construction under this specific contract, covering fiscal years 2023-2027 (with an end date of 2034). Historical spending on DDG 51 ships has been substantial, as this class has been in production for decades. Individual ship costs have varied based on specific configurations, technological upgrades, and economic factors like inflation and labor rates over time. While this $6.9 billion award covers multiple ships over several years, it aligns with the significant, multi-billion dollar annual investments the Navy makes in shipbuilding. A precise comparison would require analyzing the number of ships awarded under this contract and comparing their average cost to previous multi-ship procurements, adjusted for inflation and scope.

What are the primary risks associated with this long-term shipbuilding contract?

The primary risks associated with this long-term shipbuilding contract are multifaceted. Firstly, the inherent complexity of constructing advanced naval vessels introduces risks of schedule delays and cost overruns, particularly given the 10-year duration. Technological advancements during the construction period could necessitate costly modifications. Secondly, the 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES' award type, while competitive, involves a limited pool of bidders, potentially impacting price negotiation leverage and increasing reliance on a few key suppliers. Thirdly, supply chain disruptions for specialized materials and components, exacerbated by global events, pose a significant risk to timely delivery. Finally, workforce availability and retention of skilled labor in the shipbuilding sector are critical factors that could impact performance.

How effective is the Fixed Price Incentive (FPI) contract type in managing costs for naval shipbuilding?

The Fixed Price Incentive (FPI) contract type is designed to provide a balance between cost control and flexibility for complex projects like naval shipbuilding. In an FPI contract, the government and contractor agree on a target cost, target profit, and a price ceiling. If the final cost is below the target, both parties share in the savings according to a predetermined formula. If the cost exceeds the target but remains below the ceiling, the contractor absorbs a larger portion of the overrun. This structure incentivizes the contractor to manage costs effectively to achieve a higher profit margin, while the price ceiling protects the government from unlimited cost increases. For shipbuilding, where cost certainty is challenging due to design evolution and production complexities, FPI offers a mechanism to share risks and rewards, encouraging efficiency while maintaining a degree of cost predictability.

What are the implications of the contract's geographic concentration in Mississippi?

The geographic concentration of this contract's execution in Mississippi, specifically at Huntington Ingalls' shipyard, has significant implications. It represents a substantial economic stimulus for the region, creating and sustaining thousands of high-skilled jobs in shipbuilding, engineering, and supporting trades. This concentration also fosters a specialized industrial ecosystem within Mississippi, potentially leading to further development of related industries and supply chains. However, it also concentrates risk; any disruptions at the Mississippi facility, whether due to natural disasters, labor issues, or other unforeseen events, could have a disproportionate impact on the contract's progress and the regional economy. It also means that the benefits of this federal spending are heavily localized.

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: N0002422R2302

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: $15,802,514,956

Exercised Options: $9,722,784,013

Current Obligation: $6,947,319,040

Subaward Activity

Number of Subawards: 355

Total Subaward Amount: $757,614,241

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline