Navy awards $117.7M contract for destroyer construction, with a significant portion for Ingalls Shipbuilding

Contract Overview

Contract Amount: $117,679,597 ($117.7M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 1997-04-05

End Date: 2002-08-12

Contract Duration: 1,955 days

Daily Burn Rate: $60.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: 199708!1700!7411!BS795!SUPERVISOR SHIPBUILDING CONVERSI!N0002496C2304 !A!*!A00052 !19970405!19980405!174786913!174786913!001922749!N!97514!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSON !MISS !0001!+000000223670!N!N!000000000000!1903!DESTROYERS !A3 !SHIPS !2SCY!DESTROYER DDG-51 !3731!3!*!*!C!B!A!*!A !Y!L!2!002!N!3A!A!N!C!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $117.7 million to HUNTINGTON INGALLS INCORPORATED for work described as: 199708!1700!7411!BS795!SUPERVISOR SHIPBUILDING CONVERSI!N0002496C2304 !A!*!A00052 !19970405!19980405!174786913!174786913!001922749!N!97514!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSO… Key points: 1. Contract awarded to Huntington Ingalls Incorporated, a major defense contractor. 2. The contract is for the construction of a destroyer, a key naval asset. 3. Fixed Price Incentive contract type suggests shared risk between government and contractor. 4. The contract duration is substantial, indicating a long-term commitment to shipbuilding. 5. Awarded by the Department of the Navy, highlighting defense sector focus. 6. Geographic location of the contractor in Mississippi may have local economic implications.

Value Assessment

Rating: good

The awarded amount of $117.7 million for a destroyer construction contract appears reasonable within the context of naval shipbuilding. While specific per-unit cost benchmarks for this exact class of destroyer are not provided, the fixed-price incentive structure aims to control costs. Comparing this to other destroyer construction contracts would provide a more precise value-for-money assessment, but the initial award suggests a competitive pricing strategy was employed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The fact that it's a definitive contract suggests a structured procurement process. The level of competition is a positive sign for price discovery and ensuring the government receives competitive pricing for complex defense assets like destroyers.

Taxpayer Impact: Full and open competition generally benefits taxpayers by driving down costs through market forces, leading to more efficient use of public funds.

Public Impact

The primary beneficiaries are the U.S. Navy, which receives a critical warship, and Huntington Ingalls Incorporated, which secures significant revenue and maintains its shipbuilding capabilities. The service delivered is the construction of a destroyer, enhancing naval fleet strength and national security. The geographic impact is concentrated in Pascagoula, Mississippi, where Ingalls Shipbuilding is located, supporting local jobs and the regional economy. Workforce implications include employment for skilled laborers, engineers, and support staff at the shipyard and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in fixed-price incentive contracts if not managed closely.
Long contract duration could be subject to changes in defense priorities or technological advancements.
Dependence on a single large contractor for critical naval assets could pose supply chain risks.

Positive Signals

Fixed-price incentive structure aligns contractor and government interests in cost control.
Full and open competition suggests a robust bidding process, likely yielding competitive pricing.
Award to a known, experienced shipyard like Ingalls Shipbuilding indicates a focus on reliable execution.

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically naval shipbuilding. The market for large naval vessels is highly concentrated, with a few major players capable of undertaking such complex projects. This contract represents a significant investment in maintaining and modernizing the U.S. Navy's fleet, aligning with broader defense spending trends aimed at projecting power and ensuring maritime security.

Small Business Impact

While this contract is a large award to a major prime contractor, it's important to assess subcontracting opportunities for small businesses. Large defense contracts often have subcontracting plans that aim to include small businesses, potentially creating opportunities for them within the supply chain for components, materials, or specialized services. The impact on the small business ecosystem depends on the specific subcontracting goals and their fulfillment.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are built into the fixed-price incentive structure, which requires the contractor to meet performance and cost targets. Transparency is generally maintained through contract awards databases and reporting requirements, though specific details of performance may be sensitive.

Related Government Programs

Arleigh Burke-class destroyers
Naval shipbuilding programs
Department of Defense shipbuilding contracts
Fixed-price incentive contracts
Major defense contractor awards

Risk Flags

Long contract duration
Fixed-price incentive contract type
Single prime contractor reliance

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $117.7 million to HUNTINGTON INGALLS INCORPORATED. 199708!1700!7411!BS795!SUPERVISOR SHIPBUILDING CONVERSI!N0002496C2304 !A!*!A00052 !19970405!19980405!174786913!174786913!001922749!N!97514!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSON !MISS !0001!+000000223670!N!N!000000000000!1903!DESTROYERS !A3 !SHIPS !2SCY!DESTROYER DDG-51 !3731!3!*!*!C!B!A!*!A !Y!L!2!0

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 $117.7 million.

What is the period of performance?

Start: 1997-04-05. End: 2002-08-12.

What is the historical spending pattern for destroyer construction by the Department of the Navy?

The Department of the Navy has a long history of investing in destroyer construction, with significant spending allocated over decades. Historically, contracts for destroyers have been awarded to a limited number of shipyards, reflecting the high capital investment and specialized expertise required. Spending fluctuates based on fleet modernization needs, geopolitical threats, and budgetary allocations. For instance, the Arleigh Burke-class destroyer program, to which this contract likely relates, has seen substantial investment over many years. Analyzing historical data reveals trends in contract values, award types (e.g., fixed-price vs. cost-plus), and the number of vessels procured in different fiscal years. This context helps in evaluating whether the current award represents a typical investment or a deviation from historical norms.

How does the awarded amount compare to the cost of similar destroyer classes or previous builds?

Comparing the $117.7 million award to similar destroyer classes or previous builds requires access to specific cost data for comparable vessels. However, the Arleigh Burke-class destroyers, a likely candidate for this contract, have seen per-unit costs vary significantly over their production run due to inflation, design modifications, and learning curve efficiencies. Early ships in the class were often more expensive per unit than later ones. The fixed-price incentive (FPI) nature of this contract suggests a target cost and a ceiling, with shared savings or overruns. Without direct comparable data for this specific hull number or configuration, a precise benchmark is difficult. However, industry reports and Congressional Research Service (CRS) analyses often provide ranges for destroyer acquisition costs, which can be used for a general comparison. The current award appears to be within the expected range for a modern destroyer, especially considering the complexities of shipbuilding.

What are the key performance indicators (KPIs) for this contract and how is performance being measured?

Key performance indicators (KPIs) for a destroyer construction contract typically revolve around schedule adherence, cost control, quality of construction, and technical performance specifications. For a Fixed Price Incentive (FPI) contract, the primary KPIs are meeting the target cost and delivery schedule, as deviations impact the final price paid by the government. Quality is measured through inspections, testing, and adherence to naval standards. Technical performance relates to the ship's systems meeting the required operational capabilities. The Navy's contracting officer and technical representatives monitor these KPIs through regular progress reports, shipyard inspections, and milestone reviews. Performance is formally assessed at key delivery points and upon final acceptance of the vessel.

What is the track record of Huntington Ingalls Incorporated (HII) in delivering similar naval contracts?

Huntington Ingalls Industries (HII), through its Ingalls Shipbuilding division, has a long and extensive track record in delivering complex naval vessels, including destroyers, aircraft carriers, and amphibious assault ships, for the U.S. Navy. They are a primary builder of the Arleigh Burke-class destroyers and have been instrumental in constructing other major surface combatants. While HII is a highly experienced and capable shipyard, like any large defense contractor, they have faced challenges in the past related to schedule delays and cost overruns on certain programs. However, their overall performance is generally considered strong, given the complexity and scale of the platforms they build. The Navy's continued awarding of significant contracts to HII suggests confidence in their ability to execute, despite potential program-specific hurdles.

What are the potential risks associated with this specific contract, and how are they being mitigated?

Potential risks for this destroyer construction contract include schedule delays due to supply chain disruptions, labor shortages, or unforeseen technical issues during construction. Cost overruns are also a risk, particularly with fixed-price incentive contracts, where the government shares in cost increases beyond the target. Technological obsolescence could be a concern given the long lead times in shipbuilding. Mitigation strategies employed by the Navy and HII likely include robust project management, detailed scheduling, proactive supply chain management, stringent quality control processes, and clear communication channels. The FPI contract structure itself incentivizes cost control, and the Navy's oversight aims to identify and address risks early in the process.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc (UEI: 967362331)

Address: 1000 ACCESS RD, PASCAGOULA, MS, 39567

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline