Navy's $47.3M shipbuilding contract awarded to Huntington Ingalls Inc. raises questions on competition and value

Contract Overview

Contract Amount: $47,276,684 ($47.3M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2017-08-04

End Date: 2018-12-28

Contract Duration: 511 days

Daily Burn Rate: $92.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CVN69 FY17 PIA EXECUTION IGF::OT::IGF

Place of Performance

Location: PORTSMOUTH, PORTSMOUTH CITY County, VIRGINIA, 23709

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $47.3 million to HUNTINGTON INGALLS INC for work described as: CVN69 FY17 PIA EXECUTION IGF::OT::IGF Key points: 1. Contract awarded on a non-competitive basis, limiting price discovery. 2. Significant duration of 511 days suggests a complex and lengthy project. 3. Cost-plus-fixed-fee structure may incentivize cost overruns. 4. Lack of small business participation noted. 5. Oversight is crucial given the sole-source nature of the award.

Value Assessment

Rating: questionable

The contract's value is difficult to benchmark due to its sole-source nature and the specific nature of shipbuilding and repair. Without competitive bids, it's challenging to ascertain if the $47.3 million represents a fair market price. The cost-plus-fixed-fee (CPFF) pricing structure, while common for complex projects, can lead to higher final costs compared to fixed-price contracts if not managed rigorously. Further analysis of the fixed fee and the base cost components would be needed to assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not solicit bids from multiple potential contractors. This typically occurs when only one contractor possesses the necessary specialized capabilities, or in cases of urgent need. The absence of competition means there was no direct price comparison or negotiation against alternative offers, potentially impacting the final price paid by the government.

Taxpayer Impact: Sole-source awards can lead to higher costs for taxpayers as the government does not benefit from the competitive pressure that drives down prices.

Public Impact

The primary beneficiary is Huntington Ingalls Inc., a major defense contractor. The contract supports shipbuilding and repair services for naval assets. The geographic impact is likely concentrated around the contractor's facilities, primarily in Virginia. This contract supports a skilled workforce in the shipbuilding and repair sector.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing.
Cost-plus-fixed-fee structure carries inherent cost escalation risks.
Lack of small business involvement may limit broader economic participation.

Positive Signals

Awarded to a known, experienced defense contractor.
Contract duration suggests a substantial and potentially critical project.

Sector Analysis

The shipbuilding and repair sector is a critical component of the U.S. defense industrial base, characterized by high barriers to entry, specialized labor, and significant capital investment. This contract falls within the broader industrial manufacturing and defense sector. Comparable spending benchmarks are difficult to establish without more specific details on the vessel or repair work involved, but the scale suggests a significant undertaking for a major naval platform.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of subcontracting plans involving small businesses. The absence of small business participation in a contract of this magnitude means that opportunities for smaller firms within the defense industrial base are missed. This could limit the broader economic impact and the development of a more diverse supplier ecosystem for naval shipbuilding and repair.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and CPFF structure, rigorous oversight of cost, schedule, and performance is essential. The Inspector General's office within the Department of Defense may also conduct audits or investigations to ensure funds are used appropriately and contract terms are met.

Related Government Programs

Naval Shipbuilding Programs
Ship Repair and Maintenance Contracts
Defense Industrial Base Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee pricing
Lack of small business participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $47.3 million to HUNTINGTON INGALLS INC. CVN69 FY17 PIA EXECUTION IGF::OT::IGF

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 $47.3 million.

What is the period of performance?

Start: 2017-08-04. End: 2018-12-28.

What specific vessel or class of vessels does this contract pertain to, and what is the scope of the shipbuilding/repair work?

The provided data does not specify the exact vessel or class of vessels involved in this contract (CVN69 FY17 PIA EXECUTION IGF). However, 'CVN69' typically refers to the USS Dwight D. Eisenhower, a Nimitz-class aircraft carrier. The 'PIA EXECUTION' likely indicates a specific phase or project execution related to the Planning, Installation, and Activation of systems or components. The scope would involve the complex processes of shipbuilding or major repair/overhaul, including hull work, systems integration, outfitting, and testing, tailored to the specific needs of an aircraft carrier during its service life.

What is the historical spending pattern for similar shipbuilding and repair contracts awarded by the Department of the Navy to Huntington Ingalls Inc.?

Huntington Ingalls Industries (HII), including its predecessor Northrop Grumman Shipbuilding, has been a primary contractor for U.S. Navy aircraft carriers and submarines for decades. Historical spending patterns show consistent, multi-billion dollar awards for new construction (like the Ford-class carriers) and extensive service life extensions, overhauls, and repairs for existing fleets, including Nimitz-class carriers. The $47.3 million for FY17 execution phase work on CVN69 is a relatively small component compared to the full lifecycle costs of carrier construction or major refits, but it reflects ongoing maintenance and modernization efforts typical of HII's long-standing relationship with the Navy.

What are the key performance indicators (KPIs) and milestones associated with this contract, and how was performance measured?

Specific KPIs and milestones for this contract are not detailed in the provided data. However, for shipbuilding and repair contracts, typical KPIs include adherence to schedule, cost control within the fixed fee and estimated cost parameters, quality of workmanship, safety performance, and successful testing and integration of systems. Performance measurement would likely involve regular progress reports, site inspections, technical reviews, and milestone completion sign-offs by Navy program managers and quality assurance representatives. The CPFF structure necessitates close monitoring of incurred costs against the estimated cost base.

What is the justification for awarding this contract on a sole-source basis, especially given the significant dollar amount?

The justification for a sole-source award, particularly for a vessel like an aircraft carrier (CVN69), often stems from the highly specialized and unique nature of the work required. Huntington Ingalls Industries is the sole builder of U.S. Navy aircraft carriers and possesses unique facilities, tooling, and expertise. For specific repair or modernization phases, the original builder or a highly specialized entity may be deemed the only source capable of performing the work efficiently and safely, especially if proprietary knowledge or unique infrastructure is involved. The Navy would have likely documented this justification through a Justification and Approval (J&A) process, citing reasons such as technical expertise, industrial base requirements, or lack of viable alternatives.

How does the Cost Plus Fixed Fee (CPFF) structure potentially impact the final cost and contractor incentives compared to other contract types?

The Cost Plus Fixed Fee (CPFF) contract type is used when the exact costs cannot be easily predicted, but the government wants to limit the contractor's profit. In this structure, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing their profit. This structure incentivizes the contractor to control costs, as the fee remains constant regardless of the final cost. However, it can also lead to higher overall costs for the government compared to fixed-price contracts because the risk of cost overruns is largely borne by the government. Contractor incentives are focused on completing the work within the estimated cost to maximize their effective profit margin, but there's less incentive for aggressive cost reduction than in a firm-fixed-price contract.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › NON-NUCLEAR SHIP REPAIR

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N4215817R0002

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: $47,276,684

Exercised Options: $47,276,684

Current Obligation: $47,276,684

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline