Navy awards $113.6M for shipbuilding and repair, with limited competition and cost-plus-fixed-fee terms

Contract Overview

Contract Amount: $113,571,684 ($113.6M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2019-01-18

End Date: 2021-08-30

Contract Duration: 955 days

Daily Burn Rate: $118.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: DIRECT SERVICES

Place of Performance

Location: PORTSMOUTH, PORTSMOUTH CITY County, VIRGINIA, 23709

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $113.6 million to HUNTINGTON INGALLS INC for work described as: DIRECT SERVICES Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to higher costs if not managed carefully. 2. Limited competition suggests potential for higher pricing and reduced incentive for cost efficiency. 3. The contract duration of 955 days indicates a significant, long-term requirement for shipbuilding services. 4. The primary contractor, Huntington Ingalls Inc., is a major player in the defense shipbuilding sector. 5. The contract falls under the Ship Building and Repairing NAICS code, indicating specialized industrial services.

Value Assessment

Rating: fair

The contract's cost-plus-fixed-fee structure, while common for complex shipbuilding, carries inherent risks of cost overruns. Benchmarking against similar shipbuilding contracts is challenging without detailed cost breakdowns. The award value of $113.6 million for a 955-day period suggests a substantial investment, but the value for money is contingent on effective cost control and delivery performance. Without more granular data on labor hours, material costs, and overhead, a precise value assessment is difficult.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded on a 'NOT COMPETED' basis, indicating that the solicitation was not broadly advertised or that only one source was considered. This limited competition raises concerns about whether the government received the best possible pricing and terms. The lack of a competitive bidding process means that potential efficiencies and cost savings that might arise from multiple bidders vying for the contract were not realized.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of robust competition. The government's ability to negotiate favorable terms is diminished when only one or a limited number of contractors are considered.

Public Impact

The primary beneficiary is the Department of the Navy, receiving essential shipbuilding and repair services. Services delivered include the maintenance, repair, and potentially modification of naval vessels. The geographic impact is likely concentrated around naval shipyards and facilities where Huntington Ingalls operates. Workforce implications include employment for skilled tradespeople, engineers, and support staff within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract type can incentivize cost increases if not rigorously overseen.
Limited competition restricts price discovery and potentially leads to higher overall costs for the government.
Lack of transparency in the 'NOT COMPETED' award process hinders public scrutiny of value for money.
The long duration of the contract increases the exposure to potential cost escalations over time.

Positive Signals

Contract awarded to a major, established defense contractor with significant experience in shipbuilding.
The contract addresses a clear and ongoing need for naval vessel maintenance and repair.
The fixed-fee component provides some level of cost predictability compared to pure cost-reimbursement contracts.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base, characterized by high capital investment, specialized labor, and long production cycles. This contract falls within the broader industrial manufacturing and defense services market. Comparable spending benchmarks are difficult to establish without specific details on the type and scope of vessels being serviced, but major naval shipbuilding contracts often run into hundreds of millions or billions of dollars.

Small Business Impact

There is no indication from the provided data that this contract included a small business set-aside. Given the nature of large-scale shipbuilding and repair, it is likely that the prime contractor, Huntington Ingalls Inc., is a large business. Subcontracting opportunities for small businesses may exist, but the primary award does not appear to prioritize them. The impact on the small business ecosystem would depend on the extent to which the prime contractor engages small businesses for specialized services or supplies.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Accountability measures would be tied to the terms of the cost-plus-fixed-fee agreement, requiring the contractor to justify costs and demonstrate progress. Transparency is limited by the 'NOT COMPETED' award status. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Ship Maintenance Contracts
Shipbuilding and Repair Services
Defense Procurement
Department of the Navy Contracts

Risk Flags

Limited Competition
Cost-Plus-Fixed-Fee Contract Type
Lack of Detailed Scope Information
Potential for Cost Overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $113.6 million to HUNTINGTON INGALLS INC. DIRECT SERVICES

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 $113.6 million.

What is the period of performance?

Start: 2019-01-18. End: 2021-08-30.

What is the specific type of vessel(s) this contract pertains to, and what is the scope of work involved in the shipbuilding and repair?

The provided data indicates the NAICS code is 336611 (Ship Building and Repairing) and the contract type is 'DEFINITIVE CONTRACT'. However, the specific type of vessel (e.g., aircraft carrier, destroyer, submarine) and the detailed scope of work (e.g., routine maintenance, major overhaul, modernization, new construction) are not specified. This information is crucial for understanding the complexity, risk, and true value of the contract. Without this detail, it's difficult to assess if the $113.6 million award is appropriate for the services rendered over the 955-day period.

Can the 'NOT COMPETED' status be further elaborated upon? Were there specific justifications, such as sole-source capabilities or urgent needs, that precluded a competitive bidding process?

The 'NOT COMPETED' status signifies that the contract was not awarded through a full and open competitive process. Common justifications for such awards include the existence of only one responsible source (sole-source), urgent and compelling needs that preclude competition, or specific national security requirements. Without further documentation or justification from the Department of the Navy, it is impossible to determine the precise reason for this limited competition. This lack of transparency raises concerns about whether alternative sources were adequately explored or if the government missed opportunities to leverage competition for better pricing and innovation.

What are the key performance indicators (KPIs) and milestones associated with this contract, and how has the contractor performed against them?

The provided data does not include specific Key Performance Indicators (KPIs) or milestones for this contract. For a cost-plus-fixed-fee contract, especially in shipbuilding, KPIs typically relate to schedule adherence, quality of work (e.g., defect rates), cost control against the fixed fee, and successful completion of defined work packages. Performance against these metrics would be detailed in contract performance reports, which are not available here. Assessing contractor performance would require access to these reports to understand if the project is on track, within budget expectations (relative to the fixed fee), and meeting quality standards.

How does the fixed fee component of this contract compare to industry standards for similar shipbuilding and repair work, and what is the potential for cost growth beyond the fixed fee?

The fixed fee is the portion of the total contract price that represents the contractor's profit and is not subject to adjustment based on actual costs incurred. For a Cost Plus Fixed Fee (CPFF) contract, the government pays the actual allowable costs plus this predetermined fixed fee. Benchmarking the fixed fee requires detailed knowledge of the contract's scope, risk, and complexity. While the fee itself is fixed, the total cost to the government can exceed initial estimates if allowable costs are higher than anticipated. The CPFF structure means the government bears the cost risk, making rigorous oversight of allowable costs critical to prevent overall expenditure from ballooning.

What is the historical spending pattern for shipbuilding and repair services by the Department of the Navy, and how does this $113.6 million award fit into that trend?

The Department of the Navy is a major consumer of shipbuilding and repair services, with annual spending often reaching billions of dollars due to the extensive fleet size and maintenance requirements. This $113.6 million award represents a specific task order or contract within that larger spending picture. Historical data would show fluctuations based on shipbuilding programs, fleet readiness initiatives, and budget allocations. Without a longer-term view of the Navy's spending in this specific category (NAICS 336611) and for this particular contractor, it's difficult to definitively state if this award is higher or lower than typical trends. However, it aligns with the substantial investments required to maintain naval assets.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, REBUILD EQUIPMENT › MAINT, REPAIR, REBUILD OF EQUIPMENT

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N4215818R0002

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: $114,069,396

Exercised Options: $113,804,730

Current Obligation: $113,571,684

Actual Outlays: $-11,112,000

Subaward Activity

Number of Subawards: 1

Total Subaward Amount: $55,035

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline