DoD's $455M Contract for CVN65 Service Life Extension: A Cost-Plus Fixed Fee Agreement with Huntington Ingalls Inc
Contract Overview
Contract Amount: $454,835,584 ($454.8M)
Contractor: Huntington Ingalls Inc
Awarding Agency: Department of Defense
Start Date: 2007-06-25
End Date: 2013-06-20
Contract Duration: 2,187 days
Daily Burn Rate: $208.0K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: COST PLUS FIXED FEE
Sector: Defense
Official Description: REMAINING SERVICE LIFE PLAN FOR CVN65 TO INCLUDE ENGINEERING, MATERIAL PROCUREMENT AND CONTINUOUS MAINTENANCE.
Place of Performance
Location: NEWPORT NEWS, NEWPORT NEWS CITY County, VIRGINIA, 23607
State: Virginia Government Spending
Plain-Language Summary
Department of Defense obligated $454.8 million to HUNTINGTON INGALLS INC for work described as: REMAINING SERVICE LIFE PLAN FOR CVN65 TO INCLUDE ENGINEERING, MATERIAL PROCUREMENT AND CONTINUOUS MAINTENANCE. Key points: 1. The contract focuses on extending the service life of the CVN65, encompassing engineering, material procurement, and continuous maintenance. 2. Awarded to Huntington Ingalls Inc., this represents a significant investment in naval asset sustainment. 3. The cost-plus fixed fee structure implies potential for cost overruns if not closely managed. 4. The 'Ship Building and Repairing' sector is critical for national defense readiness.
Value Assessment
Rating: questionable
The Cost Plus Fixed Fee (CPFF) contract type, while allowing flexibility for complex projects, can lead to higher costs than fixed-price contracts if not managed diligently. The awarded amount of $454.8M for a 2187-day duration needs careful scrutiny against historical data for similar naval vessel life extension projects.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award to Huntington Ingalls Inc. This lack of competition limits price discovery and may result in a higher price than if multiple vendors had bid.
Taxpayer Impact: The absence of competition for a contract of this magnitude raises concerns about taxpayer value, as the government may not have secured the most cost-effective solution.
Public Impact
Ensures continued operational capability of a key naval asset, contributing to national security. Supports jobs within the shipbuilding and repair industry, particularly at Huntington Ingalls Inc. The long duration and significant cost highlight the substantial taxpayer investment in maintaining aging naval infrastructure.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition
- Cost-plus contract type
- Potential for cost overruns
Positive Signals
- Extends service life of critical asset
- Supports skilled labor in shipbuilding
Sector Analysis
The shipbuilding and repair sector is a vital component of the defense industrial base, characterized by high costs, long project durations, and specialized labor. Spending benchmarks for major naval vessel maintenance and upgrades are typically in the hundreds of millions to billions of dollars.
Small Business Impact
This contract was awarded to a large prime contractor, Huntington Ingalls Inc. There is no explicit information provided regarding subcontracting opportunities for small businesses within this award, which is common for large, complex defense contracts.
Oversight & Accountability
The cost-plus fixed fee nature of this contract necessitates robust oversight from the Department of the Navy to ensure costs are reasonable and allocable. Regular audits and performance reviews are crucial for accountability.
Related Government Programs
- Ship Building and Repairing
- Department of Defense Contracting
- Department of the Navy Programs
Risk Flags
- Sole-source award limits competitive pricing.
- Cost-plus contract type increases risk of cost overruns.
- Aging asset may incur higher-than-expected maintenance costs.
- Potential for scope creep during extended maintenance period.
- Dependency on a single contractor for critical maintenance.
Tags
ship-building-and-repairing, department-of-defense, va, definitive-contract, 100m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Defense awarded $454.8 million to HUNTINGTON INGALLS INC. REMAINING SERVICE LIFE PLAN FOR CVN65 TO INCLUDE ENGINEERING, MATERIAL PROCUREMENT AND CONTINUOUS MAINTENANCE.
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 $454.8 million.
What is the period of performance?
Start: 2007-06-25. End: 2013-06-20.
What is the projected return on investment for extending the service life of CVN65 versus the cost of acquiring a new vessel?
Determining the ROI requires a comprehensive lifecycle cost analysis comparing the total cost of extending CVN65's service life against the procurement and operational costs of a new carrier. Factors like remaining operational effectiveness, technological obsolescence, and future maintenance needs of both options must be weighed to justify the investment.
How will the Department of the Navy ensure cost control and prevent potential overruns under this cost-plus fixed fee contract?
The Navy must implement stringent cost-tracking mechanisms, conduct regular audits of contractor expenditures, and establish clear performance metrics. Effective oversight involves detailed review of all incurred costs, ensuring they are reasonable, allocable, and allowable under the contract terms, and actively managing scope changes.
What are the long-term implications for naval readiness if aging carriers like CVN65 are not adequately maintained or replaced?
Failure to adequately maintain or replace aging carriers like CVN65 could significantly degrade naval readiness. This could lead to reduced operational availability, increased risk of mission failures due to equipment unreliability, and a potential gap in power projection capabilities, impacting strategic deterrence and global presence.
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
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
Financial Breakdown
Contract Ceiling: $483,826,930
Exercised Options: $483,826,930
Current Obligation: $454,835,584
Contract Characteristics
Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED
Cost or Pricing Data: NO
Timeline
Start Date: 2007-06-25
Current End Date: 2013-06-20
Potential End Date: 2013-06-20 00:00:00
Last Modified: 2019-09-23
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