DoD awards $23.3M for ship maintenance, with limited competition raising cost concerns

Contract Overview

Contract Amount: $23,338,199 ($23.3M)

Contractor: Huntington Ingalls Inc

Awarding Agency: Department of Defense

Start Date: 2024-03-02

End Date: 2025-03-01

Contract Duration: 364 days

Daily Burn Rate: $64.1K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: CM/EM REPAIRS FY24-25

Place of Performance

Location: NEWPORT NEWS, NEWPORT NEWS CITY County, VIRGINIA, 23607

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $23.3 million to HUNTINGTON INGALLS INC for work described as: CM/EM REPAIRS FY24-25 Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, potentially leading to cost overruns. 2. Limited competition suggests potential for higher pricing than a fully competed contract. 3. Contract duration of one year with a single delivery order. 4. Focus on crucial ship maintenance for the Navy's operational readiness. 5. Contractor has a significant presence in the shipbuilding and repair sector.

Value Assessment

Rating: fair

The contract's cost-plus-fixed-fee structure requires careful monitoring to ensure value. Without a clear benchmark for this specific type of maintenance on this vessel class, it's difficult to definitively assess pricing. However, the limited competition aspect suggests that the fixed fee might be higher than what could be achieved in a more open market. Further analysis of historical costs for similar maintenance tasks would be beneficial.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was not competed openly, indicating a sole-source or limited competition award. The specific reasons for this limitation are not detailed, but it typically means only one or a few qualified contractors were solicited. This lack of broad competition can reduce the government's ability to secure the lowest possible price.

Taxpayer Impact: Taxpayers may be paying a premium due to the restricted competition, as the government did not leverage the full market to drive down costs.

Public Impact

Naval fleet readiness and operational capability are enhanced through essential maintenance. The Department of the Navy directly benefits from the upkeep of its assets. Work is likely to be performed in Virginia, supporting the local economy. Skilled labor in shipbuilding and repair sectors will be engaged.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contracts can incentivize cost escalation if not managed tightly.
Limited competition may result in less favorable pricing for the government.
Lack of detailed justification for limited competition raises transparency questions.

Positive Signals

Contract awarded to a major, established defense contractor with relevant experience.
Maintenance ensures the operational readiness of critical naval assets.
Contract duration is clearly defined for the specified period.

Sector Analysis

The shipbuilding and repair sector is a critical component of the defense industrial base. This contract falls within the broader category of defense procurement, specifically focusing on maintaining existing naval assets. Spending in this sector is often characterized by large, complex contracts with a limited number of highly specialized contractors, reflecting the high barriers to entry and specialized knowledge required.

Small Business Impact

There is no indication of small business set-asides or subcontracting requirements in the provided data. Given the nature of the contractor and the specialized work, it is possible that larger firms dominate the prime contract, with potential for smaller businesses to participate as subcontractors if opportunities arise.

Oversight & Accountability

Oversight will likely be conducted by the Department of the Navy's contracting and program management offices. Accountability measures are inherent in the cost-plus-fixed-fee structure, requiring detailed reporting and justification of costs. Transparency could be enhanced by making the justification for limited competition publicly available.

Related Government Programs

Naval Ship Maintenance
Defense Industrial Base Support
Shipbuilding and Repair Services

Risk Flags

Limited competition may lead to higher costs.
Cost-plus-fixed-fee contracts require robust oversight to prevent cost overruns.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $23.3 million to HUNTINGTON INGALLS INC. CM/EM REPAIRS FY24-25

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 $23.3 million.

What is the period of performance?

Start: 2024-03-02. End: 2025-03-01.

What is the track record of Huntington Ingalls Inc. in performing similar ship maintenance contracts for the Department of Defense?

Huntington Ingalls Industries (HII) is a major player in the defense sector, particularly in shipbuilding and complex maintenance for naval vessels. They have a long history of performing extensive repair, overhaul, and modernization services for a wide range of U.S. Navy ships, including aircraft carriers, submarines, and surface combatants. Their performance on previous contracts has generally been viewed as satisfactory, though like any large contractor, they have experienced periods of scrutiny regarding cost and schedule adherence on specific projects. HII's extensive infrastructure, skilled workforce, and established relationships with the Navy position them as a go-to contractor for these types of critical maintenance tasks. The specific performance on this $23.3 million contract will depend on the scope of work and the effectiveness of the Navy's oversight.

How does the cost-plus-fixed-fee (CPFF) contract type compare to other pricing arrangements for this type of service in terms of value for money?

The Cost-Plus-Fixed-Fee (CPFF) contract type is often used when the scope of work is not precisely defined or when there is a high degree of uncertainty in the costs. In this arrangement, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While CPFF can be advantageous for the government when dealing with R&D or complex services where precise cost estimation is difficult, it carries inherent risks. The contractor has less incentive to control costs compared to fixed-price contracts, as their profit is fixed regardless of actual expenses. This can lead to higher overall costs for the government if not rigorously managed and overseen. For routine maintenance, fixed-price or other incentive-based contracts might offer better value if the scope is well-defined, as they place more cost control responsibility on the contractor.

What are the primary risks associated with awarding this contract under limited competition?

The primary risks associated with awarding this contract under limited competition are increased cost and reduced innovation. When only one or a few contractors are solicited, the government loses the benefit of competitive bidding, which typically drives down prices. The selected contractor may not feel the same pressure to offer the most competitive pricing as they would in a fully open market. Furthermore, limited competition can stifle innovation, as contractors may be less inclined to invest in developing more efficient or cost-effective methods if they are guaranteed the work regardless of their approach. This can also lead to a perception of unfairness and potentially limit the pool of qualified contractors for future procurements if smaller or newer companies are consistently excluded.

What is the historical spending pattern for ship maintenance and repair by the Department of the Navy, and how does this contract fit within that trend?

The Department of the Navy consistently allocates significant portions of its budget to ship maintenance and repair, reflecting the large size and operational demands of its fleet. Historical spending in this category typically runs into billions of dollars annually, encompassing everything from routine upkeep to major overhauls and modernization programs. This $23.3 million contract, while substantial in absolute terms, represents a relatively small component of the Navy's overall maintenance expenditure. It fits within the ongoing trend of ensuring fleet readiness through regular and necessary servicing of vessels. The Navy relies on a mix of contract types and competition levels to manage this vast maintenance workload, with larger, more complex projects often involving limited competition due to specialized requirements and contractor capabilities.

What are the potential implications for the defense industrial base if limited competition becomes a common practice for routine maintenance tasks?

If limited competition becomes a common practice for routine maintenance tasks, it could have several negative implications for the defense industrial base. Firstly, it could lead to a consolidation of work among a few large, established contractors, potentially squeezing out smaller, more agile businesses that could offer competitive pricing or specialized services. This lack of broad competition could also reduce the incentive for innovation and efficiency among incumbent contractors, as they may face less pressure to improve their processes or reduce costs. Over time, this could lead to higher overall spending on maintenance and potentially impact the long-term health and competitiveness of the broader defense industrial base by creating artificial barriers to entry and limiting market dynamics.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002417R4320

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc

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: $27,213,644

Exercised Options: $27,213,644

Current Obligation: $23,338,199

Actual Outlays: $4,147,508

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0002419D4306

IDV Type: IDC

Timeline