Navy awards $21.6M for DDG 125 PSA delivery, with limited competition impacting price discovery

Contract Overview

Contract Amount: $21,570,343 ($21.6M)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2022-12-21

End Date: 2025-04-30

Contract Duration: 861 days

Daily Burn Rate: $25.1K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Official Description: DDG 125 PSA DELIVERY ORDER AWARD

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $21.6 million to HUNTINGTON INGALLS INCORPORATED for work described as: DDG 125 PSA DELIVERY ORDER AWARD Key points: 1. The contract's cost-plus-award-fee structure allows for flexibility but requires robust oversight to ensure value. 2. Limited competition raises concerns about optimal price realization for the taxpayer. 3. The duration of the contract suggests a significant, long-term commitment to this vessel's support. 4. The award is for a specific hull, indicating a focused scope within a larger shipbuilding program. 5. The Mississippi location of the contractor may have implications for regional economic impact and workforce development.

Value Assessment

Rating: fair

Benchmarking the value of this specific delivery order is challenging without detailed cost breakdowns and comparisons to similar support contracts for DDG-class destroyers. The cost-plus-award-fee (CPAF) structure, while common for complex projects, can lead to higher costs if not managed tightly. The raw award amount of $21.6 million for a period of approximately 2.5 years suggests a substantial per-year cost for support services.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, indicating that only one contractor was deemed capable or available to perform the required services. While sole-source awards can be necessary for specialized requirements or urgent needs, they inherently limit price competition. This means the government may not have achieved the most favorable pricing that could have resulted from a broader bidding process.

Taxpayer Impact: Sole-source awards can result in higher costs for taxpayers as the absence of competition reduces the incentive for contractors to offer their lowest possible prices.

Public Impact

The primary beneficiaries are the U.S. Navy's operational readiness and the specific crew of the DDG 125. Services delivered include post-shakedown availability (PSA) support, crucial for ensuring the ship is fully operational after construction. The geographic impact is concentrated around the contractor's facility in Mississippi, potentially supporting local jobs and the maritime industrial base. Workforce implications include employment for skilled trades and technical personnel involved in ship repair and outfitting.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition may lead to inflated costs for taxpayers.
Cost-plus-award-fee contracts require diligent oversight to prevent cost overruns.
The sole-source nature limits opportunities for new entrants or smaller businesses to compete for this work.

Positive Signals

Awarding to a known entity like Huntington Ingalls Incorporated suggests a level of confidence in their ability to perform.
The contract supports a critical naval asset, contributing to national security.
The specific focus on post-shakedown availability ensures the vessel meets operational standards.

Sector Analysis

The shipbuilding and repair sector is a critical component of the U.S. industrial base, heavily reliant on government contracts, particularly from the Department of Defense. This contract falls within the broader category of naval vessel construction and maintenance, a market characterized by high barriers to entry due to specialized facilities, skilled labor requirements, and stringent regulatory oversight. Spending in this sector is often driven by fleet modernization and readiness needs, with major players like Huntington Ingalls holding significant market share.

Small Business Impact

This contract was not set aside for small businesses, nor does it appear to have specific subcontracting requirements for small businesses mentioned in the provided data. The nature of large-scale shipbuilding and repair typically involves prime contractors with extensive capabilities, potentially limiting direct opportunities for small businesses unless they are part of the prime's supply chain. Further analysis would be needed to determine if subcontracting plans adequately include small business participation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. As a cost-plus-award-fee contract, rigorous financial oversight and performance monitoring are essential to ensure the contractor meets objectives and manages costs effectively. Transparency is facilitated through contract award databases, but detailed performance reports and cost justifications may not be publicly available. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

DDG 51 Arleigh Burke-class Destroyer Program
Naval Ship Maintenance and Repair Contracts
Shipbuilding and Conversion, Navy (SCN) appropriations
Defense Industrial Base Sector

Risk Flags

Limited Competition
Cost-Plus-Award-Fee Structure
Sole-Source Justification Required

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $21.6 million to HUNTINGTON INGALLS INCORPORATED. DDG 125 PSA DELIVERY ORDER AWARD

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 $21.6 million.

What is the period of performance?

Start: 2022-12-21. End: 2025-04-30.

What is the historical spending trend for Post-Shakedown Availability (PSA) for DDG-class destroyers?

Analyzing historical spending for DDG-class Post-Shakedown Availability (PSA) requires access to detailed contract databases and historical budget documents. Generally, PSA is a critical phase after a ship's construction where extensive testing, system integration, and minor corrections are performed before the vessel enters full operational service. The cost can vary significantly based on the specific class of destroyer, the complexity of its systems, and the shipyard performing the work. For Arleigh Burke-class destroyers, which are highly complex platforms, PSA costs can range from several million to tens of millions of dollars. Factors influencing these costs include the number of systems requiring calibration, the extent of crew training needed, and any emergent issues identified during sea trials. Without specific historical data for DDG 125 or comparable vessels, it's difficult to provide a precise trend, but it's understood to be a substantial and necessary investment in ensuring fleet readiness.

How does the cost-plus-award-fee (CPAF) structure compare to other contract types for shipbuilding support services?

The Cost-Plus-Award-Fee (CPAF) contract type is often used for complex, high-risk, or research and development efforts where the scope of work cannot be precisely defined at the outset. In shipbuilding support, CPAF allows the contractor to recover allowable costs plus a fee that is composed of a fixed base amount and an award amount, which is earned based on meeting or exceeding specific performance objectives. This contrasts with Fixed-Price contracts, which offer greater cost certainty to the government but can be risky for contractors if costs escalate unexpectedly. Cost-Plus-Fixed-Fee (CPFF) contracts provide a fixed fee regardless of performance, while Cost-Plus-Incentive-Fee (CPIF) contracts adjust the fee based on achieving target cost and performance goals. CPAF offers flexibility and incentivizes performance, but it requires robust government oversight to manage costs and ensure the award fee criteria are objective and aligned with government interests. For PSA, where unforeseen issues can arise, CPAF can be advantageous if managed effectively.

What are the potential risks associated with a sole-source award for critical naval support services?

Sole-source awards for critical naval support services, such as the Post-Shakedown Availability (PSA) for the DDG 125, carry several potential risks. The most significant is the lack of price competition, which can lead to the government paying a higher price than if multiple contractors had bid. This reduces the overall value for taxpayer money. Additionally, sole-source awards can stifle innovation and discourage new companies from entering the market or developing capabilities, as established contractors may have preferential access. There's also a risk that without competitive pressure, the awarded contractor might have less incentive to optimize efficiency or quality, although performance metrics and award fees in CPAF contracts aim to mitigate this. Finally, sole-source justifications must be rigorously reviewed to ensure they are truly warranted and not a result of poor planning or market research.

What is Huntington Ingalls Incorporated's track record with DDG-class shipbuilding and support?

Huntington Ingalls Industries (HII), through its Ingalls Shipbuilding division, is a primary builder of the Arleigh Burke-class (DDG 51) destroyers for the U.S. Navy. They have a long and extensive track record, having delivered numerous ships in this class. Their experience encompasses the entire lifecycle, from initial construction through post-shakedown availability and subsequent maintenance. Given their role as a major naval shipbuilder, HII possesses the specialized facilities, skilled workforce, and established processes necessary for complex tasks like PSA. While specific performance metrics for individual contracts are not always public, their continued selection for these critical programs suggests a generally positive track record in meeting the Navy's demanding requirements for quality, schedule, and technical execution, although like any large contractor, they may face challenges on specific projects.

What is the typical duration and scope of a Post-Shakedown Availability (PSA) for a modern destroyer?

A Post-Shakedown Availability (PSA) for a modern destroyer like the DDG 51 class is a critical period following the ship's initial construction and sea trials, typically lasting several months. The scope is comprehensive, focusing on ensuring all ship systems are fully operational, integrated, and meet Navy specifications before the vessel is deployed. This includes extensive testing of combat systems, navigation, propulsion, and auxiliary systems. It also involves correcting any deficiencies identified during sea trials, performing necessary maintenance, and completing crew training. The duration, as indicated by the contract's end date (April 2025) relative to its start date (December 2022), is approximately 2.5 years, which is on the longer side for a typical PSA, suggesting it may encompass more extensive work, upgrades, or integration of new technologies beyond standard post-construction fixes.

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 AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc

Address: 1000 ACCESS RD, PASCAGOULA, MS, 39567

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

Financial Breakdown

Contract Ceiling: $23,696,583

Exercised Options: $23,696,583

Current Obligation: $21,570,343

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Parent Contract

Parent Award PIID: N0002422G2303

IDV Type: BOA

Timeline