DoD's $2.22B Ship Repair Contract with Huntington Ingalls Faces Scrutiny Over Cost and Competition

Contract Overview

Contract Amount: $2,221,135,414 ($2.2B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2002-04-29

End Date: 2005-08-31

Contract Duration: 1,220 days

Daily Burn Rate: $1.8M/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: COST PLUS AWARD FEE

Sector: Defense

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568, UNITED STATES OF AMERICA

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $2.22 billion to HUNTINGTON INGALLS INCORPORATED for work described as: Key points: 1. The contract awarded to Huntington Ingalls represents a significant investment in naval shipbuilding and repair. 2. Competition for this large-scale defense contract is often limited due to specialized requirements. 3. Potential risks include cost overruns and the long-term implications of sole-source or limited competition awards. 4. The sector is critical for national security, but also prone to high costs and complex procurement processes.

Value Assessment

Rating: questionable

The contract's cost-plus award fee structure, while common in complex defense projects, can lead to higher final costs than fixed-price contracts. Benchmarking against similar ship repair contracts is difficult without more granular data on the specific services rendered.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting a competitive bidding process. However, the 'COST PLUS AWARD FEE' structure may incentivize cost increases to achieve performance bonuses, potentially impacting price discovery.

Taxpayer Impact: Taxpayer funds are utilized for this significant defense expenditure. While competition aims for efficiency, the cost-plus nature warrants careful monitoring to ensure value for money.

Public Impact

Significant taxpayer investment in naval readiness and shipbuilding capabilities. Potential for job creation and economic impact in the Mississippi region. Ensures the maintenance and operational readiness of critical naval assets. Highlights the complex and costly nature of modern defense procurement.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus award fee structure can lead to cost escalation.
Limited transparency on specific cost drivers and profit margins.
Potential for long-term reliance on a single contractor for specialized services.

Positive Signals

Awarded under full and open competition.
Addresses critical national defense needs.
Contract duration supports long-term planning for naval assets.

Sector Analysis

The shipbuilding and repairing sector is a cornerstone of national defense, characterized by high barriers to entry, specialized labor, and substantial capital investment. Spending benchmarks in this area are typically very high due to the complexity and scale of projects.

Small Business Impact

This contract was awarded to a large corporation, Huntington Ingalls Incorporated. There is no indication of specific provisions or subcontracts allocated to small businesses within this data, suggesting limited direct impact on the small business sector for this prime contract.

Oversight & Accountability

The Department of the Navy, under the Department of Defense, is responsible for oversight. The 'COST PLUS AWARD FEE' structure necessitates robust monitoring of performance metrics and cost controls to ensure accountability and prevent contractor overreach.

Related Government Programs

Ship Building and Repairing
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Potential for cost overruns due to cost-plus structure.
Limited transparency on profit margins and specific cost drivers.
Risk of contractor lock-in and reduced future competition.
Complexity of performance metrics for award fee determination.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.22 billion to HUNTINGTON INGALLS INCORPORATED. See the official description on USAspending.

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 $2.22 billion.

What is the period of performance?

Start: 2002-04-29. End: 2005-08-31.

What specific performance metrics were used to determine award fees, and how did they align with achieving the best value for the government?

The provided data does not detail the specific performance metrics tied to the award fee. Typically, these metrics would relate to schedule adherence, quality of work, technical performance, and cost control. A thorough review would assess if these metrics effectively incentivized the contractor to deliver optimal value and manage costs efficiently, rather than simply maximizing profit through higher expenditures.

Given the 'COST PLUS AWARD FEE' structure, what mechanisms were in place to mitigate the risk of cost overruns and ensure fair pricing?

Cost-plus contracts inherently carry a risk of cost overruns. Mitigation strategies would typically involve stringent government oversight, detailed cost accounting standards, independent cost reviews, and clearly defined award fee criteria that reward efficiency. The effectiveness of these mechanisms depends on the rigor of the contracting officer's administration and the transparency of the contractor's financial reporting.

How does the long-term duration and value of this contract impact the competitive landscape for future naval shipbuilding and repair contracts?

A large, long-term contract like this can solidify a contractor's market position, potentially creating barriers for competitors seeking to enter or expand in the naval sector. While it ensures capacity and stability for the awarded firm, it might reduce future opportunities for others, potentially impacting overall market innovation and price competition over time.

Industry Classification

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

Product/Service Code: RESEARCH AND DEVELOPMENT › C – National Defense R&D Services

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Offers Received: 2

Pricing Type: COST PLUS AWARD FEE (R)

Contractor Details

Parent Company: Huntington Ingalls Industries, Inc (UEI: 967362331)

Address: 1000 ACCESS RD, PASCAGOULA, MS, 39567

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

Contract Characteristics

Cost or Pricing Data: NO

Timeline