DoD's $2.23B contract with Huntington Ingalls for shipbuilding and repair shows fixed-price incentive structure

Contract Overview

Contract Amount: $2,232,096,494 ($2.2B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2002-09-13

End Date: 2019-09-25

Contract Duration: 6,221 days

Daily Burn Rate: $358.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $2.23 billion to HUNTINGTON INGALLS INCORPORATED for work described as: Key points: 1. Contract value of $2.23 billion awarded to Huntington Ingalls Incorporated. 2. Fixed Price Incentive (FPI) contract type suggests shared risk between government and contractor. 3. Competition method was 'Full and Open Competition After Exclusion of Sources', indicating a specific justification. 4. Sector is Shipbuilding and Repair, a critical component of national defense. 5. Contract duration of 6221 days (approx. 17 years) highlights long-term commitment.

Value Assessment

Rating: fair

The contract is a Fixed Price Incentive type, which aims to balance cost control with performance incentives. The large value and long duration suggest significant investment, but the specific pricing structure's effectiveness requires further analysis of performance metrics and final costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The competition method 'Full and Open Competition After Exclusion of Sources' implies that while the process was intended to be open, specific sources were excluded, potentially limiting the competitive landscape and impacting price discovery.

Taxpayer Impact: The long-term nature and FPI structure mean taxpayer impact will depend on contractor performance and cost management over the contract's extensive duration.

Public Impact

Significant taxpayer investment in naval shipbuilding and repair capabilities. Impact on the defense industrial base and associated workforce. Potential for technological advancements in shipbuilding through incentive structures. Long-term commitment to a single prime contractor for critical assets.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition due to source exclusion.
Long contract duration increases risk of cost overruns.
Complexity of Fixed Price Incentive contracts can obscure true costs.

Positive Signals

Potential for shared risk and cost savings via FPI.
Supports critical defense industrial base.
Long-term planning and stability for shipbuilding.

Sector Analysis

The shipbuilding and repair sector is capital-intensive and strategically vital for national defense. This contract represents a substantial portion of spending within this sector, supporting major naval assets and requiring specialized infrastructure and expertise.

Small Business Impact

The data does not indicate any specific subcontracting to small businesses. Large, complex defense contracts often involve extensive supply chains, but the primary awardee is a large corporation, suggesting limited direct benefit to small businesses unless through subcontracting.

Oversight & Accountability

The 'Full and Open Competition After Exclusion of Sources' suggests a specific justification was provided, which should be documented and auditable. Oversight would focus on performance metrics, cost tracking, and adherence to the FPI terms to ensure value for money.

Related Government Programs

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

Risk Flags

Potential for cost growth despite FPI structure.
Limited competitive landscape due to source exclusion.
Long contract duration increases exposure to market and technological changes.
Dependence on a single contractor for critical assets.
Lack of transparency on small business participation.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.23 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 $2.23 billion.

What is the period of performance?

Start: 2002-09-13. End: 2019-09-25.

What was the specific justification for excluding sources in this 'Full and Open Competition After Exclusion of Sources' award?

The justification for excluding sources in this type of competition typically relates to factors such as unique capabilities, proprietary technology, or specific national security requirements that limit the pool of eligible contractors. A thorough review of the contract award documentation would be necessary to ascertain the precise reasons for exclusion in this instance.

How does the Fixed Price Incentive (FPI) structure mitigate cost overrun risks compared to other contract types for long-duration shipbuilding projects?

FPI contracts establish a target cost, target profit, and a price ceiling. If the final cost is below the target, both the government and contractor share in the savings. If it exceeds the target but stays below the ceiling, the contractor absorbs a larger portion of the overrun. This incentivizes efficiency while providing a ceiling to protect the government from unlimited cost increases, though long durations still pose risks.

What is the projected long-term effectiveness of this contract in meeting the Navy's shipbuilding and repair needs, considering its 17-year duration?

The effectiveness hinges on the contractor's ability to meet performance specifications, delivery schedules, and quality standards throughout the contract's extensive lifecycle. The FPI structure aims to align incentives for successful outcomes. However, the long duration necessitates robust program management and potential adjustments for evolving technological or strategic requirements to ensure sustained effectiveness.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE (L)

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

Financial Breakdown

Contract Ceiling: $545,905

Exercised Options: $545,905

Current Obligation: $2,232,096,494

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline