DoD's $3.44B engineering services contract to Huntington Ingalls Inc. awarded via sole-source justification

Contract Overview

Contract Amount: $3,440,615,229 ($3.4B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2005-07-15

End Date: 2016-09-15

Contract Duration: 4,080 days

Daily Burn Rate: $843.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39567

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $3.44 billion to HUNTINGTON INGALLS INCORPORATED for work described as: Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Long contract duration of 4080 days suggests a need for sustained engineering support. 3. Cost-plus-fixed-fee structure may incentivize cost increases, requiring robust oversight. 4. The contract's value places it among significant engineering service procurements. 5. Focus on engineering services indicates a critical support function for naval operations. 6. No small business set-aside was applied, potentially limiting opportunities for smaller firms.

Value Assessment

Rating: questionable

Benchmarking the value of this $3.44 billion contract is challenging without specific service details and comparable contracts. However, the sole-source award and cost-plus-fixed-fee structure raise concerns about potential overpricing and lack of competitive pressure to achieve optimal value. The extended duration suggests a significant scope of work, but the absence of competitive bidding makes it difficult to assess if the pricing reflects fair market value or represents a premium due to limited competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a sole-source justification, meaning only one bidder, Huntington Ingalls Incorporated, was solicited. This approach bypasses the competitive bidding process, which typically leads to better price discovery and potentially lower costs for the government. The lack of competition means that taxpayers did not benefit from the potential cost savings that could arise from multiple firms vying for the contract.

Taxpayer Impact: The sole-source award means taxpayers did not benefit from the price reductions typically achieved through a competitive bidding process. This could result in a higher overall cost for the services rendered.

Public Impact

The primary beneficiaries are the Department of the Navy and its operational readiness, supported by essential engineering services. Services delivered likely encompass a broad range of engineering support critical for naval platforms and infrastructure. The geographic impact is primarily centered around naval facilities and operations, with potential implications for the Mississippi region where the contractor is based. Workforce implications include the employment of engineers and technical staff at Huntington Ingalls, contributing to specialized job creation.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs.
Cost-plus-fixed-fee contract type can incentivize cost escalation.
Lack of small business participation noted.
Extended contract duration requires sustained oversight to manage performance and costs.

Positive Signals

Contract awarded to a known entity with established capabilities in shipbuilding and engineering.
Long-term nature of the contract suggests a critical and ongoing need for these services.
The contract value indicates a significant investment in essential engineering support.

Sector Analysis

This contract falls within the Engineering Services sector, a critical component of the broader Defense Industrial Base. The market for specialized engineering services supporting naval operations is often concentrated among a few large, experienced contractors. The $3.44 billion value positions this as a major procurement, reflecting the complexity and scale of the engineering requirements for advanced naval assets. Comparable spending benchmarks would typically involve other large-scale, long-term engineering support contracts for military branches.

Small Business Impact

The contract was not set aside for small businesses, and the data indicates no small business participation (sb: false). This suggests that the scope and nature of the engineering services required were deemed to be within the capabilities of large prime contractors. Consequently, there are no direct subcontracting implications for small businesses stemming from this specific award, nor is there an immediate positive impact on the small business ecosystem through this particular contract.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Given the cost-plus-fixed-fee structure and long duration, robust oversight is crucial to monitor costs, ensure performance, and prevent fraud or abuse. Transparency may be limited due to the sole-source nature, but contract performance reports and financial audits would be key accountability measures. Inspector General jurisdiction would apply to investigate any potential waste, fraud, or abuse.

Related Government Programs

Naval Ship Systems Engineering Support
Defense Engineering Services
Shipbuilding and Repair Contracts
Military Engineering Support Services
Department of Defense Professional Services

Risk Flags

Sole-source award raises concerns about competition and potential cost overruns.
Cost-plus-fixed-fee structure requires diligent oversight to manage costs.
Extended contract duration necessitates long-term performance monitoring.
Lack of small business participation limits opportunities for smaller firms.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.44 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 $3.44 billion.

What is the period of performance?

Start: 2005-07-15. End: 2016-09-15.

What specific engineering services are covered under this $3.44 billion contract?

The provided data does not specify the exact engineering services covered under this $3.44 billion contract awarded to Huntington Ingalls Incorporated. However, given the contractor's background and the Department of Defense's needs, these services likely encompass a wide range of activities such as naval architecture, systems engineering, design, integration, testing, and lifecycle support for naval vessels and related systems. The 'Engineering Services' NAICS code (541330) broadly covers establishments primarily engaged in providing architectural, engineering, and related services. Without more granular details, it's presumed to be comprehensive support critical to naval operations and maintenance.

How does the cost-plus-fixed-fee (CPFF) contract type typically impact project costs and contractor incentives?

The Cost-Plus-Fixed-Fee (CPFF) contract type is characterized by the government reimbursing the contractor for all allowable costs incurred, plus a predetermined fixed fee representing profit. This structure is often used when the scope of work is not well-defined or involves significant uncertainty. For the government, it carries the risk of cost overruns, as the final cost is not fixed. For the contractor, the fixed fee provides a guaranteed profit margin regardless of cost fluctuations, which can sometimes reduce the incentive to control costs aggressively compared to fixed-price contracts. Robust government oversight is essential to manage allowable costs and ensure the fixed fee remains appropriate for the effort.

What are the implications of awarding a contract of this magnitude on a sole-source basis?

Awarding a contract of this magnitude ($3.44 billion) on a sole-source basis means that the Department of Defense did not conduct a competitive bidding process. This typically occurs when only one responsible source is available or capable of meeting the requirement. The primary implication for taxpayers is the potential loss of cost savings that could have been achieved through competition. Without competing offers, there is less pressure on the contractor to offer the lowest possible price, and the government may end up paying a premium. It also raises questions about market research and whether alternative sources were adequately explored.

What is the typical track record of Huntington Ingalls Incorporated with the Department of Defense?

Huntington Ingalls Industries (HII), the parent company of Huntington Ingalls Incorporated, is a major defense contractor with a long and extensive track record, particularly in shipbuilding and complex engineering for naval platforms. They are known for constructing aircraft carriers, submarines, and other major naval vessels for the U.S. Navy. HII has consistently been one of the largest government contractors, receiving billions of dollars annually for its products and services. Their history with the DoD is characterized by large-scale, long-term programs requiring significant engineering and manufacturing expertise, often involving complex, sole-source or limited-competition contracts due to the specialized nature of their work.

How does the duration of this contract (4080 days) compare to similar engineering service contracts?

A contract duration of 4080 days, which is equivalent to 10 years and 4 months, is exceptionally long for a single definitive contract, even within the defense sector. While multi-year procurements and indefinite-delivery/indefinite-quantity (IDIQ) contracts can span many years, a single definitive contract of this length typically signifies a requirement for sustained, long-term support that is deeply integrated into the government's operations. Many engineering service contracts are shorter, ranging from 1-5 years, often with options for renewal. Such an extended duration suggests a critical, ongoing need for specialized engineering expertise that is either unique to the contractor or essential for maintaining specific platforms or systems over their lifecycle.

What is the significance of the 'MS' (Mississippi) state code in relation to this contract?

The 'MS' state code likely indicates the primary location of performance or the headquarters of the contractor, Huntington Ingalls Incorporated, for this specific contract. Huntington Ingalls Industries has major shipyards and facilities in Mississippi, such as the Ingalls Shipbuilding division in Pascagoula. Therefore, this code signifies that a substantial portion of the work under this $3.44 billion engineering services contract is expected to be performed in Mississippi, potentially impacting the local economy through job creation, supply chain activity, and investment in that region.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

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

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: 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

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline