Navy awards $1.23B for DDG 1000 detail design to Huntington Ingalls, a sole-source contract

Contract Overview

Contract Amount: $1,228,329,901 ($1.2B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2006-08-31

End Date: 2015-01-31

Contract Duration: 3,075 days

Daily Burn Rate: $399.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Defense

Official Description: DDG 1000 DETAIL DESIGN

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $1.23 billion to HUNTINGTON INGALLS INCORPORATED for work described as: DDG 1000 DETAIL DESIGN Key points: 1. Contract awarded on a sole-source basis, limiting price competition. 2. Significant investment in a complex shipbuilding program. 3. Long contract duration suggests a substantial, multi-year effort. 4. Cost-plus incentive fee structure aims to balance contractor profit with performance. 5. Focus on detail design indicates a critical early phase of a major acquisition. 6. The contract's value represents a considerable portion of shipbuilding budgets.

Value Assessment

Rating: fair

Benchmarking the value of this specific detail design contract is challenging due to its unique nature and the complexity of the DDG 1000 program. However, the total award of over $1.2 billion for design work alone suggests a high per-unit cost, typical for advanced naval platforms. Without comparable detail design contracts for similar vessels, a precise value-for-money assessment is difficult. The cost-plus incentive fee structure implies that actual costs could vary, but the initial award sets a high baseline.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one contractor, Huntington Ingalls Incorporated, was solicited. This approach bypasses the competitive bidding process, which typically drives down prices and fosters innovation. While sole-source awards can be justified for specialized capabilities or urgent needs, they reduce the opportunity for price discovery and may lead to higher costs for the government.

Taxpayer Impact: The lack of competition means taxpayers did not benefit from potential cost savings that a competitive bidding process might have yielded. This could result in a higher overall expenditure for the DDG 1000 program.

Public Impact

The primary beneficiary is the U.S. Navy, which will receive the detailed design for the DDG 1000 class of destroyers. This contract supports the development of advanced naval capabilities, enhancing national security. The contract's execution will likely involve a significant workforce of engineers, designers, and technical specialists. Geographic impact is concentrated in areas where Huntington Ingalls Incorporated has design and engineering facilities, primarily Mississippi.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure on pricing.
Cost-plus contract types can incentivize higher spending if not carefully managed.
Long duration and high value increase financial risk exposure.
Complexity of the DDG 1000 program introduces technical risks.

Positive Signals

Award to an established, experienced shipbuilding contractor.
Cost-plus incentive fee structure aims to align contractor and government interests.
Focus on detail design is a critical step in ensuring program success.
The DDG 1000 program represents a significant investment in future naval capabilities.

Sector Analysis

The shipbuilding and repair industry is a capital-intensive sector characterized by long production cycles and high technological sophistication. Major naval contracts, like the DDG 1000 program, represent a significant portion of the defense industrial base. This contract fits within the broader context of naval modernization efforts, aiming to equip the fleet with next-generation platforms. Comparable spending benchmarks are difficult to establish due to the unique nature of Zumwalt-class destroyers, but large naval vessel construction and design contracts typically run into hundreds of millions or billions of dollars.

Small Business Impact

This contract does not appear to have a small business set-aside component, as it was awarded sole-source to a large prime contractor. There is no explicit information regarding subcontracting plans for small businesses within this specific award notice. The focus on detail design for a major warship may limit opportunities for direct small business involvement at the prime contract level, though they could be involved in lower-tier subcontracts.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the sole-source nature and significant value, enhanced oversight mechanisms are likely in place. Transparency may be limited due to the competitive nature of the award, but contract performance, cost reporting, and milestones would be subject to government review. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

DDG 51 Arleigh Burke-class Destroyer Program
Littoral Combat Ship (LCS) Program
Amphibious Assault Ship Program
Aircraft Carrier Construction Program

Risk Flags

Sole-source award
High contract value
Cost-plus contract type
Complex technology integration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.23 billion to HUNTINGTON INGALLS INCORPORATED. DDG 1000 DETAIL DESIGN

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 $1.23 billion.

What is the period of performance?

Start: 2006-08-31. End: 2015-01-31.

What is the track record of Huntington Ingalls Incorporated in delivering complex naval shipbuilding contracts?

Huntington Ingalls Incorporated (HII), through its predecessor companies like Northrop Grumman Shipbuilding, has a long and extensive track record in delivering complex naval vessels for the U.S. Navy. They are the sole builder of nuclear-powered aircraft carriers and a major builder of surface combatants. HII has been responsible for constructing numerous Arleigh Burke-class destroyers, amphibious assault ships, and logistics support vessels. While they have a strong history, large shipbuilding programs are inherently complex and can face challenges related to cost overruns, schedule delays, and technical issues, as seen in various naval programs. Their experience with the DDG 1000 program itself, prior to this detail design award, would be a key indicator of their capability for this specific project.

How does the $1.23 billion award for detail design compare to industry benchmarks for similar naval vessel design contracts?

Directly comparing the $1.23 billion award for the DDG 1000 detail design to industry benchmarks is challenging because each naval platform is unique in its technological complexity, size, and mission requirements. The DDG 1000 (Zumwalt-class) was designed to be a revolutionary, multi-mission destroyer incorporating advanced technologies like an integrated electric propulsion system and a stealthy hull form. Such groundbreaking design efforts typically command higher costs than incremental upgrades or designs for less complex vessels. While specific cost breakdowns for design phases of comparable vessels are often not publicly available, the scale of this award reflects the significant engineering effort required for a next-generation capital ship. It is understood that design costs can represent a substantial percentage of a vessel's total lifecycle cost, especially for highly advanced platforms.

What are the primary risks associated with a sole-source award for a critical shipbuilding design contract?

The primary risks associated with a sole-source award for a critical shipbuilding design contract like the DDG 1000 detail design are related to cost and competition. Without competitive pressure, there is a reduced incentive for the contractor to minimize costs, potentially leading to higher prices for the government and taxpayers. Price discovery, a key benefit of competitive bidding, is absent. Furthermore, a sole-source award limits the government's ability to explore alternative design approaches or technologies that might be offered by other capable firms. This can also stifle innovation if the chosen contractor does not proactively seek out the most cost-effective or advanced solutions. Finally, reliance on a single source can create dependency and potential vulnerabilities if the contractor faces significant performance issues or financial instability.

What is the expected effectiveness of the DDG 1000 program in achieving its intended naval capabilities?

The DDG 1000 program was intended to deliver a next-generation multi-mission destroyer with significantly enhanced capabilities over existing platforms. Key intended capabilities included advanced area air defense, land attack, and anti-submarine warfare, supported by an integrated electric propulsion system, advanced sensors, and a reduced manning requirement. The program aimed to provide a survivable platform in high-threat environments. However, the program faced significant challenges, including escalating costs and shifting strategic priorities, which led to a reduction in the planned fleet size from over 30 ships to just three. While the three ships built are highly capable, the program's overall effectiveness is debated due to its high cost and limited production run, impacting its ability to field widespread capabilities across the fleet as originally envisioned.

How has federal spending on naval shipbuilding and design evolved over the past decade, and where does the DDG 1000 fit in?

Federal spending on naval shipbuilding and design has fluctuated significantly over the past decade, influenced by budget priorities, geopolitical events, and strategic reviews. While overall defense budgets have seen variations, there has been a consistent emphasis on maintaining and modernizing the Navy's fleet. Programs like the Arleigh Burke-class destroyers, Ford-class aircraft carriers, and various submarine programs have consumed substantial portions of the shipbuilding budget. The DDG 1000 program, initiated earlier, represented a significant departure with its focus on revolutionary technology and design. However, its high unit cost and reduced procurement numbers mean its overall spending impact is less than that of more numerous platforms like the Arleigh Burke destroyers. The program's trajectory, from ambitious plans to a limited buy, reflects broader trends in defense acquisition where balancing technological advancement with affordability and strategic relevance is a constant challenge.

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 COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002406R2304

Offers Received: 1

Pricing Type: COST PLUS INCENTIVE FEE (V)

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

Financial Breakdown

Contract Ceiling: $1,654,072,928

Exercised Options: $1,384,349,296

Current Obligation: $1,228,329,901

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline