Navy awards $2.7B for long lead time material and engineering services to Huntington Ingalls, a sole-source contract

Contract Overview

Contract Amount: $2,704,759,379 ($2.7B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 2010-06-30

End Date: 2019-12-04

Contract Duration: 3,444 days

Daily Burn Rate: $785.4K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: PROCURE LONG LEAD TIME MATERIAL (LLTM), ADVANCED ENGINEERING AND PLANNING SERVICES AND SPECIAL STUDIES.

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $2.70 billion to HUNTINGTON INGALLS INCORPORATED for work described as: PROCURE LONG LEAD TIME MATERIAL (LLTM), ADVANCED ENGINEERING AND PLANNING SERVICES AND SPECIAL STUDIES. Key points: 1. Contract awarded on a sole-source basis, limiting competitive pressure on pricing. 2. Significant duration of over 9 years suggests a long-term strategic need. 3. Fixed Price Incentive contract type introduces performance risk for the contractor. 4. Awarded for critical shipbuilding components, indicating a vital role in naval readiness. 5. High dollar value signifies a major investment in naval asset sustainment or development. 6. Contractor has a substantial history with the Department of Defense, suggesting established capabilities.

Value Assessment

Rating: fair

The contract's value of $2.7 billion over nearly a decade is substantial. Without comparable sole-source contracts for similar long-lead time materials and advanced engineering services, a precise value-for-money assessment is challenging. The fixed-price incentive structure suggests an attempt to control costs while incentivizing performance, but the lack of competition inherently limits the government's ability to secure the lowest possible price. Benchmarking against industry standards for advanced shipbuilding engineering and specialized material procurement would be necessary for a more definitive value assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when only one responsible source is available or when a compelling justification exists for excluding competition. The absence of multiple bidders means that price discovery through market forces was not utilized, potentially leading to higher costs than if the contract had been competed.

Taxpayer Impact: The sole-source nature of this award means taxpayers did not benefit from the cost savings that typically arise from a competitive procurement process. The government may have paid a premium due to the lack of alternative offers.

Public Impact

The primary beneficiaries are the U.S. Navy and its shipbuilding programs, ensuring the availability of critical components and engineering expertise. Services delivered include the procurement of long lead time materials essential for shipbuilding and advanced engineering and planning services. The geographic impact is primarily centered around Huntington Ingalls' facilities and the Navy's shipbuilding yards, with potential ripple effects on the supply chain. Workforce implications include the employment of highly skilled engineers, technicians, and manufacturing personnel involved in complex shipbuilding processes.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Long contract duration could lead to cost overruns if not managed effectively.
Reliance on a single contractor for critical long-lead items poses supply chain risk.
Fixed Price Incentive contracts can be complex to administer and may not always yield the best value if incentives are not well-aligned.

Positive Signals

Contractor is a major, established player in naval shipbuilding, suggesting deep expertise.
Fixed Price Incentive contract type aims to align contractor and government interests on cost and performance.
Awarding long-lead time material ensures critical components are secured well in advance, mitigating schedule risks.
The contract's duration supports long-term strategic planning for naval asset acquisition and sustainment.

Sector Analysis

This contract falls within the shipbuilding and repair sector, a critical component of the defense industrial base. The market for specialized long-lead time materials and advanced engineering services for naval vessels is highly concentrated, with a few large, experienced contractors dominating. The $2.7 billion value is significant, reflecting the complexity and scale of modern naval shipbuilding. Comparable spending benchmarks would likely be found within other major naval platform construction or modernization programs.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. Given the sole-source nature and the specialized requirements for long-lead time materials and advanced engineering in shipbuilding, it is unlikely that small businesses would be primary awardees. However, Huntington Ingalls, as a large prime contractor, may engage small businesses as subcontractors, contributing to the broader small business ecosystem within the defense supply chain.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Fixed Price Incentive contract terms, which link contractor profit to performance against cost and schedule targets. Transparency may be limited due to the sole-source nature, but contract modifications and performance reports would likely be subject to internal review and potentially Inspector General oversight if performance issues arise.

Related Government Programs

Naval Shipbuilding Programs
Submarine Construction
Aircraft Carrier Construction
Ship Repair and Maintenance
Defense Industrial Base Support
Long Lead Time Material Procurement

Risk Flags

Sole-source award
Long contract duration
High dollar value
Fixed Price Incentive contract type

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.70 billion to HUNTINGTON INGALLS INCORPORATED. PROCURE LONG LEAD TIME MATERIAL (LLTM), ADVANCED ENGINEERING AND PLANNING SERVICES AND SPECIAL STUDIES.

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 $2.70 billion.

What is the period of performance?

Start: 2010-06-30. End: 2019-12-04.

What is Huntington Ingalls Incorporated's track record with the Department of Defense, particularly in shipbuilding and related engineering services?

Huntington Ingalls Industries (HII), through its various divisions, has a long and extensive track record with the Department of Defense, particularly the Department of the Navy. As the sole builder of U.S. Navy aircraft carriers and a major builder of amphibious assault ships and destroyers, HII is a cornerstone of the naval shipbuilding industrial base. Their experience spans decades, encompassing new construction, complex modernizations, and sustainment services for a wide array of naval platforms. The company consistently receives large, multi-year contracts for shipbuilding, often involving significant engineering, design, and long-lead time material procurement, similar to the contract in question. Their performance history is generally characterized by deep technical expertise and the capacity to manage highly complex, multi-billion dollar programs, though like any large defense contractor, they may face scrutiny on cost, schedule, and performance metrics for specific contracts.

How does the $2.7 billion contract value compare to similar long-lead time material and advanced engineering service contracts within the defense sector?

The $2.7 billion contract value for long-lead time material (LLTM) and advanced engineering services is substantial, even within the defense sector. LLTM contracts are inherently high-value due to the specialized nature of components (e.g., propulsion systems, advanced electronics, specialized alloys) that require lengthy manufacturing lead times. Advanced engineering and planning services for major defense platforms, especially naval vessels, also command significant investment. While direct comparisons are difficult without knowing the specific scope and duration, contracts for major shipbuilding programs (like new carrier or submarine construction) often run into the tens of billions of dollars, with LLTM and engineering being significant sub-components. This $2.7 billion award, spanning nearly a decade, represents a considerable portion of a larger platform's lifecycle cost or a significant investment in maintaining the industrial base for such critical components.

What are the primary risks associated with this sole-source, fixed-price incentive contract for the government?

The primary risks for the government in this sole-source, Fixed Price Incentive (FPI) contract are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to inflated pricing and reduced value for money. The government relies heavily on the contractor's cost proposals and negotiation skills. Secondly, while FPI contracts aim to share risk and reward between the government and contractor based on performance against targets, they can be complex to administer. If the target cost or incentive structure is poorly defined, it could lead to disputes or unintended consequences. The government bears the risk of cost overruns if the contractor achieves the target cost but the actual costs are higher, though the contractor also shares in overruns beyond a ceiling price. Finally, the long duration increases the risk of scope creep, unforeseen technological changes, or contractor performance degradation over time, which can be harder to manage without competitive alternatives.

What does the contract's duration of over 9 years imply about the program's strategic importance and potential future needs?

The contract's extensive duration, spanning from June 2010 to December 2019 (over 9 years), strongly suggests a program of significant strategic importance and long-term planning. Procuring long-lead time materials and advanced engineering services requires substantial upfront investment and planning, often tied to the construction or modernization of major defense assets like warships. This extended timeline indicates that the materials and services are critical for platforms with multi-year development or production cycles. It implies a stable, predictable requirement from the Navy, likely related to shipbuilding schedules for new vessels or major refits. Such long-term commitments also signal the government's intent to secure necessary capabilities and components well in advance, mitigating risks associated with supply chain disruptions or capacity limitations in the defense industrial base.

How does the 'Ship Building and Repairing' North American Industry Classification System (NAICS) code relate to the contract's scope and the contractor's capabilities?

The NAICS code 336611, 'Ship Building and Repairing,' is highly relevant and directly aligns with the contract's stated purpose: 'PROCURE LONG LEAD TIME MATERIAL (LLTM), ADVANCED ENGINEERING AND PLANNING SERVICES AND SPECIAL STUDIES.' Huntington Ingalls Incorporated is a primary entity within this sector, known for its extensive capabilities in designing, building, and repairing naval vessels. This NAICS code encompasses establishments primarily engaged in building and repairing ships, barges, and other major floating structures. The inclusion of LLTM and advanced engineering services falls squarely within the operational domain of shipbuilders, as these are essential precursors to actual construction and major repair activities. It confirms that the contract is for core activities supporting the naval shipbuilding and maintenance enterprise, leveraging the specialized industrial capacity and expertise associated with this sector.

What are the potential implications of awarding this contract as a 'DEFINITIVE CONTRACT' type, especially given its long duration?

Awarding this contract as a 'DEFINITIVE CONTRACT' signifies a firm commitment by the government to purchase the specified goods and services from Huntington Ingalls Incorporated. Unlike basic ordering agreements or other indefinite-delivery vehicles, a definitive contract typically outlines all terms, conditions, quantities, and prices (or pricing structure) for the duration of the agreement. For a long-duration contract like this one (over 9 years), being a definitive contract implies that the government had a clear understanding of its needs and committed to fulfilling them over an extended period. This provides stability for the contractor, enabling them to make necessary investments in facilities, workforce, and supply chains. However, it also means the government is locked into this specific arrangement, making it harder to adapt to changing requirements or take advantage of potentially better market conditions that might emerge later, especially given the sole-source nature.

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: N0002410R2229

Offers Received: 1

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Continental Maritime of SAN Diego LLC

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: $2,935,184,868

Exercised Options: $2,921,675,522

Current Obligation: $2,704,759,379

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline