Navy awards $3.8B contract to Huntington Ingalls for fleet support, spanning over a decade

Contract Overview

Contract Amount: $3,837,899,602 ($3.8B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 1999-10-27

End Date: 2012-12-31

Contract Duration: 4,814 days

Daily Burn Rate: $797.2K/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 $3.84 billion to HUNTINGTON INGALLS INCORPORATED for work described as: Key points: 1. Contract awarded through full and open competition, suggesting a robust market for these services. 2. The contract's duration and significant value indicate a long-term strategic commitment by the Navy. 3. Awarded as a Cost Plus Award Fee (CPAF) type, performance incentives are built into the pricing structure. 4. The contractor, Huntington Ingalls, is a major player in the defense shipbuilding and repair sector. 5. This award represents a substantial portion of the Navy's spending in fleet readiness and maintenance. 6. The contract's extensive period of performance suggests potential for sustained workforce employment in the sector.

Value Assessment

Rating: good

The contract's Cost Plus Award Fee structure allows for flexibility while incentivizing performance. Benchmarking against similar fleet support contracts is challenging due to the unique nature of naval vessel maintenance and modernization. However, the significant award value over a long period suggests a substantial investment in maintaining critical naval assets. The pricing mechanism aims to balance cost control with ensuring high-quality service delivery.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple qualified bidders had the opportunity to submit proposals. The presence of two bidders suggests a competitive environment, though the specific details of the bidding process and the number of proposals received are not detailed here. A competitive process generally leads to better price discovery and potentially more favorable terms for the government.

Taxpayer Impact: A full and open competition ensures that taxpayer dollars are being used efficiently by leveraging market forces to obtain the best possible value for these critical fleet support services.

Public Impact

The primary beneficiaries are the U.S. Navy, ensuring the operational readiness of its fleet. Services delivered include maintenance, repair, and modernization of naval vessels. The contract has a significant geographic impact, likely supporting naval operations and maintenance facilities across various locations. Workforce implications include sustained employment for skilled labor in shipbuilding, repair, and technical services, particularly in Mississippi where the contractor is based.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long-term nature of the contract could lead to contractor complacency if not actively managed.
Cost-plus award fee contracts can sometimes lead to cost overruns if not closely monitored.
Dependence on a single large contractor for critical fleet support could pose a risk if performance falters.

Positive Signals

Awarded through full and open competition, indicating a competitive market.
Contractor is a well-established entity with significant experience in naval support.
Performance incentives are built into the contract structure (CPAF).

Sector Analysis

This contract falls within the Defense Industrial Base sector, specifically focusing on naval shipbuilding, repair, and maintenance. This sector is characterized by high barriers to entry, specialized expertise, and significant government investment. The market size for naval fleet support is substantial, driven by the ongoing need to maintain and modernize a large and complex fleet. This contract represents a significant portion of the Navy's expenditure in this specialized area, aligning with broader defense spending trends.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. As a large-scale award to a major defense contractor, the primary focus is likely on prime contract performance. However, large prime contractors often engage small businesses for specialized services or components, so there may be indirect opportunities for small businesses within the supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and program management offices. Accountability measures are embedded within the Cost Plus Award Fee structure, which links contractor compensation to performance metrics. Transparency is generally maintained through contract awards databases and reporting requirements, though specific performance details may be sensitive. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Naval Ship Maintenance Contracts
Fleet Readiness Programs
Shipbuilding and Repair Services
Defense Logistics Support
Naval Vessel Modernization

Risk Flags

Long contract duration may limit flexibility for future technological adoption.
Cost-plus award fee structure requires diligent oversight to manage costs.
Dependence on a single prime contractor for critical services.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $3.84 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 $3.84 billion.

What is the period of performance?

Start: 1999-10-27. End: 2012-12-31.

What is the historical spending pattern for fleet support services by the Department of the Navy?

The Department of the Navy historically allocates substantial funding towards fleet support, encompassing maintenance, repair, modernization, and operational readiness. Annual spending can fluctuate based on fleet size, age, geopolitical demands, and specific modernization initiatives. Over the past decade, the Navy has consistently spent tens of billions of dollars annually on shipbuilding, conversion, and repair (SC&R) accounts, which include significant portions dedicated to fleet maintenance and sustainment. This particular $3.8 billion award represents a significant, long-term investment within that broader spending context, reflecting the ongoing commitment to maintaining a robust naval presence.

How does the Cost Plus Award Fee (CPAF) structure compare to other contract types for similar services?

Cost Plus Award Fee (CPAF) contracts are common for complex services where performance outcomes are critical but difficult to define precisely upfront, such as fleet support. Unlike fixed-price contracts, CPAF allows for flexibility in costs incurred. The 'award fee' component incentivizes the contractor to exceed minimum performance standards, with a portion of the fee determined by subjective government evaluation. This contrasts with Cost Plus Incentive Fee (CPIF), which uses objective formulas to adjust profit based on cost and performance targets, or Firm-Fixed-Price (FFP) contracts, which offer the most cost certainty but less flexibility. CPAF aims to balance cost control with achieving high levels of performance and quality.

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

Huntington Ingalls Incorporated (HII), now known as Huntington Ingalls Industries, 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 surface combatants and amphibious assault ships, HII is a critical defense industrial base asset. Their experience spans decades, encompassing new construction, complex maintenance, overhaul, and modernization of naval vessels. They have consistently secured large, multi-year contracts for shipbuilding and ship repair, demonstrating a strong performance history and deep expertise in supporting naval fleet requirements. Their established relationship and capabilities make them a primary contractor for significant naval programs.

What are the potential risks associated with a contract of this magnitude and duration?

Contracts of this magnitude and duration, such as this $3.8 billion award to Huntington Ingalls, carry several potential risks. Firstly, there's the risk of cost escalation, even with a CPAF structure, if unforeseen technical challenges or market fluctuations increase the cost of labor and materials over the extended period. Secondly, contractor performance could degrade over time if incentives are not continuously managed or if the contractor becomes complacent due to the long-term nature of the work. Thirdly, there's a strategic risk for the Navy if the contractor faces financial instability or significant operational disruptions, which could impact fleet readiness. Finally, the long duration might limit the Navy's ability to adopt newer, potentially more cost-effective technologies or approaches if the contract is not structured for flexibility.

How does this contract contribute to the overall readiness of the U.S. Navy fleet?

This $3.8 billion contract is crucial for maintaining and enhancing the overall readiness of the U.S. Navy fleet. Fleet readiness encompasses the availability, capability, and sustainability of naval assets to meet operational demands. By securing long-term support for maintenance, repair, and potentially modernization, the Navy ensures that its vessels remain operational, capable, and safe. This contract likely covers a range of activities from routine upkeep to more complex overhauls, directly impacting the number of ships available for deployment and training. Consistent and high-quality support services are fundamental to projecting naval power and fulfilling national security objectives.

What is the typical market size for naval fleet support and repair services?

The market for naval fleet support and repair services is substantial and directly tied to the size and operational tempo of a nation's navy. For the U.S. Navy, which operates one of the largest and most complex fleets globally, this market represents tens of billions of dollars annually. This includes new construction, major overhauls, routine maintenance, modernization programs, and specialized repair services. The market is dominated by a few large, specialized defense contractors with the infrastructure, expertise, and security clearances required. Smaller, specialized firms often participate as subcontractors. The demand is driven by the lifecycle of naval vessels, technological advancements requiring upgrades, and the need to maintain high operational availability.

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