Navy Awards $174.7M Contract for Destroyer Production to Ingalls Shipbuilding

Contract Overview

Contract Amount: $1,355,648,029 ($1.4B)

Contractor: Huntington Ingalls Incorporated

Awarding Agency: Department of Defense

Start Date: 1998-03-06

End Date: 2006-10-31

Contract Duration: 3,161 days

Daily Burn Rate: $428.9K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 2

Pricing Type: FIXED PRICE INCENTIVE

Sector: Defense

Official Description: 199811!1700!2484!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2307 !A!*!* !19980306!19990306!174786913!174786913!001922749!N!34293!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSON !MISS !0001!+000018007090!N!Y!001771358449!1903!DESTROYERS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3731!3!*!*!*!B!A!*!A !Y!L!2!002!N!3A!A!N!D!* !* !N!C!*!A!A!A!A!A!*!* !*!N!A!D!N!*!*!*!*!*!

Place of Performance

Location: PASCAGOULA, JACKSON County, MISSISSIPPI, 39568, UNITED STATES OF AMERICA

State: Mississippi Government Spending

Plain-Language Summary

Department of Defense obligated $1.36 billion to HUNTINGTON INGALLS INCORPORATED for work described as: 199811!1700!2484!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2307 !A!*!* !19980306!19990306!174786913!174786913!001922749!N!34293!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSO… Key points: 1. The contract is for the production of destroyers, a critical component of naval fleet modernization. 2. Ingalls Shipbuilding, a subsidiary of Huntington Ingalls Industries, is the primary contractor. 3. The contract was awarded under full and open competition after exclusion of sources, suggesting a competitive process. 4. The fixed-price incentive contract type aims to balance cost control with performance incentives. 5. The total value of the contract is $174,786,913, with an initial award of $135,564,802.86.

Value Assessment

Rating: good

The contract value of $174.7 million for destroyer production appears reasonable given the complexity and scale of naval shipbuilding. Benchmarking against similar large-scale defense contracts would provide a more precise assessment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under 'full and open competition after exclusion of sources.' This indicates that while competition was sought, specific sources were initially excluded, potentially impacting the breadth of price discovery.

Taxpayer Impact: The competitive nature of the award, even with exclusions, suggests an effort to secure fair pricing for taxpayers on a significant defense procurement.

Public Impact

This contract directly supports national defense by ensuring the continued production of advanced naval vessels. The funding allocated will sustain jobs and economic activity within the shipbuilding sector and related supply chains. The successful execution of this contract is crucial for maintaining the U.S. Navy's operational readiness and technological superiority. The fixed-price incentive structure may lead to cost savings for the government if performance targets are met or exceeded.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if performance incentives are not met.
Dependence on a single prime contractor for a critical defense asset.
Long-term sustainment and maintenance costs not detailed in this award.

Positive Signals

Supports a key defense industrial base company.
Fixed-price incentive contract encourages efficiency.
Awarded through a competitive process.

Sector Analysis

This contract falls within the Defense sector, specifically naval shipbuilding. Spending in this area is characterized by large, complex, and long-term projects with significant R&D and manufacturing components.

Small Business Impact

While the prime contractor is a large corporation, the contract likely involves numerous subcontracts that could benefit small businesses in the supply chain for components and services.

Oversight & Accountability

The Department of Defense and the Department of the Navy are responsible for oversight. The fixed-price incentive contract type includes mechanisms for monitoring performance and costs.

Related Government Programs

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

Risk Flags

Long contract duration increases exposure to economic fluctuations.
Reliance on a single source for critical shipbuilding capacity.
Potential for scope creep and cost overruns in complex projects.
Geopolitical factors impacting defense spending priorities.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.36 billion to HUNTINGTON INGALLS INCORPORATED. 199811!1700!2484!BZ002!NAVAL SEA SYSTEMS COMMAND !N0002498C2307 !A!*!* !19980306!19990306!174786913!174786913!001922749!N!34293!INGALLS SHIPBUILDING, INC !1000 ACCESS RD !PASCAGOULA !MS!39568!55360!059!28!PASCAGOULA !JACKSON !MISS !0001!+000018007090!N!Y!001771358449!1903!DESTROYERS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3731!3!*!*!*!B!A!*!A !Y!L!2!0

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 $1.36 billion.

What is the period of performance?

Start: 1998-03-06. End: 2006-10-31.

What specific performance metrics are tied to the incentive portion of this contract, and how are they measured?

The contract details would specify the performance metrics, which could include factors like delivery schedule adherence, quality of construction, and system integration. These are typically monitored through regular progress reports, inspections, and testing by the Naval Sea Systems Command to ensure compliance and trigger incentive payments or penalties.

What are the long-term implications of awarding destroyer production to a limited number of shipyards regarding market competition and innovation?

Concentrating production in a few large shipyards can lead to a stable, albeit less competitive, market. While this ensures capacity for critical defense needs, it may limit opportunities for newer companies and potentially slow down innovation if competition is not actively fostered through other means, such as research and development contracts.

How does the 'exclusion of sources' in the competition process impact the government's ability to secure the best possible price?

Excluding sources, even if justified, inherently reduces the number of bidders. This can limit the competitive pressure on pricing. While the government likely had valid reasons for exclusion, it necessitates careful negotiation and cost analysis to ensure the final price reflects fair market value despite the narrowed competition.

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

Contract Characteristics

Multi-Year Contract: Yes

Cost or Pricing Data: NO

Timeline