USS Eisenhower Contract Announced

Wednesday, December 17, 2003
The Department of Defense announced that the Navy and Northrop Grumman Newport News (NGNN) have successfully renegotiated a modification to the refueling and complex overhaul (RCOH) contract for the USS Dwight D. Eisenhower (CVN 69). The contract modification extends the end date of the USS Eisenhower RCOH by 11 weeks to Nov. 6, 2004. This modification is due to realignment of work priorities to complete the USS Enterprise extended drydocking selected restricted availability, and the unforeseen impact of Hurricane Isabel. "The contract restructuring agreement reached by the Navy and the Northrop Grumman Newport News team is highly unique. The contract provides incentives for NGNN and the Navy team to work together to manage the completion of the USS Eisenhower refueling overhaul," according to John Young, assistant secretary of the Navy, for research, development and acquisition. "The Navy and NGNN have created a better incentive contract structure to contain cost risk and schedule adherence, and we expect this model to be used in future contracts for aircraft carrier construction and overhaul. Most importantly, the new contract structure will encourage careful management attention to progress on the RCOH, the most challenging engineering and industrial task undertaken anywhere by any organization. NGNN will definitely benefit because it provides additional motivation to reduce costs so they can maximize their fee. Any underrun is beneficial to both NGNN and the Navy. NGNN also agrees to an increased share of overruns if the costs exceed expectations, and a reduced minimum fee guarantee. The new contract structure creates a win-win opportunity that is fair, reasonable and achievable for both the Navy and Northrop Grumman Newport News," Young added. The Navy reset the contract target cost from $1.36 billion to NGNN's current estimated cost at completion of $1.49 billion. The difference was covered by existing engineering and science pool funds within the contract and reprogrammed money.
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