Navy awards $220M contract for nuclear components, raising questions about competition and value

Contract Overview

Contract Amount: $220,012,875 ($220.0M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2002-01-18

End Date: 2016-09-30

Contract Duration: 5,369 days

Daily Burn Rate: $41.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200210!020664!1700!BZ002 !NAVAL SEA SYSTEMS COMMAND !N0002402C2101 !A!N! !N! !20020118!20071231!072972644!094878998!094878980!N!BECHTEL PLANT MACHINERY, INC !600 LIBERTY ST !SCHENECTADY !NY!12305!65508!093!36!SCHENECTADY !SCHENECTADY !NEW YORK !+000135998887!N!N!000000000000!1140!NUCLEAR COMPONENTS !A3 !SHIPS !2SDN!SUBMARINE NUCLEAR-SSN !541330!E! !3! ! ! ! ! !99990909!B! ! !A! !D!U!U!1!001!N!1A!A!Y!Z! ! !N!C!N! ! ! !B!B!A!A!000!A!C!N! ! ! ! ! ! !0001!

Place of Performance

Location: SCHENECTADY, SCHENECTADY County, NEW YORK, 12305

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $220.0 million to BECHTEL PLANT MACHINERY, INC. for work described as: 200210!020664!1700!BZ002 !NAVAL SEA SYSTEMS COMMAND !N0002402C2101 !A!N! !N! !20020118!20071231!072972644!094878998!094878980!N!BECHTEL PLANT MACHINERY, INC !600 LIBERTY ST !SCHENECTADY !NY!12305!65508!093!36!SCHENECTADY !SCHEN… Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant duration of the contract (over 14 years) suggests a long-term need for these specialized components. 3. The contractor, Bechtel Plant Machinery, Inc., has a history with this type of work, indicating specialized expertise. 4. The contract's cost-plus-fixed-fee structure may incentivize cost overruns, requiring close oversight. 5. Lack of competition raises concerns about whether the government secured the best possible price. 6. The specific nature of nuclear components for submarines points to a highly specialized and limited market.

Value Assessment

Rating: questionable

The awarded amount of $220 million for nuclear components is substantial. Without comparable sole-source contracts or detailed cost breakdowns, it's difficult to definitively benchmark the value. However, the absence of competition inherently weakens the government's negotiating position, suggesting that the price may not be as competitive as it could have been in a more open bidding environment. The cost-plus-fixed-fee (CPFF) contract type also introduces risk, as it allows the contractor to recoup costs plus a fixed fee, potentially leading to higher overall expenditures than a fixed-price contract if costs are not meticulously managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning that only one contractor, Bechtel Plant Machinery, Inc., was solicited. This approach is typically used when a unique capability or proprietary technology is required, or in situations where only one source is available. The lack of competition means there were no other bidders to compare against, and no market pressure to drive down prices. This significantly limits the government's ability to ensure it is receiving the most cost-effective solution.

Taxpayer Impact: For taxpayers, a sole-source award means a reduced likelihood of achieving the lowest possible price. Without competitive bids, there's less incentive for the contractor to offer aggressive pricing, and the government bears a higher risk of paying a premium for the goods or services.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine programs, ensuring the continued operation and maintenance of nuclear-powered submarines. The contract delivers critical nuclear components essential for the propulsion and power systems of SSN submarines. The geographic impact is concentrated around the contractor's facilities in Schenectady, New York, and the Navy's operational bases. This contract supports a highly specialized workforce within Bechtel Plant Machinery, Inc., likely involving engineers, technicians, and manufacturing personnel with nuclear expertise.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing and value for taxpayer dollars.
Cost-plus-fixed-fee structure can incentivize cost overruns if not rigorously managed.
Long contract duration (over 14 years) increases exposure to potential cost escalations and performance issues.
Lack of transparency in sole-source justification makes it difficult to assess necessity.
Potential for contractor lock-in due to specialized nature of nuclear components.

Positive Signals

Contractor has demonstrated capability in producing specialized nuclear components.
Ensures continued availability of critical components for national security assets (submarines).
Long-term contract provides stability for specialized manufacturing capabilities.
Fixed fee component of CPFF provides some cost predictability compared to pure cost-plus contracts.

Sector Analysis

This contract falls within the Engineering Services sector, specifically supporting the defense industrial base for naval nuclear propulsion. The market for such specialized components is extremely limited, often dominated by a few firms with the requisite security clearances, technical expertise, and manufacturing capabilities. Comparable spending benchmarks are difficult to establish due to the unique nature of nuclear submarine components and the typical sole-source or limited-competition environment for such critical defense articles.

Small Business Impact

There is no indication that this contract included small business set-asides. Given the highly specialized and sensitive nature of nuclear components for submarines, it is unlikely that small businesses would possess the necessary certifications, infrastructure, or experience to compete. Subcontracting opportunities for small businesses may exist for lower-tier components or support services, but the primary contract is with a large, established firm.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of the Navy and potentially the Naval Sea Systems Command (NAVSEA). Given the critical nature of nuclear components, rigorous quality assurance, inspection, and performance monitoring protocols are expected. The cost-plus-fixed-fee structure necessitates close financial oversight to ensure costs are reasonable and allocable. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse.

Related Government Programs

Naval Nuclear Propulsion Program
Submarine Maintenance, Repair, and Overhaul Contracts
Defense Industrial Base Manufacturing Contracts
Department of Energy Nuclear Component Procurement

Risk Flags

Sole-source award lacks competitive transparency.
Cost-plus-fixed-fee contract type carries inherent cost overrun risk.
Long contract duration increases exposure to market fluctuations and potential performance decay.
Highly specialized nature of components may limit future competition or alternative sourcing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $220.0 million to BECHTEL PLANT MACHINERY, INC.. 200210!020664!1700!BZ002 !NAVAL SEA SYSTEMS COMMAND !N0002402C2101 !A!N! !N! !20020118!20071231!072972644!094878998!094878980!N!BECHTEL PLANT MACHINERY, INC !600 LIBERTY ST !SCHENECTADY !NY!12305!65508!093!36!SCHENECTADY !SCHENECTADY !NEW YORK !+000135998887!N!N!000000000000!1140!NUCLEAR COMPONENTS !A3 !SHIPS !2SDN!SUBMARINE NUCLEAR-SSN !541330!E! !3! ! ! ! ! !99990909!B

Who is the contractor on this award?

The obligated recipient is BECHTEL PLANT MACHINERY, INC..

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $220.0 million.

What is the period of performance?

Start: 2002-01-18. End: 2016-09-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data does not explicitly state the justification for the sole-source award. However, contracts for nuclear components for submarines are typically sole-sourced due to the highly specialized technical requirements, stringent safety and security protocols, unique manufacturing capabilities, and often proprietary nature of the technology involved. The government may have determined that only Bechtel Plant Machinery, Inc. possessed the necessary expertise, facilities, and clearances to produce these specific components to the required standards, making competition impractical or impossible.

How does the cost-plus-fixed-fee (CPFF) structure compare to other contract types for similar defense procurements?

Cost-plus-fixed-fee (CPFF) contracts are common in defense procurement, especially for research, development, or complex manufacturing where cost estimation is difficult. In a CPFF contract, the contractor is reimbursed for allowable costs plus a predetermined fixed fee representing profit. This differs from fixed-price contracts, where the price is set regardless of actual costs, offering more cost certainty to the buyer but potentially higher risk for the contractor. It also differs from cost-plus-incentive-fee (CPIF) or cost-plus-award-fee (CPAF) contracts, which include mechanisms to adjust the fee based on performance against cost, schedule, or technical targets. For nuclear components, CPFF might be chosen if the exact costs are highly uncertain, but it requires robust oversight to prevent cost escalation.

What is Bechtel Plant Machinery, Inc.'s track record with nuclear component manufacturing for the Navy?

Bechtel Plant Machinery, Inc. has a significant history and established expertise in manufacturing components for naval nuclear propulsion systems. As indicated by this contract and likely others, the company is a key player in the defense industrial base for this specialized area. Their long-standing involvement suggests a proven capability to meet the stringent requirements of the Navy's nuclear programs, including quality, safety, and reliability standards. This established relationship likely contributed to the sole-source justification.

What are the potential risks associated with the long duration of this contract (over 14 years)?

The long duration of this contract, spanning from January 2002 to September 2016 (effective period), presents several potential risks. Firstly, it increases the government's exposure to inflation and potential cost increases over time, even with a fixed fee, as underlying labor and material costs can fluctuate significantly over more than a decade. Secondly, it extends the period during which performance issues or quality defects could arise and impact submarine operations. Thirdly, it can lead to contractor 'lock-in,' making it difficult to switch providers even if better alternatives emerge later. Finally, maintaining oversight and ensuring continued relevance of specifications over such a long period requires sustained effort and resources.

Are there any publicly available benchmarks for the cost of nuclear components for submarines?

Publicly available cost benchmarks for specific nuclear components used in submarines are extremely rare, if they exist at all. This is due to the highly classified nature of submarine technology, the specialized and limited market, and the fact that most such procurements are sole-sourced or awarded under highly restricted competition. Detailed cost breakdowns are typically considered proprietary or sensitive defense information. Therefore, assessing the value-for-money of this $220 million contract relies heavily on internal government cost analyses, comparisons with historical internal data, or expert judgment rather than readily accessible market data.

What is the significance of the PSC code 541330 (Engineering Services) for this contract?

The Product Service Code (PSC) 541330, 'Engineering Services,' indicates that the primary focus of this contract is on the design, development, analysis, and potentially the manufacturing oversight of engineering systems. For nuclear components, this implies that the contract likely encompasses not just the physical production but also the intricate engineering processes, quality assurance, testing, and integration support required to ensure these critical parts function correctly and safely within the submarine's nuclear power plant. It signifies a high level of technical expertise and specialized engineering knowledge is being procured.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Architectural, Engineering, and Related Services › Engineering Services

Product/Service Code: NUCLEAR ORDNANCE

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Bechtel Group, Inc. (UEI: 094878980)

Address: 3500 TECHNOLOGY DR, MONROEVILLE, PA, 15146

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline