Navy awards $228M contract for power boiler and heat exchanger manufacturing to Bechtel Plant Machinery, Inc

Contract Overview

Contract Amount: $228,114,810 ($228.1M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2004-10-14

End Date: 2019-09-30

Contract Duration: 5,464 days

Daily Burn Rate: $41.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Place of Performance

Location: SCHENECTADY, SCHENECTADY County, NEW YORK, 12305, UNITED STATES OF AMERICA

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $228.1 million to BECHTEL PLANT MACHINERY, INC. for work described as: Key points: 1. Contract awarded on a sole-source basis, raising questions about potential price efficiencies. 2. Long contract duration of over 15 years suggests a sustained need for these specialized manufacturing services. 3. The 'Cost Plus Fixed Fee' pricing structure may incentivize cost overruns if not closely monitored. 4. The absence of competition limits opportunities for market-driven price discovery and innovation. 5. This contract falls under the 'Power Boiler and Heat Exchanger Manufacturing' NAICS code, indicating a specialized industrial sector.

Value Assessment

Rating: questionable

The contract's value of $228 million over a 15-year period is substantial. Without comparable sole-source contracts for similar specialized manufacturing, it is difficult to benchmark the value for money. The 'Cost Plus Fixed Fee' (CPFF) structure, while common for complex projects where costs are uncertain, can lead to higher overall expenditures compared to fixed-price contracts if cost controls are not robust. The lack of competition further complicates a direct value assessment, as there's no market pressure to drive down prices.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when only one vendor possesses the unique capabilities, technology, or security clearances required for the specific requirement. The lack of competition means that the Department of the Navy did not benefit from the price discovery and potential cost savings that a competitive bidding process could have provided. It also limits the opportunity for other qualified businesses to demonstrate their capabilities and potentially offer more competitive pricing.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without multiple bids, there is less assurance that the negotiated price represents the best possible value.

Public Impact

The primary beneficiaries are the Department of the Navy, which receives critical components for its operations. The contract supports the manufacturing of power boilers and heat exchangers, essential for naval vessels and potentially shore facilities. The contract's geographic impact is centered in New York, where Bechtel Plant Machinery, Inc. is located, potentially supporting local employment and the regional industrial base. This contract likely sustains specialized manufacturing jobs within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and potential taxpayer savings.
Cost Plus Fixed Fee structure carries inherent risk of cost escalation without stringent oversight.
Long contract duration may mask inefficiencies if performance is not continuously evaluated.
Lack of transparency in the sole-source justification process could obscure potential alternatives.

Positive Signals

Award to an established contractor like Bechtel suggests a level of confidence in their technical capability.
The contract addresses a critical need for specialized manufacturing within the defense sector.
The fixed fee component of the CPFF contract provides some level of cost predictability for the contractor's profit.

Sector Analysis

This contract falls within the industrial manufacturing sector, specifically focusing on power boilers and heat exchangers, which are critical components for various industrial applications, including defense. The NAICS code 332410 confirms this specialization. The market for such specialized components is often characterized by a limited number of highly qualified manufacturers due to the technical expertise, capital investment, and regulatory compliance required. Comparable spending benchmarks are difficult to establish without more specific details on the exact specifications and quantities of the boilers and exchangers procured.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Given the specialized nature of power boiler and heat exchanger manufacturing, it is likely that the primary contractor, Bechtel Plant Machinery, Inc., is a large business. There is no explicit information on subcontracting plans for small businesses within this award, which could represent a missed opportunity to engage the small business industrial base.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The 'Cost Plus Fixed Fee' structure necessitates rigorous financial oversight to ensure costs are reasonable and allocable, and that the fixed fee is earned. Transparency regarding the justification for the sole-source award and ongoing performance metrics would be key accountability measures. The specific Inspector General jurisdiction would depend on the Navy's organizational structure overseeing this contract.

Related Government Programs

Naval Ship Systems
Defense Industrial Base Manufacturing
Power Generation Equipment Procurement
Heat Exchanger Manufacturing Contracts

Risk Flags

Sole-source award
Cost-plus contract type
Long contract duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $228.1 million to BECHTEL PLANT MACHINERY, INC.. See the official description on USAspending.

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 $228.1 million.

What is the period of performance?

Start: 2004-10-14. End: 2019-09-30.

What is the specific justification for awarding this contract on a sole-source basis to Bechtel Plant Machinery, Inc.?

The provided data indicates the contract was awarded as 'NOT COMPETED' (ct: NOT COMPETED), which is synonymous with a sole-source award. The specific justification for this sole-source determination is not detailed in the provided data snippet. Typically, sole-source awards are justified under circumstances such as the existence of only one responsible source, urgent and compelling needs, or when a specific technology or capability is uniquely held by a single contractor. For a contract of this magnitude and duration, the justification would likely involve a detailed analysis by the Department of the Navy demonstrating why competition was not feasible or advantageous, potentially citing proprietary technology, specialized manufacturing capabilities, or unique integration requirements with existing naval systems that only Bechtel Plant Machinery, Inc. could fulfill.

How does the 'Cost Plus Fixed Fee' (CPFF) pricing structure compare to other contract types for similar manufacturing needs?

The 'Cost Plus Fixed Fee' (CPFF) contract type is often used when the scope of work is well-defined but the exact costs are uncertain, or when the contractor needs to invest significantly in specialized facilities or processes. In a CPFF contract, the government reimburses the contractor for allowable costs and pays a predetermined fixed fee representing profit. This differs from fixed-price contracts, where the price is set upfront, and cost savings benefit the contractor while cost overruns are their responsibility. Compared to 'Cost Plus Incentive Fee' (CPIF) contracts, CPFF offers less incentive for the contractor to control costs beyond what is necessary to meet the contract requirements, as the fee is fixed regardless of the final cost. For specialized manufacturing like power boilers and heat exchangers, a competitive fixed-price contract would generally be preferred by the government for better cost certainty and value, assuming sufficient competition exists and the requirements are clearly defined.

What are the potential risks associated with a sole-source contract of this duration and value?

A sole-source contract of this magnitude ($228 million) and duration (over 15 years) carries several potential risks. Firstly, the lack of competition means the government may not be achieving the best possible price, as there is no market pressure to drive down costs. This can lead to overpayment compared to what a competitive process might yield. Secondly, the 'Cost Plus Fixed Fee' (CPFF) structure, while providing flexibility, can incentivize the contractor to incur higher costs, as their profit (the fixed fee) is guaranteed regardless of the final cost. Without robust government oversight and stringent cost controls, this can lead to significant cost overruns. Thirdly, a long-term sole-source relationship can lead to complacency on the part of the contractor and a potential erosion of specialized skills within the broader industrial base if other firms are discouraged from developing competing capabilities.

What is Bechtel Plant Machinery, Inc.'s track record with the Department of Defense for similar contracts?

While the provided data snippet identifies Bechtel Plant Machinery, Inc. as the contractor and the Department of Defense as the agency, it does not offer details on their specific track record with the DoD for similar contracts. To assess their performance history, one would need to examine past contract awards, performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS), and any history of disputes or contract modifications. Bechtel is a large, well-established engineering and construction company with extensive experience in various sectors, including defense. However, the specific performance and reliability of Bechtel Plant Machinery, Inc. in manufacturing power boilers and heat exchangers for the Navy would require a deeper dive into historical contract data and performance reviews.

How does the spending on power boiler and heat exchanger manufacturing compare to other defense procurement categories?

The provided data focuses on a single contract for power boiler and heat exchanger manufacturing, totaling approximately $228 million. To compare this to other defense procurement categories, one would need broader data on the Department of Defense's overall budget and spending patterns. Defense procurement encompasses a vast array of categories, including aircraft, ships, vehicles, weapons systems, IT services, personnel support, and research and development. Manufacturing of specialized components like boilers and heat exchangers represents a specific segment within the broader defense industrial base. While significant in absolute terms, $228 million for this specific niche is likely a small fraction of the total annual defense budget, which often runs into hundreds of billions of dollars. Categories like major weapon system acquisition (e.g., fighter jets, submarines) or large-scale IT infrastructure projects typically involve much larger sums.

Industry Classification

NAICS: Manufacturing › Boiler, Tank, and Shipping Container Manufacturing › Power Boiler and Heat Exchanger Manufacturing

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

Cost or Pricing Data: YES

Timeline