Navy awards $278.7M for submarine components, citing sole-source justification for specialized manufacturing

Contract Overview

Contract Amount: $278,709,266 ($278.7M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2005-10-18

End Date: 2019-09-30

Contract Duration: 5,095 days

Daily Burn Rate: $54.7K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: LONG LEAD REACTOR PLANT COMPONENT AND MATERIAL FOR VIRGINIA CLASS SUBMARINE

Place of Performance

Location: SCHENECTADY, SCHENECTADY County, NEW YORK, 12305

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $278.7 million to BECHTEL PLANT MACHINERY, INC. for work described as: LONG LEAD REACTOR PLANT COMPONENT AND MATERIAL FOR VIRGINIA CLASS SUBMARINE Key points: 1. Contract awarded on a sole-source basis, limiting competitive price discovery. 2. Significant duration of nearly 14 years suggests a long-term, complex requirement. 3. Cost-plus-fixed-fee structure may incentivize cost escalation, requiring robust oversight. 4. Specialized nature of reactor plant components points to a niche market with few qualified suppliers. 5. Awarded to Bechtel Plant Machinery, Inc., a company with established experience in this domain. 6. Geographic location in New York may indicate a concentration of specialized manufacturing capabilities.

Value Assessment

Rating: fair

The total award amount of $278.7 million for long lead reactor plant components and materials for the Virginia Class submarine is substantial. Benchmarking this against similar sole-source contracts for highly specialized defense components is challenging due to the unique nature of nuclear-related submarine parts. The cost-plus-fixed-fee contract type, while common for complex R&D or production where costs are uncertain, carries inherent risks of cost overruns. Without detailed cost breakdowns and performance metrics, a precise value-for-money assessment is difficult, but the long duration and specialized nature suggest a premium for guaranteed supply.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of the Navy did not conduct a competitive bidding process. This typically occurs when only one responsible source is available or when a compelling justification for other than full and open competition exists. The lack of competition means that pricing was likely negotiated directly with the contractor, potentially leading to higher costs than if multiple bidders had vied for the contract.

Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure to drive down costs. The justification for sole-source procurement needs to be rigorously evaluated to ensure it was indeed the only viable option.

Public Impact

The primary beneficiaries are the U.S. Navy's Virginia Class submarine program, ensuring the continued production and maintenance of these critical assets. The contract delivers essential reactor plant components and materials, vital for the operational readiness and technological advancement of the submarine fleet. The geographic impact is concentrated in New York, where Bechtel Plant Machinery, Inc. is located, potentially supporting local jobs and the regional industrial base. This contract supports a highly specialized segment of the defense industrial base, requiring skilled labor in advanced manufacturing and engineering.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially increasing costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize higher spending if not closely managed.
Long contract duration (nearly 14 years) increases exposure to potential cost escalations and performance issues over time.
Lack of publicly available detailed cost breakdowns hinders independent value assessment.
Reliance on a single supplier for critical components creates supply chain risk.

Positive Signals

Award to an established contractor (Bechtel Plant Machinery, Inc.) with demonstrated experience in complex defense systems.
Focus on critical components for a high-priority naval program (Virginia Class submarines).
Contract duration suggests a stable, long-term commitment to a vital defense capability.
Potential for technology transfer and development within a specialized manufacturing sector.

Sector Analysis

This contract falls within the 'All Other Miscellaneous Electrical Equipment and Component Manufacturing' sector, specifically serving the defense industry's need for highly specialized nuclear reactor components. The market for such components is extremely niche, 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 submarine reactor technology and the limited number of suppliers. The overall defense manufacturing sector is a significant portion of federal spending, with components like these representing high-value, low-volume production.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by the 'sb': false field. Given the highly specialized and complex nature of nuclear reactor components for submarines, it is unlikely that small businesses would be primary contractors for such work. However, the prime contractor, Bechtel Plant Machinery, Inc., may engage small businesses as subcontractors for specific parts or services, though this information is not detailed in the provided data. The impact on the broader small business ecosystem is likely minimal for this specific contract.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the cost-plus-fixed-fee structure and the long duration, robust oversight mechanisms are crucial to monitor costs, ensure performance, and manage risks. Transparency may be limited due to the sensitive nature of defense contracting and sole-source awards. The Inspector General for the Department of Defense would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Virginia Class Submarine Program
Naval Nuclear Propulsion Program
Defense Manufacturing Industrial Base
Submarine Component Procurement
Sole-Source Defense Contracts

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Critical defense component procurement
Potential for cost overruns

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $278.7 million to BECHTEL PLANT MACHINERY, INC.. LONG LEAD REACTOR PLANT COMPONENT AND MATERIAL FOR VIRGINIA CLASS SUBMARINE

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 $278.7 million.

What is the period of performance?

Start: 2005-10-18. End: 2019-09-30.

What is the specific justification provided by the Department of the Navy for awarding this contract on a sole-source basis?

The provided data indicates the contract was 'NOT COMPETED'. While the specific justification is not detailed, sole-source awards for defense contracts of this magnitude typically stem from reasons such as the existence of only one responsible source capable of providing the unique, specialized components required for nuclear reactor plants. This often involves proprietary technology, unique manufacturing capabilities, or specific security clearances that limit the pool of potential contractors. The Navy would have had to formally document and justify this determination, likely citing the specialized nature of long lead reactor plant components for the Virginia Class submarine as a critical factor.

How does the cost-plus-fixed-fee (CPFF) contract structure compare to other contract types for similar defense procurements, and what are the associated risks?

The Cost-Plus-Fixed-Fee (CPFF) structure is common for complex projects where the final costs are difficult to estimate accurately at the outset, such as research, development, or the production of highly specialized components like nuclear reactor parts. Under CPFF, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. Compared to fixed-price contracts, CPFF offers greater flexibility for the government if requirements change or unforeseen costs arise. However, it carries a significant risk of cost escalation, as the contractor is incentivized to incur costs to achieve the fixed fee, rather than minimize them. Robust government oversight, detailed cost accounting, and clear performance metrics are essential to mitigate these risks and ensure value for money.

What is Bechtel Plant Machinery, Inc.'s track record with the Navy and in manufacturing complex defense systems?

Bechtel Plant Machinery, Inc. (BPMI) has a long-standing relationship with the U.S. Navy, particularly in the realm of naval nuclear propulsion. They are a key player in the design, manufacture, and support of nuclear propulsion components for submarines and aircraft carriers. BPMI is known for its expertise in handling complex, high-stakes projects requiring stringent quality control and adherence to rigorous safety and security standards. Their involvement in the Virginia Class submarine program, as evidenced by this contract, underscores their established capability and the Navy's confidence in their ability to deliver critical, specialized components.

How does the $278.7 million award compare to historical spending on similar submarine components or programs?

Direct comparisons of this $278.7 million award for 'LONG LEAD REACTOR PLANT COMPONENT AND MATERIAL' are challenging due to the highly specialized and unique nature of nuclear submarine components. Such awards are typically sole-source and represent significant investments in critical, long-lead-time items. Historical spending on Virginia Class submarine construction, or on components for previous submarine classes (like the Seawolf or Ohio classes), would provide context. However, the exact figures for comparable 'long lead' component procurements are often embedded within larger program budgets and may not be easily isolated. The duration of this contract (nearly 14 years) also suggests a phased delivery of components over a substantial period, making a simple annual spending comparison less meaningful.

What are the potential risks associated with the nearly 14-year duration of this contract?

A contract duration of nearly 14 years (from Oct 2005 to Sep 2019) for specialized components presents several risks. Firstly, the extended timeline increases the potential for cost inflation due to market fluctuations in labor, materials, and overhead over such a long period. Secondly, technological advancements in submarine design or propulsion systems could occur during this time, potentially making the contracted components outdated or less efficient by the time they are fully integrated. Thirdly, maintaining consistent quality control and contractor performance over such an extended period requires sustained oversight. Finally, the longer the contract, the greater the exposure to unforeseen geopolitical events, changes in defense priorities, or contractor performance issues that could disrupt production.

Industry Classification

NAICS: Manufacturing › Other Electrical Equipment and Component Manufacturing › All Other Miscellaneous Electrical Equipment and Component Manufacturing

Product/Service Code: SHIP AND MARINE EQUIPMENT

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

Financial Breakdown

Contract Ceiling: $278,709,266

Exercised Options: $278,709,266

Current Obligation: $278,709,266

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline