Navy awards $595M contract for ship components to Bechtel Plant Machinery, Inc

Contract Overview

Contract Amount: $594,932,062 ($594.9M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2007-10-16

End Date: 2022-09-30

Contract Duration: 5,463 days

Daily Burn Rate: $108.9K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: FY08 S9G COMPONENTS

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 $594.9 million to BECHTEL PLANT MACHINERY, INC. for work described as: FY08 S9G COMPONENTS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, which can lead to cost overruns if not managed carefully. 2. The contract has a long duration of 5,463 days, spanning over 15 years, indicating a long-term need for these components. 3. Awarded as 'NOT COMPETED', raising questions about the level of competition and potential for better pricing. 4. The contract value of $595 million suggests a significant investment in shipbuilding or repair capabilities. 5. The primary contractor, Bechtel Plant Machinery, Inc., has a substantial contract value, indicating a significant role in this sector. 6. The North American Industry Classification System (NAICS) code 336611 points to the shipbuilding and repair industry.

Value Assessment

Rating: questionable

The contract's cost-plus-fixed-fee structure, combined with a lack of competition, makes a definitive value assessment difficult without further data on the fixed fee and the cost base. Benchmarking against similar sole-source contracts for ship components would be necessary to determine if the pricing is reasonable. The extended duration also introduces risks related to cost escalation over time. Without transparency into the cost drivers and profit margins, it's challenging to ascertain the true value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded as 'NOT COMPETED', indicating that a full and open competition was not conducted. This suggests that the Department of the Navy likely determined that only one source was capable of meeting the requirements, or that there were other justifications for a sole-source award, such as urgency or a lack of adequate competition. The absence of multiple bidders means there was no direct price comparison, potentially leading to a higher price than if the contract had been competed.

Taxpayer Impact: Taxpayers may have paid a premium due to the lack of competitive bidding. Without competition, there is less pressure on the contractor to offer the lowest possible price.

Public Impact

The primary beneficiaries are likely the U.S. Navy, ensuring the availability of critical ship components for its fleet. The contract supports the shipbuilding and repair industry, potentially sustaining jobs within this sector. The geographic impact is centered around the contractor's operations in New York, but the ultimate impact is on naval readiness nationwide. Workforce implications include the need for skilled labor in manufacturing, engineering, and logistics related to shipbuilding components.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition could lead to inflated costs.
Long contract duration increases risk of cost escalation and obsolescence.
Cost-plus-fixed-fee contracts can incentivize higher spending if not tightly managed.
Potential for contractor lock-in due to specialized nature of components.

Positive Signals

Ensures a critical supply of components for naval vessels.
Long-term award provides stability for the contractor and supply chain.
Contractor's established presence suggests experience in delivering these components.

Sector Analysis

The shipbuilding and repair sector (NAICS 336611) is a critical component of national defense and maritime commerce. This contract falls within a specialized segment of this industry, focusing on specific ship components. The total federal spending in this sector can fluctuate based on defense budgets and shipbuilding needs. Comparable spending benchmarks would involve analyzing other large, long-term contracts for naval ship components, particularly those awarded through sole-source or limited competition.

Small Business Impact

The data indicates that this contract was not awarded to a small business (ss: false) and there is no explicit mention of small business set-asides (sb: false). This suggests that the primary contract is with a large entity. There is no information provided on subcontracting plans, but for a contract of this magnitude and nature, it is possible that smaller businesses could be involved as subcontractors, though this is not guaranteed.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. Given the long duration and significant value, regular performance reviews, audits, and potentially oversight from the Government Accountability Office (GAO) or the Department of Defense Inspector General would be expected. Transparency is limited by the sole-source nature, but contract modifications, performance reports, and payment data should be subject to review.

Related Government Programs

Naval Ship Production
Defense Procurement
Shipbuilding and Repair
Military Equipment Manufacturing
Department of the Navy Contracts

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $594.9 million to BECHTEL PLANT MACHINERY, INC.. FY08 S9G COMPONENTS

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 $594.9 million.

What is the period of performance?

Start: 2007-10-16. End: 2022-09-30.

What is the specific nature of the 'S9G COMPONENTS' and why were they deemed only available from Bechtel Plant Machinery, Inc.?

The 'S9G COMPONENTS' likely refer to specialized parts or systems for a specific class of Navy ships, possibly related to propulsion or power generation, given the contractor's name 'Plant Machinery'. The designation 'S9G' is often an internal Navy designation for a particular engine or system. The sole-source award suggests these components are either proprietary to Bechtel, require unique manufacturing capabilities that only Bechtel possesses, or are critical spares for an existing system where only Bechtel has the necessary technical data and expertise. Without further declassification or specific contract details, the exact nature and the precise justification for the sole-source award remain proprietary.

How does the cost-plus-fixed-fee (CPFF) structure typically perform in long-term defense contracts compared to other contract types?

Cost-plus-fixed-fee (CPFF) contracts are often used when the scope of work is not precisely defined or when there is significant uncertainty in the costs. In long-term defense contracts, CPFF can provide flexibility for evolving requirements. However, it carries a risk of cost overruns because the contractor is reimbursed for actual costs plus a fixed fee. This can incentivize the contractor to incur higher costs, as their profit (the fixed fee) remains constant regardless of the total cost. Effective oversight, stringent cost controls, and clear performance metrics are crucial to mitigate these risks and ensure value for money. Compared to fixed-price contracts, CPFF offers less price certainty for the government but can be more adaptable to complex, long-duration projects.

What are the potential risks associated with a 15-year contract duration for specialized ship components?

A 15-year contract duration presents several risks. Firstly, technological obsolescence is a significant concern; components designed and manufactured today might be outdated or incompatible with future naval technologies by the end of the contract. Secondly, economic inflation and fluctuations in material costs over such a long period can lead to substantial cost increases, even with a fixed fee, if the base cost estimates are not robust. Thirdly, the contractor's financial stability and operational capacity could change over 15 years, potentially impacting delivery schedules or quality. Lastly, maintaining the same level of oversight and contract management effectiveness over such an extended period requires sustained institutional commitment and resources.

Given the sole-source nature, what mechanisms are in place to ensure Bechtel Plant Machinery, Inc. is not overcharging for these components?

Even in sole-source contracts, the government employs several mechanisms to control costs. The Department of the Navy would likely conduct detailed 'should-cost' analyses to determine a fair and reasonable price based on industry standards, historical data, and projected costs. They would scrutinize the contractor's proposed costs, including labor, materials, and overhead. The fixed fee itself would be negotiated based on the assessed risk and complexity. Furthermore, contract clauses may include limitations on indirect cost rates, requirements for detailed cost reporting, and provisions for audits by the Defense Contract Audit Agency (DCAA). Regular performance reviews and milestone payments tied to verifiable progress also serve as oversight tools.

What is the historical spending pattern for Bechtel Plant Machinery, Inc. with the Department of Defense, and how does this contract compare?

Historical data for Bechtel Plant Machinery, Inc. with the Department of Defense would need to be accessed through federal procurement databases (like FPDS or USAspending). Generally, Bechtel is a large, established engineering and construction company with a long history of significant government contracts, particularly in defense and infrastructure. This $595 million contract, awarded over a 15-year period, represents a substantial, long-term commitment. Without specific historical figures, it's difficult to say precisely how it compares, but it aligns with the company's profile as a major contractor capable of handling large-scale, complex projects for the military. Its duration and sole-source nature are key distinguishing factors.

Industry Classification

NAICS: Manufacturing › Ship and Boat Building › Ship Building and Repairing

Product/Service Code: FURNACE/STEAM/DRYING; NUCL REACTOR

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002407R2118

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

Financial Breakdown

Contract Ceiling: $594,932,062

Exercised Options: $594,932,062

Current Obligation: $594,932,062

Contract Characteristics

Cost or Pricing Data: NO

Timeline