Naval Reactors contract awarded to Bechtel Plant Machinery, Inc. for over $1.3 billion

Contract Overview

Contract Amount: $1,316,045,847 ($1.3B)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2011-11-17

End Date: 2025-09-30

Contract Duration: 5,066 days

Daily Burn Rate: $259.8K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: NAVAL REACTORS

Place of Performance

Location: MONROEVILLE, ALLEGHENY County, PENNSYLVANIA, 15146

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $1.32 billion to BECHTEL PLANT MACHINERY, INC. for work described as: NAVAL REACTORS Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, indicating potential for cost overruns. 2. Long duration of the contract (over 13 years) suggests a critical, long-term need. 3. Lack of competition raises concerns about price discovery and potential for inflated costs. 4. The contract is for power boiler and heat exchanger manufacturing, a specialized industrial sector. 5. Awarded by the Department of the Navy, highlighting its importance to naval operations. 6. The contractor, Bechtel Plant Machinery, Inc., has a significant role in this specialized area.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its specialized nature and lack of competitive bidding. The cost-plus-fixed-fee structure means the final cost is not predetermined, and the government bears the risk of cost increases. While the base award is substantial, the total value could escalate significantly over its long duration. Without comparable contracts or a competitive process, it's difficult to definitively assess if the pricing represents good value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning there was no open competition. This typically occurs when a unique capability or proprietary technology is required, or when only one responsible source exists. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms.

Taxpayer Impact: For taxpayers, a sole-source award means less assurance that the price paid is the most economical. It removes the downward pressure on costs that competition usually provides, potentially leading to higher overall expenditures.

Public Impact

The primary beneficiaries are the U.S. Navy and its operational readiness, ensuring critical components for naval vessels are manufactured. Services delivered include the manufacturing of power boilers and heat exchangers, essential for propulsion and power generation systems. The geographic impact is primarily centered around the contractor's facilities in Pennsylvania, where the manufacturing will take place. Workforce implications include the employment of skilled labor in manufacturing, engineering, and project management roles within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost-plus-fixed-fee contract structure increases financial risk for the government.
Sole-source award limits price negotiation and oversight effectiveness.
Long contract duration (over 13 years) increases exposure to potential cost escalations and performance issues.
Lack of transparency in pricing due to sole-source nature.

Positive Signals

Contract awarded to a known entity with presumed expertise in a critical defense area.
Long-term award suggests a stable and predictable need for the services.
The contract supports a vital national security function (Naval Reactors).

Sector Analysis

This contract falls within the industrial manufacturing sector, specifically focusing on power boilers and heat exchangers. This is a niche but critical area for defense applications, particularly for naval propulsion systems managed by Naval Reactors. The market for such specialized components is limited, often dominated by a few key players with the necessary expertise and security clearances. Comparable spending benchmarks are difficult to establish due to the unique nature of naval nuclear propulsion components.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Furthermore, the 'ss' (small business subcontracting) is also false. This suggests that small businesses are unlikely to be directly involved as prime contractors or through mandatory subcontracting requirements on this specific award. The focus is on a large, specialized prime contractor.

Oversight & Accountability

Oversight for this contract is likely managed by the Department of the Navy, specifically within the Naval Sea Systems Command (NAVSEA) or the Naval Nuclear Propulsion Program. Given the critical nature of Naval Reactors, oversight is expected to be stringent, though the specifics of accountability measures and transparency are not detailed in the provided data. Inspector General jurisdiction would apply to any potential fraud, waste, or abuse.

Related Government Programs

Naval Nuclear Propulsion Program
Submarine and Aircraft Carrier Construction
Defense Industrial Base Manufacturing
Power Generation Equipment Manufacturing

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Critical defense component manufacturing

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.32 billion to BECHTEL PLANT MACHINERY, INC.. NAVAL REACTORS

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 $1.32 billion.

What is the period of performance?

Start: 2011-11-17. End: 2025-09-30.

What is the historical spending pattern for Bechtel Plant Machinery, Inc. with the Department of the Navy for similar components?

Historical spending data for Bechtel Plant Machinery, Inc. with the Department of the Navy for power boilers and heat exchangers would provide crucial context for evaluating the current contract's value. Analyzing past awards, contract types, and final costs for similar components could reveal trends in pricing, cost growth, and contractor performance. Without this specific historical data, it is difficult to ascertain if the current $1.3 billion award represents an increase or decrease compared to previous engagements, or if the cost-plus-fixed-fee structure has historically led to significant cost overruns for this contractor in similar contexts. Such analysis is vital for understanding the long-term financial commitment and potential risks associated with this sole-source award.

How does the cost-plus-fixed-fee structure typically perform for long-duration, specialized manufacturing contracts within the defense sector?

Cost-plus-fixed-fee (CPFF) contracts are often used in defense for research, development, or complex manufacturing where the final costs are uncertain at the outset. While the fixed fee provides the contractor with a guaranteed profit margin, the government bears the risk of cost overruns. For long-duration, specialized manufacturing like power boilers and heat exchangers for naval reactors, CPFF can incentivize the contractor to control costs to maximize their fee relative to the effort expended. However, it also requires robust government oversight to monitor expenditures and prevent unnecessary costs. Historically, CPFF contracts can lead to higher final costs than fixed-price contracts if not managed diligently, especially over extended periods where unforeseen technical challenges or material price fluctuations can occur.

What are the specific risks associated with a sole-source award for critical naval components like power boilers and heat exchangers?

A sole-source award for critical naval components like power boilers and heat exchangers presents several significant risks. Firstly, the absence of competition means the government cannot leverage market forces to ensure the lowest possible price, potentially leading to higher costs for taxpayers. Secondly, it reduces the incentive for the contractor to innovate or improve efficiency, as there is no competitive pressure. Thirdly, it can create a dependency on a single supplier, making the Navy vulnerable if the contractor faces financial difficulties, production issues, or decides to exit the market. Finally, without competitive benchmarking, it is harder to assess the fairness and reasonableness of the pricing and terms, necessitating extremely rigorous government oversight and negotiation.

What is the typical performance benchmark for contractors in the power boiler and heat exchanger manufacturing industry serving the defense sector?

Performance benchmarks for contractors in the power boiler and heat exchanger manufacturing industry serving the defense sector are typically measured by adherence to stringent quality standards (e.g., ASME codes), on-time delivery schedules, and successful integration into complex systems like naval vessels. For specialized components like those for Naval Reactors, performance is also critically evaluated based on reliability, durability under extreme conditions, and compliance with nuclear safety regulations. Contractors are often assessed on their technical expertise, manufacturing capabilities, and ability to manage complex supply chains. While specific metrics may vary, consistent delivery of high-quality, defect-free products that meet all technical specifications and operational requirements is paramount.

How does the geographic concentration of this contract (Pennsylvania) impact supply chain resilience and potential risks?

The geographic concentration of this contract, with manufacturing likely occurring in Pennsylvania, can have mixed impacts on supply chain resilience and risk. On one hand, a concentrated location can facilitate closer collaboration, streamlined logistics, and potentially faster communication between the government and the contractor. It may also leverage established regional expertise and infrastructure. However, it also introduces risks. A single geographic location is more vulnerable to localized disruptions such as natural disasters, labor strikes, transportation issues, or regional economic downturns. If a significant disruption occurs in Pennsylvania, it could halt production entirely, impacting the Navy's operational readiness. Diversifying manufacturing locations or having robust contingency plans would mitigate these risks.

Industry Classification

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

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

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002411R2106

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, Corporate Entity Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $1,316,045,847

Exercised Options: $1,316,045,847

Current Obligation: $1,316,045,847

Subaward Activity

Number of Subawards: 172

Total Subaward Amount: $81,302,734

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline