Naval Reactors contract awarded to Bechtel Plant Machinery, Inc. for over $592 million

Contract Overview

Contract Amount: $592,468,557 ($592.5M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2012-02-06

End Date: 2027-09-30

Contract Duration: 5,715 days

Daily Burn Rate: $103.7K/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 $592.5 million to BECHTEL PLANT MACHINERY, INC. for work described as: NAVAL REACTORS Key points: 1. Contract awarded for power boiler and heat exchanger manufacturing. 2. Long-term contract with an estimated duration of over 5700 days. 3. Sole-source award indicates limited competition. 4. Contract type is Cost Plus Fixed Fee, which can lead to cost overruns. 5. Significant federal investment in naval nuclear propulsion. 6. Contractor has a substantial role in a critical national security program.

Value Assessment

Rating: fair

The contract's value of over $592 million over its extended period suggests a significant investment. Benchmarking the value for power boiler and heat exchanger manufacturing is challenging due to the specialized nature of naval nuclear components. The Cost Plus Fixed Fee (CPFF) contract type, while common for complex R&D and production, carries inherent risks of cost escalation compared to fixed-price contracts. Without detailed cost breakdowns and comparisons to similar specialized manufacturing efforts, a definitive value-for-money assessment is difficult.

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 considered for the award. This typically occurs when a unique capability or proprietary technology is required, or when it is deemed impractical to solicit bids from multiple sources. The lack of competition means that the government did not benefit from a competitive bidding process, which could have potentially led to lower prices or more innovative solutions.

Taxpayer Impact: Sole-source awards limit the government's ability to leverage market competition to secure the best possible pricing for taxpayers. This can result in higher costs than might be achieved through a competitive process.

Public Impact

The primary beneficiaries are the U.S. Navy and the Department of Defense, ensuring the continued operation and maintenance of naval nuclear propulsion systems. Services delivered include the manufacturing of critical components for nuclear-powered vessels. The geographic impact is primarily national, supporting defense infrastructure and national security. Workforce implications include specialized manufacturing jobs in engineering, fabrication, and quality assurance.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Cost Plus Fixed Fee contract type introduces risk of cost overruns.
Sole-source award limits competitive pricing opportunities.
Long contract duration increases exposure to potential scope creep or changing requirements.
Specialized nature of the work may limit the pool of qualified contractors.
Potential for contractor lock-in due to unique expertise.

Positive Signals

Contractor is a long-standing entity with deep expertise in naval nuclear propulsion.
Ensures continuity of critical national security capabilities.
Focus on specialized manufacturing supports high-skilled jobs.
Long-term award provides stability for program execution.

Sector Analysis

This contract falls within the Power Boiler and Heat Exchanger Manufacturing sector (NAICS 332410), a specialized area of industrial manufacturing. The market for naval nuclear components is highly concentrated, with a limited number of firms possessing the necessary security clearances, technical expertise, and infrastructure. Spending in this sector is heavily influenced by defense budgets and national security priorities. Comparable spending benchmarks are difficult to establish due to the unique, high-security nature of naval nuclear applications.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'sb': false. Given the specialized and high-security nature of naval nuclear component manufacturing, it is unlikely that small businesses would be primary contractors for this type of work. Subcontracting opportunities for small businesses may exist for ancillary services or component parts, but the prime contract is with a large, established firm.

Oversight & Accountability

Oversight for the Naval Reactors program is exceptionally stringent, managed jointly by the Department of Energy and the Department of the Navy. Bechtel Plant Machinery, Inc. operates under rigorous quality assurance and safety protocols. Transparency is maintained through regular reporting and audits, though specific contract details may be classified due to national security implications. Inspector General oversight would apply to ensure efficient use of funds and prevent fraud, waste, and abuse.

Related Government Programs

Naval Nuclear Propulsion Program
Department of Energy - National Nuclear Security Administration
Department of the Navy - Shipyards and Naval Facilities
Defense Industrial Base

Risk Flags

Sole-source award
Cost Plus Fixed Fee contract type
Long contract duration
Critical national security component

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $592.5 million 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 $592.5 million.

What is the period of performance?

Start: 2012-02-06. End: 2027-09-30.

What is the historical spending trend for Bechtel Plant Machinery, Inc. with the Naval Reactors program?

Historical spending data for Bechtel Plant Machinery, Inc. with the Naval Reactors program would reveal the company's long-standing relationship and the scale of its involvement over time. Analyzing past contract values, durations, and types (e.g., cost-plus vs. fixed-price) can indicate trends in program needs and contractor performance. A consistent award of large, long-term contracts suggests a critical and enduring role. Without specific historical data, it's presumed that Bechtel has been a primary contractor for these specialized components for an extended period, reflecting the stable, long-term nature of naval nuclear platforms. This sustained relationship implies a deep institutional knowledge and established operational capacity, but also warrants scrutiny to ensure continued cost-effectiveness and innovation.

How does the Cost Plus Fixed Fee (CPFF) structure impact the value for money in this contract?

The Cost Plus Fixed Fee (CPFF) contract structure means the contractor is reimbursed for allowable costs plus a fixed fee representing profit. While CPFF is often used for research, development, or complex manufacturing where cost estimation is difficult, it carries a risk of cost overruns. The 'fixed fee' provides some incentive for the contractor to control costs, as their profit is predetermined. However, if costs escalate significantly, the total contract value increases, potentially diminishing the value for money compared to a fixed-price contract where the contractor bears more of the cost risk. For this Naval Reactors contract, the CPFF structure suggests that the government is accepting a higher degree of cost risk in exchange for the contractor's specialized expertise and the complexity of the work. Rigorous oversight and cost controls are essential to mitigate potential inefficiencies and ensure fair pricing.

What are the primary risks associated with a sole-source award for critical defense components?

Sole-source awards for critical defense components, such as those for naval reactors, present several primary risks. Firstly, the lack of competition can lead to higher prices than might be achieved in a competitive bidding environment, as the contractor faces less pressure to optimize costs. Secondly, it can stifle innovation, as there is less incentive for the sole-source provider to develop novel or more efficient solutions when they are guaranteed the contract. Thirdly, it can create contractor dependency or 'lock-in,' making it difficult and costly to switch providers in the future, even if performance issues arise. Finally, without competitive benchmarking, it can be harder for the government to ascertain if it is receiving fair market value. Robust justification and stringent oversight are crucial to mitigate these risks.

What is the significance of the 'Power Boiler and Heat Exchanger Manufacturing' classification for this contract?

The classification 'Power Boiler and Heat Exchanger Manufacturing' (NAICS 332410) indicates the core industrial activity covered by this contract. For naval reactors, these components are not standard industrial equipment; they are highly specialized, safety-critical elements designed to withstand extreme conditions and ensure the reliable operation of nuclear propulsion systems. This classification highlights the contract's focus on precision engineering, advanced materials, stringent quality control, and adherence to rigorous safety and security standards mandated by the Naval Reactors program. It signifies a high-value, technically demanding manufacturing process essential for national defense capabilities.

How does the duration of the contract (5715 days) influence program management and cost control?

A contract duration of 5715 days (approximately 15.6 years) significantly impacts program management and cost control. Such a long duration necessitates robust long-term planning, including forecasting future material costs, labor rates, and technological advancements. It allows for greater stability and continuity in production and support, which can be beneficial for complex, specialized programs like naval reactors. However, it also increases the risk of cost escalation due to inflation and potential changes in program requirements or government priorities over such an extended period. Effective management requires mechanisms for periodic review, potential contract modifications, and strong cost surveillance to ensure that the government continues to receive value throughout the contract's life.

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: N0002411R2107

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Bechtel Group, Inc.

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: $592,468,557

Exercised Options: $592,468,557

Current Obligation: $592,468,557

Subaward Activity

Number of Subawards: 3

Total Subaward Amount: $4,400,200

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline