Naval Reactors contract awarded to Bechtel Plant Machinery, Inc. for over $612 million

Contract Overview

Contract Amount: $612,744,642 ($612.7M)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2014-10-22

End Date: 2028-09-30

Contract Duration: 5,092 days

Daily Burn Rate: $120.3K/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 $612.7 million 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. The contract has a long duration of 5092 days, suggesting a significant long-term commitment. 3. Awarded as 'NOT COMPETED', raising questions about the procurement process and potential for better pricing. 4. The North American Industry Classification System (NAICS) code 332410 points to manufacturing of power boilers and heat exchangers. 5. The contract is a definitive contract, suggesting a firm agreement for services or goods. 6. The contract is not set aside for small businesses, implying larger prime contractors are involved.

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 performance and cost breakdowns. Benchmarking against similar sole-source contracts for specialized naval equipment would be necessary to determine if the pricing is reasonable. The significant duration of the contract also implies substantial resource allocation, warranting close scrutiny of cost efficiency over its lifespan.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded using a 'NOT COMPETED' procurement method, indicating that the solicitation was not open to all potential offerors. This typically occurs when only one source is capable of meeting the agency's needs, often due to specialized expertise, proprietary technology, or urgent requirements. The lack of competition means that price discovery through market forces was bypassed, potentially leading to higher costs for the government.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without a competitive process, there is less pressure on the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are likely entities within the Department of the Navy requiring specialized power boiler and heat exchanger manufacturing services. The contract supports the maintenance and potentially the construction of critical naval infrastructure and platforms. The geographic impact is primarily centered around the contractor's facilities in Pennsylvania, where the work is performed. The contract implies a need for skilled labor in manufacturing, engineering, and project management within the defense industrial base.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition raises concerns about potential overpricing and reduced incentive for cost efficiency.
The cost-plus-fixed-fee structure can incentivize cost growth if not rigorously managed.
The long contract duration (over 13 years) increases the risk of scope creep and evolving requirements not being optimally addressed.
Limited transparency due to sole-source award makes it difficult to benchmark performance and cost against industry standards.

Positive Signals

Awarded to a known entity (Bechtel Plant Machinery, Inc.) suggests a potentially established relationship and understanding of requirements.
The definitive contract type provides a clear framework for the agreement.
The contract supports critical national defense functions related to naval power systems.

Sector Analysis

This contract falls within the manufacturing sector, specifically related to power boilers and heat exchangers, as indicated by NAICS code 332410. This is a specialized area within heavy manufacturing, often requiring significant technical expertise and capital investment. The defense industry relies heavily on such manufacturing capabilities for its operational fleet. Comparable spending benchmarks would involve analyzing other large-scale, specialized manufacturing contracts within the defense sector, particularly those supporting naval power systems.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the prime contractor is likely a large business, and any subcontracting opportunities for small businesses would be at the discretion of the prime. There is no explicit information provided regarding small business subcontracting plans or goals, which could limit the direct economic benefit to the small business ecosystem from this specific award.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy and potentially the Naval Reactors program office. As a sole-source award, transparency might be limited compared to competed contracts. Accountability measures would be defined within the contract's terms and conditions, focusing on performance milestones and cost controls. The Inspector General's office for the Department of Defense would likely have jurisdiction for audits and investigations if any issues arise.

Related Government Programs

Naval Nuclear Propulsion Program
Department of Defense Manufacturing Contracts
Power Boiler and Heat Exchanger Manufacturing
Sole-Source Defense Procurements

Risk Flags

Sole-source award
Cost-plus-fixed-fee contract type
Long contract duration
Lack of explicit small business set-aside

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $612.7 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 $612.7 million.

What is the period of performance?

Start: 2014-10-22. End: 2028-09-30.

What is the historical spending pattern for Bechtel Plant Machinery, Inc. with the Department of Defense, particularly for similar naval reactor components?

Analyzing historical spending with Bechtel Plant Machinery, Inc. is crucial for understanding their track record and the government's reliance on their services. Without specific historical data for this contract, a general assessment can be made. Bechtel has a long history of involvement in large-scale engineering and construction projects, including significant work within the defense sector and nuclear power. For the Naval Reactors program specifically, the government often engages in long-term relationships with specialized contractors due to the unique and critical nature of the work. Historical data would reveal the volume and nature of previous awards, payment histories, and any documented performance issues or successes. This context is vital for evaluating the current contract's value and risk, especially given its sole-source nature. A review of past performance metrics and cost trends on similar contracts would provide a baseline for assessing the current $612 million award.

How does the cost-plus-fixed-fee (CPFF) structure of this contract compare to other similar sole-source contracts for specialized manufacturing in the defense sector?

The Cost-Plus-Fixed-Fee (CPFF) contract type is common in defense procurement, especially for complex projects where the final cost is difficult to estimate precisely at the outset. In a CPFF contract, the contractor is reimbursed for allowable costs plus a fixed fee representing profit. This structure aims to incentivize the contractor to control costs, as the fee remains constant regardless of the final cost. However, it can also lead to cost overruns if not managed diligently. Comparing this specific CPFF contract to similar sole-source procurements for specialized manufacturing requires access to detailed contract data, including the base fee, target cost, ceiling price, and performance metrics. Without such granular data, a direct comparison is challenging. Generally, sole-source CPFF contracts in specialized defense manufacturing tend to have higher fees or less stringent cost controls compared to competitively bid fixed-price contracts, reflecting the inherent risks and unique capabilities involved. The government's oversight and negotiation of the fee are critical to ensuring value for money.

What are the specific risks associated with a sole-source award for a contract of this magnitude and duration?

Sole-source awards, particularly for large and long-duration contracts like this one ($612 million over nearly 14 years), carry inherent risks. The primary risk is the lack of price competition, which can lead to the government paying a premium compared to what might be achieved in a competitive bidding process. This reduces the incentive for the contractor to be highly cost-efficient. Another significant risk is reduced innovation and responsiveness; without competitive pressure, the contractor may be less motivated to explore novel solutions or adapt quickly to changing requirements. Furthermore, sole-source awards can create a dependency on a single supplier, making the government vulnerable if that supplier faces financial difficulties, operational issues, or decides to exit the market. Robust contract management, including stringent performance monitoring, clear deliverables, and effective negotiation, is essential to mitigate these risks.

What performance metrics or milestones are typically associated with Naval Reactors contracts of this nature to ensure program effectiveness?

Contracts for the Naval Reactors program are known for their stringent performance requirements and rigorous oversight. While specific metrics for this particular contract are not detailed in the provided data, typical performance indicators for such programs often include adherence to strict safety and quality standards, meeting production schedules for critical components, achieving specified operational readiness levels, and demonstrating effective maintenance and lifecycle support. Program effectiveness is usually measured by the reliability and availability of the nuclear propulsion systems, the successful completion of refueling and maintenance cycles, and compliance with all regulatory and security protocols. The Naval Reactors program itself maintains a high level of direct government oversight, often involving on-site personnel, which contributes significantly to ensuring program effectiveness and contractor accountability beyond standard contract clauses.

How does the $612 million award amount compare to the total annual spending on power boiler and heat exchanger manufacturing within the Department of Defense?

The $612 million award to Bechtel Plant Machinery, Inc. represents a significant investment within the power boiler and heat exchanger manufacturing sector for the Department of Defense (DoD). To contextualize this amount, one would need to analyze the DoD's total annual spending on NAICS code 332410 and related manufacturing categories. This specific contract, spanning from late 2014 to late 2028 (nearly 14 years), suggests a substantial portion of the annual budget for this niche might be allocated to this single award, especially considering its sole-source nature. Without aggregate spending data for the entire DoD in this category, it's difficult to state definitively if this contract represents a majority or a smaller fraction of the total. However, given the specialized nature of naval reactors and the long duration, it is likely a major component of the DoD's spending in this specific manufacturing sub-sector.

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

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: $612,744,642

Exercised Options: $612,744,642

Current Obligation: $612,744,642

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline