Naval Reactors contract awarded to Bechtel Plant Machinery, Inc. for over $2.7 billion

Contract Overview

Contract Amount: $2,708,595,970 ($2.7B)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2015-12-30

End Date: 2033-09-30

Contract Duration: 6,484 days

Daily Burn Rate: $417.7K/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: PITTSBURGH, ALLEGHENY County, PENNSYLVANIA, 15235

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $2.71 billion to BECHTEL PLANT MACHINERY, INC. for work described as: NAVAL REACTORS Key points: 1. Contract value significantly exceeds typical spending for power boiler and heat exchanger manufacturing. 2. Sole-source award raises questions about potential for inflated pricing and lack of market pressure. 3. Long contract duration (over 17 years) suggests a critical, long-term need for these services. 4. Cost-plus-fixed-fee structure may incentivize cost overruns, requiring robust oversight. 5. The contract's focus on nuclear propulsion components indicates a highly specialized and sensitive area. 6. Limited competition suggests a concentrated market or unique capabilities required.

Value Assessment

Rating: questionable

The contract value of over $2.7 billion is substantial and warrants careful benchmarking against similar, if any, specialized nuclear component manufacturing contracts. Given the sole-source nature, it is difficult to assess pricing competitiveness. The cost-plus-fixed-fee structure, while common for complex projects, carries inherent risks of cost escalation. Without comparable data, a definitive value-for-money assessment is challenging, but the scale of spending suggests a need for rigorous justification.

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 only one responsible source is available or capable of meeting the requirement. The lack of competition limits the government's ability to leverage market forces to achieve the best possible price and terms. It suggests that Bechtel Plant Machinery, Inc. likely possesses unique expertise or facilities essential for this specific naval nuclear component manufacturing.

Taxpayer Impact: Taxpayers may be paying a premium due to the absence of competitive bidding. Without competing offers, the government cannot be assured it is receiving the most cost-effective solution available in the market.

Public Impact

The primary beneficiaries are the U.S. Navy's nuclear-powered fleet, ensuring the continued operation and maintenance of critical propulsion systems. Services delivered include the manufacturing of power boilers and heat exchangers essential for nuclear reactors. The geographic impact is primarily centered around the contractor's facilities in Pennsylvania, but the ultimate impact is national, supporting naval readiness. Workforce implications include the employment of highly skilled engineers, technicians, and manufacturing personnel specializing in nuclear technologies.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially leads to higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Long contract duration increases exposure to potential cost increases over time.
The highly specialized nature of nuclear component manufacturing may limit the pool of potential competitors.
Lack of transparency in sole-source justifications can obscure the rationale for not competing.

Positive Signals

Award to an established contractor (Bechtel) suggests a degree of confidence in their capabilities and past performance.
The contract supports a critical national security function (naval nuclear propulsion), indicating a high priority.
Long-term nature of the contract provides stability for a specialized industrial base.
The fixed-fee component of the contract type provides some level of cost predictability compared to pure cost-reimbursement.

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 nuclear reactor components, particularly for naval applications, is highly concentrated due to stringent safety, security, and technical requirements. Comparable spending benchmarks are difficult to establish due to the unique nature of naval nuclear technology and the limited number of entities capable of producing such components. This contract represents a significant portion of spending within this niche sector.

Small Business Impact

This contract does not appear to involve small business set-asides, as indicated by 'sb': false. Given the specialized nature of nuclear component manufacturing for naval reactors, it is unlikely that small businesses would be primary contractors. However, Bechtel Plant Machinery, Inc. may engage small businesses as subcontractors for specific components or services, though this is not explicitly detailed in the provided data. The overall impact on the small business ecosystem for this specific contract is likely minimal.

Oversight & Accountability

Oversight for this contract would likely fall under the purview of the Naval Sea Systems Command (NAVSEA) and potentially the Department of Energy's National Nuclear Security Administration (NNSA), given the nuclear aspect. The cost-plus-fixed-fee structure necessitates rigorous financial oversight to monitor costs and ensure the fixed fee remains appropriate. Transparency is likely limited due to the sensitive nature of naval nuclear technology. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse.

Related Government Programs

Naval Nuclear Propulsion Program
Shipbuilding and Repair Contracts
Defense Manufacturing Industrial Base
Nuclear Power Plant Components

Risk Flags

Sole Source Justification
Cost-Plus-Fixed-Fee Structure
Long Contract Duration
High Contract Value
Specialized Industry

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.71 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 $2.71 billion.

What is the period of performance?

Start: 2015-12-30. End: 2033-09-30.

What is Bechtel Plant Machinery, Inc.'s track record with the Department of Defense, particularly on large-scale, sole-source contracts?

Bechtel Plant Machinery, Inc. has a long history of supporting the Naval Reactors program, often through sole-source or limited-competition contracts. Their expertise is critical for the design, manufacturing, and maintenance of nuclear propulsion components for submarines and aircraft carriers. While specific details on all past contracts are not provided, their sustained role suggests a consistent performance record meeting the stringent requirements of the Navy's nuclear program. However, the sole-source nature of many of these awards means that direct comparisons of pricing and value against competitive bids are not publicly available, making it difficult to assess cost-effectiveness comprehensively.

How does the $2.7 billion contract value compare to historical spending on similar naval reactor components?

The $2.7 billion contract value is substantial and likely represents a significant investment in the ongoing sustainment and potential modernization of the U.S. Navy's nuclear fleet. Historical spending on similar components can be difficult to benchmark precisely due to the unique, long-lifecycle nature of nuclear propulsion systems and the specialized, often sole-source, contracting environment. However, contracts of this magnitude typically cover extended periods and encompass the manufacturing of complex, high-value components like power boilers and heat exchangers. Without access to detailed historical contract data for comparable items, it's challenging to state definitively if this represents an increase or decrease relative to past trends, but it underscores the significant financial commitment to maintaining this critical capability.

What are the primary risks associated with a sole-source, cost-plus-fixed-fee contract of this magnitude and duration?

The primary risks associated with this contract are multifaceted. Firstly, the sole-source nature eliminates competitive pressure, potentially leading to higher prices than might be achieved in an open market. Secondly, the cost-plus-fixed-fee (CPFF) structure, while providing some cost certainty via the fixed fee, can incentivize the contractor to incur costs, as a portion of them are reimbursed, and the fee is predetermined. This necessitates robust government oversight to scrutinize costs and prevent inefficiencies. The long duration (over 17 years) amplifies these risks, increasing exposure to potential cost overruns, changes in material costs, and evolving technological requirements. Ensuring the fixed fee remains fair and the contractor maintains efficiency throughout the contract lifecycle are key challenges.

What is the expected impact of this contract on the U.S. naval readiness and the defense industrial base?

This contract is crucial for maintaining and potentially enhancing U.S. naval readiness by ensuring the availability of critical nuclear propulsion components. It directly supports the operational capability of the Navy's nuclear-powered submarines and aircraft carriers, which are vital for national security. Furthermore, it bolsters the specialized defense industrial base focused on nuclear technologies. By providing a long-term, substantial contract, it helps sustain the unique skills, facilities, and supply chains necessary for nuclear component manufacturing, preventing erosion of this critical capability and ensuring future readiness.

Are there any specific performance metrics or milestones tied to this contract that indicate its effectiveness?

The provided data does not specify the performance metrics or milestones tied to this contract. However, for a contract of this nature, particularly involving nuclear components and a CPFF structure, performance would typically be measured against stringent technical specifications, quality standards, delivery schedules, and safety protocols. Effectiveness would be assessed through the successful delivery of compliant components, adherence to budget (within the cost reimbursement), and ultimately, their reliable performance in operational naval vessels. Detailed performance data is usually found in contract line item details and performance reports, which are not included here.

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: N0002415R2106

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: $2,708,849,792

Exercised Options: $2,708,849,792

Current Obligation: $2,708,595,970

Subaward Activity

Number of Subawards: 136

Total Subaward Amount: $1,925,568,923

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline