Navy awards $1.05B contract for power boiler and heat exchanger manufacturing to Bechtel Plant Machinery, Inc

Contract Overview

Contract Amount: $1,051,399,060 ($1.1B)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2018-11-30

End Date: 2030-09-30

Contract Duration: 4,322 days

Daily Burn Rate: $243.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Other

Official Description: OPN

Place of Performance

Location: MONROEVILLE, ALLEGHENY County, PENNSYLVANIA, 15146

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $1.05 billion to BECHTEL PLANT MACHINERY, INC. for work described as: OPN Key points: 1. Contract awarded on a sole-source basis, raising questions about potential cost efficiencies. 2. Long contract duration (over 12 years) suggests a need for sustained support or a strategic acquisition. 3. The contract type (Cost Plus Fixed Fee) can incentivize cost overruns if not closely monitored. 4. Significant contract value indicates a critical need for these specialized manufacturing capabilities. 5. The contractor, Bechtel Plant Machinery, Inc., is a known entity in large-scale industrial projects. 6. The specific product service code (332410) points to a niche manufacturing requirement.

Value Assessment

Rating: fair

The contract's value of $1.05 billion over approximately 12 years represents a substantial investment. Without comparable sole-source contracts for similar specialized equipment, a precise value-for-money assessment is challenging. The Cost Plus Fixed Fee (CPFF) structure, while allowing for flexibility, carries inherent risks of cost escalation if not rigorously managed. Benchmarking against industry standards for power boiler and heat exchanger manufacturing is difficult due to the likely specialized nature of the Navy's requirements and the sole-source award.

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 when the agency determines it is in the public interest to award without competition. The lack of competition limits the government's ability to leverage market forces to achieve the lowest possible price and may result in higher costs for taxpayers.

Taxpayer Impact: Sole-source awards mean taxpayers do not benefit from competitive bidding, potentially leading to higher prices than if multiple vendors had vied for the contract.

Public Impact

The U.S. Navy benefits from the continued availability of specialized power boilers and heat exchangers essential for its operations. This contract supports the manufacturing of critical components for naval vessels or shore-based facilities. The contract's geographic impact is primarily centered around the contractor's facilities in Pennsylvania. Workforce implications include the potential for sustained employment at Bechtel Plant Machinery, Inc. and its supply chain.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition, potentially increasing costs for taxpayers.
Cost Plus Fixed Fee contract type can incentivize higher costs if oversight is insufficient.
Long contract duration increases exposure to potential cost increases over time.
Lack of transparency in the sole-source justification makes independent value assessment difficult.

Positive Signals

Contract awarded to an established company (Bechtel Plant Machinery, Inc.) with experience in industrial manufacturing.
The contract addresses a critical need for specialized equipment for the Department of Defense.
The fixed fee component of the CPFF contract provides some level of cost certainty for the contractor's profit.

Sector Analysis

The manufacturing of power boilers and heat exchangers falls within the broader industrial manufacturing sector, specifically related to heavy equipment and components. This sector is characterized by high capital investment, specialized engineering expertise, and often long production cycles. The market size for such specialized defense-related manufacturing can be significant, driven by government procurement needs for naval and other military applications. This contract represents a substantial portion of spending within this niche, underscoring its strategic importance to the Navy's readiness.

Small Business Impact

This contract does not appear to include a small business set-aside, as indicated by 'sb: false'. There is no explicit information regarding subcontracting plans for small businesses. Without specific set-aside goals or subcontracting requirements, the direct impact on the small business ecosystem is likely minimal, and opportunities for small businesses may be limited to the prime contractor's discretion.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and program management offices. The Cost Plus Fixed Fee structure necessitates robust financial oversight to ensure costs are reasonable and allocable. Transparency may be limited due to the sole-source nature of the award. Inspector General jurisdiction would apply to investigations of fraud, waste, or abuse related to the contract.

Related Government Programs

Naval Ship Systems
Defense Industrial Base Manufacturing
Heavy Equipment Manufacturing
Power Generation Equipment Procurement

Risk Flags

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

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.05 billion to BECHTEL PLANT MACHINERY, INC.. OPN

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 $1.05 billion.

What is the period of performance?

Start: 2018-11-30. End: 2030-09-30.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data indicates the contract was awarded as 'NOT COMPETED', which is synonymous with a sole-source award. The specific justification for this determination is not detailed in the provided data snippet. Typically, sole-source awards are justified under circumstances such as the unavailability of other sources, urgent and compelling needs, or when a specific technology or capability is only available from a single contractor. Without further documentation from the Department of the Navy, the precise rationale remains unknown. This lack of competitive bidding means that the government did not explore alternative solutions or pricing from other potential suppliers, which could impact overall cost-effectiveness for the taxpayer.

How does the Cost Plus Fixed Fee (CPFF) contract type compare to other contract types for this type of manufacturing?

The Cost Plus Fixed Fee (CPFF) contract type is often used when the scope of work is not precisely defined or when there is uncertainty in the cost of performance. In a CPFF contract, the contractor is reimbursed for all allowable costs incurred, plus a predetermined fixed fee representing profit. This contrasts with fixed-price contracts, where the price is set regardless of the actual costs incurred, offering greater cost certainty to the buyer but potentially higher risk for the contractor. For specialized manufacturing like power boilers and heat exchangers, a CPFF contract might be chosen if the design or production process involves significant unknowns or requires extensive research and development. However, it places a greater burden on the government to closely monitor costs to prevent overruns, as the contractor has less incentive to control expenses compared to a fixed-price arrangement. Other contract types like Cost Plus Incentive Fee (CPIF) could offer better cost control by linking profit to performance metrics.

What is the historical spending pattern for power boiler and heat exchanger manufacturing by the Department of Defense?

Analyzing historical spending patterns for power boiler and heat exchanger manufacturing by the Department of Defense (DoD) requires access to comprehensive procurement databases. The provided data snippet focuses on a single, large contract awarded in 2018. Without broader historical data, it's difficult to establish a trend. However, the DoD's need for such equipment is likely tied to shipbuilding programs, maintenance of existing vessels, and potentially shore-based infrastructure. Spending in this category can fluctuate based on defense budgets, modernization initiatives, and the lifecycle of naval assets. The significant value of this single contract suggests that such procurements, when they occur, are substantial investments. Further analysis would involve querying databases like FPDS-NG or USAspending for similar contracts over multiple fiscal years to identify patterns in award values, contract types, and prime contractors.

What are the potential risks associated with a contract duration extending to 2030?

A contract duration extending to September 30, 2030, presents several potential risks. Firstly, economic inflation over the multi-year period could significantly increase the actual cost of performance beyond initial projections, especially if the contract has limited escalation clauses. Secondly, technological advancements in manufacturing or materials could render the contracted equipment or processes obsolete before the contract's end date, leading to diminished utility or the need for costly modifications. Thirdly, changes in strategic priorities or defense budgets could lead to contract modifications, delays, or even termination for convenience, incurring termination costs. Lastly, maintaining consistent oversight and contract management over such an extended period requires sustained resources and institutional knowledge within the contracting agency, posing a risk of diminished oversight effectiveness due to personnel turnover or shifting agency priorities.

How does the product service code (PSC) 332410 relate to the overall defense industrial base?

The Product Service Code (PSC) 332410 specifically designates 'Power Boiler and Heat Exchanger Manufacturing'. This code falls under the broader category of 'Manufacturing' within the federal procurement system. Its relevance to the defense industrial base is significant because naval vessels, submarines, and other critical military platforms often rely heavily on sophisticated power boilers and heat exchangers for propulsion, power generation, and environmental control systems. The ability to manufacture these components domestically is crucial for national security, ensuring a reliable supply chain for essential defense assets and reducing reliance on foreign sources. Contracts awarded under this PSC often involve complex engineering, specialized materials, and stringent quality control, reflecting the high demands of military applications. Therefore, maintaining domestic capabilities in this area is a key component of the defense industrial base's resilience and readiness.

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: N0002418R2112

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: $1,051,399,060

Exercised Options: $1,051,399,060

Current Obligation: $1,051,399,060

Subaward Activity

Number of Subawards: 22

Total Subaward Amount: $42,499,406

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline