DoD awards $2.5B boiler manufacturing contract to Bechtel Plant Machinery, Inc. with no competition

Contract Overview

Contract Amount: $2,542,667,076 ($2.5B)

Contractor: Bechtel Plant Machinery, Inc.

Awarding Agency: Department of Defense

Start Date: 2023-12-22

End Date: 2035-09-30

Contract Duration: 4,300 days

Daily Burn Rate: $591.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: S9G

Place of Performance

Location: MONROEVILLE, ALLEGHENY County, PENNSYLVANIA, 15146

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $2.54 billion to BECHTEL PLANT MACHINERY, INC. for work described as: S9G Key points: 1. Contract awarded on a cost-plus-fixed-fee basis, potentially leading to higher costs than fixed-price contracts. 2. The lack of competition raises concerns about price discovery and potential overpayment. 3. Long contract duration of 12 years suggests a need for sustained support or a strategic, long-term requirement. 4. The contract is for power boiler and heat exchanger manufacturing, a critical component for naval operations. 5. The contractor, Bechtel Plant Machinery, Inc., has a significant presence in defense manufacturing. 6. The contract value is substantial, representing a significant investment by the Department of Defense.

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 cost breakdowns and profit margins. Benchmarking against similar sole-source contracts for specialized manufacturing would be necessary. The awarded amount of $2.5 billion over 12 years suggests a high per-unit cost, but without knowing the quantity and specifications of the boilers and heat exchangers, it's hard to draw firm conclusions. The significant duration implies a long-term need, which could justify a higher initial investment if it ensures operational readiness.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning the Department of Defense did not solicit bids from multiple potential suppliers. This typically occurs when only one contractor possesses the necessary unique capabilities, technology, or security clearances required for the specific product or service. The absence of competition means that the government did not benefit from a competitive bidding process, which usually drives down prices and encourages innovation.

Taxpayer Impact: Taxpayers may be paying a premium due to the lack of competitive pressure. Without competing offers, there is a reduced incentive for the contractor to offer the most cost-effective solution.

Public Impact

The primary beneficiaries are the Department of the Navy, ensuring the availability of critical power boilers and heat exchangers for its fleet. The contract supports the manufacturing of essential components for naval vessels, contributing to national defense capabilities. The contract's geographic impact is primarily centered in Pennsylvania, where Bechtel Plant Machinery, Inc. is located, potentially creating or sustaining jobs in that region. The contract implies a need for specialized manufacturing labor, potentially impacting the skilled workforce in the power boiler and heat exchanger industry.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price competition and may result in higher costs for taxpayers.
Cost-plus-fixed-fee contract type can incentivize cost overruns if not closely monitored.
Long contract duration (12 years) increases exposure to potential cost escalations and performance issues over time.
Lack of transparency in the sole-source justification requires careful review to ensure necessity.
Potential for contractor to leverage unique position for future sole-source opportunities.

Positive Signals

Contract awarded to a known entity with experience in defense manufacturing.
Ensures supply of critical components for naval operations, supporting national security.
Long-term contract provides stability for production and potential for long-term relationship building.
Fixed fee component of the contract provides some cost certainty compared to pure cost-plus contracts.

Sector Analysis

The power boiler and heat exchanger manufacturing sector is a specialized niche within the broader industrial manufacturing landscape. It serves critical infrastructure needs across various sectors, including defense, energy, and commercial shipping. The market is often characterized by high barriers to entry due to technical expertise, capital investment, and stringent quality control requirements. For the defense sector, such manufacturing is vital for maintaining naval fleets and other operational assets. Spending in this area is often driven by specific platform requirements and long-term sustainment needs, with contracts frequently being sole-sourced due to the specialized nature of the equipment and the limited number of qualified manufacturers.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by 'ss': false and 'sb': false. The substantial value and specialized nature of power boiler and heat exchanger manufacturing suggest that large, established industrial firms like Bechtel Plant Machinery, Inc. are the primary players. There is no explicit information regarding subcontracting plans for small businesses within this award, which could be a missed opportunity to engage the small business industrial base. Further analysis would be needed to determine if subcontracting goals were established or if small businesses will be involved in the supply chain.

Oversight & Accountability

Oversight for this contract will likely fall under the Department of Defense's contracting and program management offices, with potential involvement from the Defense Contract Management Agency (DCMA) for performance and cost monitoring. Given the sole-source nature and long duration, robust oversight is crucial to ensure adherence to contract terms, cost control, and quality standards. Inspector General (IG) jurisdiction would apply in cases of suspected fraud, waste, or abuse. Transparency regarding the justification for the sole-source award and ongoing performance metrics would enhance accountability.

Related Government Programs

Naval Ship Systems
Defense Industrial Base Manufacturing
Power Generation Equipment
Heat Exchanger Manufacturing
Naval Vessel Sustainment
Cost-Plus Contracts

Risk Flags

Sole-source award without clear justification.
Cost-plus-fixed-fee contract type carries inherent cost overrun risk.
Long contract duration increases exposure to market volatility and technological obsolescence.
Lack of small business subcontracting information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $2.54 billion to BECHTEL PLANT MACHINERY, INC.. S9G

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 $2.54 billion.

What is the period of performance?

Start: 2023-12-22. End: 2035-09-30.

What is the specific justification provided by the Department of Defense for awarding this contract on a sole-source basis?

The provided data does not include the specific justification for the sole-source award. Typically, sole-source contracts are justified when only one responsible source is available or capable of meeting the agency's needs. This could be due to unique technical capabilities, proprietary technology, specialized manufacturing processes, or urgent requirements where no other source can fulfill the need within the required timeframe. For a contract of this magnitude and duration concerning power boilers and heat exchangers for the Navy, the justification likely centers on the highly specialized engineering, manufacturing expertise, and established production facilities required, which may be possessed by only a limited number of entities, potentially including Bechtel Plant Machinery, Inc. due to its specific expertise and existing infrastructure.

How does the 'cost plus fixed fee' (CPFF) contract type compare to other contract types in terms of potential cost efficiency for the government in this context?

The Cost Plus Fixed Fee (CPFF) contract type is often used for research and development or complex projects where the scope is not fully defined, or costs are difficult to estimate accurately. In a CPFF contract, the contractor is reimbursed for all allowable costs plus a fixed fee representing profit. While it allows for flexibility and encourages the contractor to undertake complex work, it carries a higher risk of cost overruns compared to fixed-price contracts, as the contractor is incentivized to incur costs to complete the work, and the profit is fixed regardless of the final cost. For specialized manufacturing like power boilers, if the design or material requirements are subject to change or unforeseen challenges, CPFF can be appropriate. However, without strong cost controls and oversight, it can be less cost-efficient for the government than a firm-fixed-price contract, where the contractor bears more risk for cost overruns.

What is the historical spending pattern for power boiler and heat exchanger manufacturing within the Department of Defense, and how does this $2.5 billion award compare?

Historical spending data for power boiler and heat exchanger manufacturing within the Department of Defense is not detailed in the provided information. However, a $2.5 billion award over 12 years represents a significant and sustained investment in this specific capability. Such large, long-term contracts are typically associated with major platform procurements or sustainment programs, like naval shipbuilding, where these components are integral. Annual spending on such specialized equipment can fluctuate based on shipbuilding schedules and modernization efforts. This particular award suggests a substantial, ongoing requirement for these critical components, potentially indicating a large-scale fleet modernization or expansion effort by the Navy. Without comparative historical data, it's difficult to definitively state if this is an outlier, but its size and duration point to a major program.

What are the potential risks associated with the 12-year duration of this contract, and what mitigation strategies might be in place?

The 12-year duration of this contract presents several potential risks. Firstly, economic inflation and material cost fluctuations over such a long period could significantly increase the actual costs incurred by the contractor, potentially impacting the government if not adequately managed through contract clauses. Secondly, technological advancements in boiler and heat exchanger design or manufacturing could render the contracted items obsolete or less efficient before the contract term ends. Thirdly, contractor performance or financial stability could degrade over such an extended period. Mitigation strategies might include incorporating economic price adjustment clauses, regular performance reviews, options for contract modification or termination for convenience, and robust oversight to ensure the contractor maintains financial health and adheres to quality standards throughout the contract's lifecycle.

Given the 'PA' (Pennsylvania) state code and 'SN' (Pennsylvania) state name, what is the likely geographic concentration of this contract's performance and its impact on the regional economy?

The 'PA' state code and 'SN' Pennsylvania state name strongly indicate that the primary performance location for this contract, likely involving manufacturing activities, will be in Pennsylvania. This suggests a significant economic impact on the state, potentially through job creation in specialized manufacturing roles, support for local supply chains, and contributions to the regional industrial base. Bechtel Plant Machinery, Inc. likely has substantial facilities or operations in Pennsylvania that will be leveraged for this contract. This concentration could bolster the state's manufacturing sector and provide long-term employment opportunities, particularly in areas related to heavy industrial equipment production.

Industry Classification

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

Product/Service Code: SHIPS, SMALL CRAFT, PONTOON, DOCKS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Solicitation ID: N0002424R2114

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: $2,542,667,076

Exercised Options: $2,542,667,076

Current Obligation: $2,542,667,076

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline