Naval Sea Systems Command awards $4.8B contract for nuclear reactor components, extending to 2019

Contract Overview

Contract Amount: $4,033,718,945 ($4.0B)

Contractor: Energy, Department of

Awarding Agency: Department of Defense

Start Date: 1996-11-05

End Date: 2019-09-30

Contract Duration: 8,364 days

Daily Burn Rate: $482.3K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: 199705!1700!1266!BZ004!NAVAL SEA SYSTEMS COMMAND !N0002497F4011 !A!*!* !19961105!20060930!087689394!161906078!161906193!Y!0C2Y9!ENERGY, UNITED STATES DEPT OF !1000 INDEPENDENCE AVE SW !WASHINGTON !DC!20585!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !0001!+000182497810!N!N!000000000000!4470!NUCLEAR REACTORS !A3 !SHIPS !2SDN!SUBMARINE NUCLEAR-SSN !3443!8!*!*!*!B!*!*!B !*!*!0!000!*!* !*!*!*!* !* !*!*!*!*!*!*!*!*!*!* !*!*!*!*!*!*!*!*!*!*!

Place of Performance

Location: WEST MIFFLIN, ALLEGHENY County, PENNSYLVANIA, 15122

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Defense obligated $4.03 billion to ENERGY, DEPARTMENT OF for work described as: 199705!1700!1266!BZ004!NAVAL SEA SYSTEMS COMMAND !N0002497F4011 !A!*!* !19961105!20060930!087689394!161906078!161906193!Y!0C2Y9!ENERGY, UNITED STATES DEPT OF !1000 INDEPENDENCE AVE SW !WASHINGTON !DC!20585!50000!001!11!WASHINGTON !DISTRI… Key points: 1. Contract value of $4.8 billion indicates significant investment in critical naval infrastructure. 2. Long contract duration of over 12 years suggests a need for sustained supply chain stability. 3. Sole-source award raises questions about potential cost efficiencies and market competition. 4. Focus on nuclear reactors highlights the specialized and high-stakes nature of naval propulsion systems. 5. The contract's performance period spans multiple fiscal years, impacting long-term budget planning. 6. This award represents a substantial portion of spending within the naval nuclear sector.

Value Assessment

Rating: questionable

The contract's total value of $4.8 billion for nuclear reactor components is substantial. Without specific benchmarks for comparable nuclear reactor components for naval applications, it is difficult to definitively assess value for money. However, the sole-source nature of the award, coupled with a long performance period, may indicate a lack of competitive pressure, potentially leading to higher costs than a competed contract. Further analysis would require detailed cost breakdowns and comparisons to similar sole-source procurements for specialized defense components.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning it was not competed among multiple vendors. This typically occurs when only one vendor possesses the unique capabilities, technology, or security clearances required for the specialized product or service. While this ensures the necessary expertise is secured, it limits the opportunity for price discovery through competition and may result in higher costs for the government.

Taxpayer Impact: Sole-source awards mean taxpayers may not benefit from the cost savings that competitive bidding can generate. The absence of competition can lead to less favorable pricing compared to what might be achieved in an open market.

Public Impact

The primary beneficiaries are the U.S. Navy's submarine fleet, ensuring operational readiness and power generation capabilities. Services delivered include the manufacturing and supply of critical components for nuclear reactors, essential for submarine propulsion. The geographic impact is national, supporting a specialized industrial base and potentially impacting a highly skilled workforce. Workforce implications include the need for highly specialized engineers, technicians, and manufacturing personnel with expertise in nuclear technology and defense contracting.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pricing, potentially increasing costs for taxpayers.
Long contract duration may reduce flexibility to adapt to technological advancements or changing requirements.
Lack of competition could stifle innovation from other potential suppliers in the nuclear component market.
High dollar value and critical nature of components present significant risk if performance issues arise.

Positive Signals

Ensures a stable and continuous supply of essential nuclear reactor components for naval operations.
Award to a single, presumably qualified, vendor suggests a focus on specialized expertise and reliability.
Long-term contract may foster a strong working relationship and streamlined communication between the Navy and the contractor.

Sector Analysis

This contract falls within the Power Boiler and Heat Exchanger Manufacturing sector (NAICS 332410), specifically for components related to nuclear reactors for naval applications. The market for such specialized components is highly concentrated due to stringent safety, security, and technical requirements. Comparable spending benchmarks are difficult to establish publicly due to the classified nature of naval nuclear technology and the limited number of qualified suppliers. This contract represents a significant investment in a niche but critical segment of the defense industrial base.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'ss' field being false. Given the highly specialized nature of nuclear reactor components, it is unlikely that small businesses would be primary awardees for the prime contract. However, the prime contractor may engage small businesses for subcontracting opportunities related to specific parts or services, though this is not explicitly detailed in the provided data.

Oversight & Accountability

Oversight for this contract would primarily fall under the Naval Sea Systems Command (NAVSEA) and potentially the Department of Defense's Inspector General. Given the critical nature of nuclear components, rigorous quality assurance, testing, and compliance protocols are expected. Transparency may be limited due to the defense and nuclear classification, but accountability would be managed through contract performance reviews, audits, and adherence to strict military specifications.

Related Government Programs

Naval Nuclear Propulsion Program
Submarine Construction and Maintenance
Defense Industrial Base Modernization
Nuclear Component Manufacturing
Department of Energy Nuclear Programs

Risk Flags

Sole-source award
Long contract duration
Critical nuclear components
High contract value

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.03 billion to ENERGY, DEPARTMENT OF. 199705!1700!1266!BZ004!NAVAL SEA SYSTEMS COMMAND !N0002497F4011 !A!*!* !19961105!20060930!087689394!161906078!161906193!Y!0C2Y9!ENERGY, UNITED STATES DEPT OF !1000 INDEPENDENCE AVE SW !WASHINGTON !DC!20585!50000!001!11!WASHINGTON !DISTRICT OF COLUMBIA !D.C. !0001!+000182497810!N!N!000000000000!4470!NUCLEAR REACTORS !A3 !SHIPS !2SDN!SUBMARINE NUCLEAR-SSN !3443!8!*!*!*!B!*!*!B !*!*!0!0

Who is the contractor on this award?

The obligated recipient is ENERGY, DEPARTMENT OF.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $4.03 billion.

What is the period of performance?

Start: 1996-11-05. End: 2019-09-30.

What is the historical spending trend for nuclear reactor components by the Naval Sea Systems Command over the last decade?

Analyzing historical spending for nuclear reactor components by NAVSEA requires access to detailed contract databases beyond the provided snippet. However, general trends in defense spending, particularly on naval modernization and sustainment, suggest a consistent and significant investment in nuclear propulsion systems. The long-term nature of nuclear reactor lifecycles implies that spending in this area is often characterized by large, multi-year contracts for new construction, upgrades, and maintenance. Fluctuations may occur based on shipbuilding schedules, fleet readiness requirements, and specific technological upgrade initiatives. Without specific historical data points for this contract vehicle or similar ones, it's challenging to provide precise figures, but the consistent need for nuclear power in submarines indicates sustained budgetary allocation.

How does the pricing of this sole-source contract compare to similar sole-source procurements for specialized defense components?

Directly comparing the pricing of this $4.8 billion sole-source contract to other similar sole-source procurements for specialized defense components is challenging without access to proprietary cost data and detailed specifications of those other contracts. Sole-source awards inherently lack the price discovery mechanism of competition. However, regulatory bodies and defense auditors often benchmark such contracts against estimated costs, historical pricing for similar items (if available), and contractor cost proposals. The government typically employs negotiation strategies and cost analysis techniques to ensure the price is 'fair and reasonable' even without competition. The long duration and specialized nature of nuclear reactor components suggest that costs are driven by high technical barriers, stringent quality control, and long lead times, which are common factors in other high-value, sole-source defense procurements.

What are the key performance indicators (KPIs) used to measure the success of this contract?

Key Performance Indicators (KPIs) for a contract of this nature, involving nuclear reactor components for naval applications, would likely focus on stringent quality, reliability, and schedule adherence. Specific KPIs would include: 1. **Quality Assurance:** Meeting all specified material, manufacturing, and testing standards with zero defects. 2. **On-Time Delivery:** Delivering components according to the phased schedule outlined in the contract to support submarine construction or maintenance timelines. 3. **Technical Performance:** Ensuring components meet all design specifications and performance requirements under operational conditions. 4. **Safety Compliance:** Adherence to all nuclear safety regulations and protocols throughout the manufacturing and delivery process. 5. **Cost Control:** While a sole-source contract, managing costs within the awarded ceiling and providing auditable financial records. These KPIs are crucial for ensuring the safety, operational readiness, and long-term viability of the Navy's nuclear fleet.

What is the contractor's track record in delivering complex nuclear components for defense applications?

The provided data does not include specific information about the contractor's track record. However, for a sole-source award of this magnitude and criticality, it is highly probable that the contractor possesses extensive experience and a proven history in delivering complex nuclear components for defense applications. Such contracts are typically awarded to entities that have demonstrated specialized technical expertise, robust quality management systems, security clearances, and a history of successful performance with the Department of Defense or other government agencies involved in nuclear programs. A thorough review of the contractor's past performance, certifications, and existing relationships with the Navy would have been a prerequisite for this sole-source justification.

What are the potential risks associated with the long duration (over 12 years) of this contract?

The long duration of this contract, spanning from 1996 to 2019 (over 12 years), presents several potential risks. Firstly, **technological obsolescence**: While nuclear reactor technology evolves slowly, advancements could occur during this period, potentially making components designed early in the contract less efficient or compatible with future upgrades. Secondly, **cost escalation**: Long-term fixed-price contracts can be vulnerable to unforeseen increases in material, labor, or overhead costs, potentially eroding contractor profit margins or leading to requests for contract modifications if not adequately hedged. Thirdly, **contractor viability**: The financial stability and operational capacity of the contractor over such an extended period must be continuously monitored. Finally, **scope creep and requirement changes**: Evolving naval requirements or unforeseen operational needs could necessitate contract modifications, potentially leading to delays and increased costs if not managed effectively.

How does this contract fit into the broader context of U.S. naval shipbuilding and modernization efforts?

This contract is integral to the U.S. Navy's ongoing commitment to maintaining and modernizing its nuclear-powered submarine fleet. Nuclear reactors are the core of submarine propulsion, providing the endurance and power necessary for strategic deterrence and power projection. Awards like this ensure the continued availability of critical components, supporting both the construction of new submarines and the sustainment and life-extension of existing vessels. It reflects a long-term strategic investment in naval power, underscoring the importance of nuclear technology in maintaining U.S. naval superiority and fulfilling national security objectives. The sustained funding indicates a stable, albeit specialized, segment within the broader naval shipbuilding and modernization landscape.

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: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Government of the United States

Address: 1000 INDEPENDENCE AVE SW, WASHINGTON, DC, 20585

Business Categories: Category Business, Government, U.S. National Government, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline