Bechtel Parsons Blue Grass JV receives $49.8B contract for hazardous waste treatment, with $1.5B obligated in FY09

Contract Overview

Contract Amount: $4,980,576,179 ($5.0B)

Contractor: Bechtel Parsons Blue Grass, a Joint Venture

Awarding Agency: Department of Defense

Start Date: 2009-03-19

End Date: 2028-04-03

Contract Duration: 6,955 days

Daily Burn Rate: $716.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: COST PLUS AWARD FEE

Sector: Other

Official Description: THE PURPOSE OF MODIFICATION P00003 - CLIN 0002 CONSTRUCTION IS TO DO THE FOLLOWING: 1. FY 09 RDTE FUNDS ARE HEREBY OBLIGATED IN THE AMOUNT OF $1,518,599.00 TO SUPPORT CONTINUED EFFORTS FOR PHASE IV LONG LEAD EQUIPMENT UNDER ESTABLISHED CLIN 0002AA. MIPR: W91CPT90770019 01 PRON: DE9R0019DE AMD 02 2. FY 08 MCD FUNDS ARE HEREBY OBLIGATED IN THE AMOUNT OF $43,020,072.00 TO SUPPORT CONTINUED EFFORTS FOR PHASE IV DESIGN EFFORTS UNDER NEWLY ESTABLISHED CLIN 0002AC. MIPR: W31RY091057705 PRON: PD8R7705PD AMD 01

Place of Performance

Location: RICHMOND, MADISON County, KENTUCKY, 40475

State: Kentucky Government Spending

Plain-Language Summary

Department of Defense obligated $4.98 billion to BECHTEL PARSONS BLUE GRASS, A JOINT VENTURE for work described as: THE PURPOSE OF MODIFICATION P00003 - CLIN 0002 CONSTRUCTION IS TO DO THE FOLLOWING: 1. FY 09 RDTE FUNDS ARE HEREBY OBLIGATED IN THE AMOUNT OF $1,518,599.00 TO SUPPORT CONTINUED EFFORTS FOR PHASE IV LONG LEAD EQUIPMENT UNDER ESTABLISHED CLIN 0002AA. MIPR: W91CPT90770019 01 … Key points: 1. Significant funding ($43M) allocated for Phase IV design efforts, indicating substantial ongoing project development. 2. The contract's cost-plus-award-fee structure incentivizes performance but requires careful monitoring of cost overruns. 3. A long contract duration (over 19 years) suggests a complex, multi-phase project with potential for evolving requirements. 4. The project's focus on hazardous waste treatment positions it within a critical environmental and national security sector. 5. The joint venture structure for the contractor may offer specialized expertise but could also introduce coordination challenges.

Value Assessment

Rating: fair

The total contract value of $49.8 billion is substantial, reflecting the scale and complexity of hazardous waste treatment. Benchmarking this against similar large-scale environmental remediation projects is challenging due to the unique nature of the Blue Grass facility. The cost-plus-award-fee (CPAF) pricing structure means that the final cost will depend on performance, making a direct value-for-money assessment difficult without detailed performance metrics. However, the significant initial obligations suggest a commitment to the project's long-term viability.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders likely vied for the opportunity. The presence of three bidders (as suggested by 'no': 3) implies a competitive environment, which should theoretically drive more favorable pricing and terms for the government. The specific details of the bidding process and the evaluation criteria would be crucial to fully assess the effectiveness of this competition in securing the best value.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a market that encourages competitive pricing and innovation, potentially leading to cost savings and higher quality services.

Public Impact

The primary beneficiaries are the Department of Defense and the public, through the safe treatment and disposal of hazardous waste. Services delivered include the design and construction of facilities for the treatment of chemical weapons. The geographic impact is concentrated in Kentucky, where the Blue Grass Chemical Agent-Disposal Facility is located. Workforce implications include the creation of specialized jobs in engineering, construction, and hazardous material handling.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

The long-term nature of the contract and its significant value present a risk of cost escalation if not managed tightly.
The complexity of hazardous waste treatment requires stringent safety protocols and continuous oversight to prevent environmental incidents.
Reliance on a joint venture may introduce complexities in accountability and decision-making, potentially impacting project timelines.
The cost-plus-award-fee structure necessitates robust performance monitoring to ensure the award fee is justified and costs are controlled.

Positive Signals

Awarded through full and open competition, suggesting a competitive process that should yield good value.
The contractor, Bechtel Parsons Blue Grass, is a joint venture likely bringing together specialized expertise for this complex task.
Significant funding obligations indicate a strong commitment to addressing a critical national security and environmental need.
The contract's structure allows for performance incentives, which can drive efficiency and effectiveness.

Sector Analysis

This contract falls within the environmental services and defense sector, specifically focusing on the destruction of chemical weapons. The market for such specialized hazardous waste treatment is limited, often dominated by a few large, experienced contractors capable of handling the immense technical, safety, and regulatory challenges. The scale of this project is exceptionally large, likely representing a significant portion of federal spending in this niche area for the duration of the contract.

Small Business Impact

The data does not indicate any specific small business set-asides for this contract. Given the highly specialized nature and immense scale of hazardous waste treatment, it is likely that the prime contract is awarded to large, experienced firms. However, there may be opportunities for small businesses to participate as subcontractors, particularly in areas like construction support, logistics, or specialized equipment supply, though this is not explicitly detailed.

Oversight & Accountability

Oversight for this contract would typically involve the Department of the Army, potentially with support from Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA). The cost-plus-award-fee structure necessitates rigorous performance monitoring and financial audits to ensure funds are used appropriately and award fees are earned based on merit. Transparency would be managed through contract reporting requirements and potentially public affairs releases regarding project milestones.

Related Government Programs

Chemical Weapons Demilitarization Program
Environmental Remediation Services
Hazardous Waste Management
Department of Defense Construction Contracts
Research, Development, Test, and Evaluation (RDTE) Funds

Risk Flags

Long-term contract duration increases potential for cost escalation.
Complexity of hazardous waste treatment requires stringent safety and environmental oversight.
Cost-plus-award-fee structure necessitates robust performance monitoring.
Joint venture structure may introduce coordination and accountability complexities.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $4.98 billion to BECHTEL PARSONS BLUE GRASS, A JOINT VENTURE. THE PURPOSE OF MODIFICATION P00003 - CLIN 0002 CONSTRUCTION IS TO DO THE FOLLOWING: 1. FY 09 RDTE FUNDS ARE HEREBY OBLIGATED IN THE AMOUNT OF $1,518,599.00 TO SUPPORT CONTINUED EFFORTS FOR PHASE IV LONG LEAD EQUIPMENT UNDER ESTABLISHED CLIN 0002AA. MIPR: W91CPT90770019 01 PRON: DE9R0019DE AMD 02 2. FY 08 MCD FUNDS ARE HEREBY OBLIGATED IN THE AMOUNT OF $43,020,072.00 TO SUPPORT CONTINUED EFFORTS FOR PHASE IV DESIGN EFFORTS UNDER NEWLY ESTABLISHED CLIN 0002AC. MIPR: W31RY091057

Who is the contractor on this award?

The obligated recipient is BECHTEL PARSONS BLUE GRASS, A JOINT VENTURE.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $4.98 billion.

What is the period of performance?

Start: 2009-03-19. End: 2028-04-03.

What is the historical spending trend for the Blue Grass Chemical Agent-Disposal Facility project?

The provided data indicates significant obligations across fiscal years, with $1.5 million in FY09 RDTE funds and $43 million in FY08 MCD funds. The total contract value is approximately $49.8 billion, suggesting a long-term, multi-year funding profile. To understand the historical trend, one would need to examine annual obligations and expenditures over the contract's lifespan, comparing them against planned budgets and milestones. This would reveal patterns of funding allocation, potential delays or accelerations, and the overall financial trajectory of the project.

How does the cost-plus-award-fee (CPAF) structure impact the government's financial risk and contractor incentives?

A Cost-Plus-Award-Fee (CPAF) contract covers allowable costs plus a fee that is composed of a fixed base fee and an award amount. The award amount is intended to motivate the contractor to meet or exceed certain performance objectives. This structure shifts some financial risk to the government, as the total cost is not fixed. However, it provides strong incentives for the contractor to perform efficiently and effectively to earn the award fee. For the government, effective oversight and clearly defined performance metrics are crucial to ensure that award fees are earned legitimately and that costs remain controlled.

What are the key performance indicators (KPIs) used to determine the award fee for Bechtel Parsons Blue Grass, A Joint Venture?

The provided data does not specify the key performance indicators (KPIs) used for determining the award fee. In CPAF contracts for complex projects like hazardous waste treatment, KPIs typically relate to schedule adherence, cost control, safety performance (e.g., incident rates), environmental compliance, quality of work, and successful achievement of technical milestones. The government agency overseeing the contract would establish these metrics, and the contractor's performance against them would be evaluated periodically to determine the award fee amount.

What is the government's strategy for managing the long-term risks associated with this extensive hazardous waste treatment contract?

The government's strategy for managing long-term risks likely involves several components. Firstly, the full and open competition aims to select a highly capable contractor. Secondly, the CPAF structure includes performance incentives and requires rigorous oversight. Thirdly, the contract duration itself, while long, allows for phased execution and adaptation to evolving technologies or regulations. Robust contract management, including regular performance reviews, audits, and potentially contingency planning for unforeseen technical or environmental challenges, would be essential. Clear communication channels and defined dispute resolution processes are also critical.

How does the joint venture structure of the contractor affect project execution and accountability?

The joint venture structure, Bechtel Parsons Blue Grass, suggests that two or more established companies have pooled their resources, expertise, and financial capacity to undertake this large and complex project. This can lead to enhanced capabilities and a broader range of specialized skills. However, it can also introduce complexities in management, decision-making, and accountability. Clear delineation of roles and responsibilities among the joint venture partners, as well as a unified point of contact for the government, is crucial for efficient project execution. Accountability ultimately rests with the joint venture entity as a whole, but internal coordination is key.

What are the potential environmental and safety risks associated with the chemical weapons treatment, and how are they mitigated?

The treatment of chemical weapons inherently involves significant environmental and safety risks due to the toxic and hazardous nature of the agents. Risks include potential leaks, accidental releases, exposure to personnel, and improper disposal of residual waste. Mitigation strategies typically involve state-of-the-art containment systems, advanced monitoring technologies, stringent personal protective equipment (PPE) requirements, comprehensive training programs for all personnel, emergency response plans, and strict adherence to environmental regulations. The government and the contractor would work closely to implement and continuously update these safety and environmental protocols throughout the project lifecycle.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Waste Treatment and Disposal › Hazardous Waste Treatment and Disposal

Product/Service Code: NATURAL RESOURCES MANAGEMENT › ENVIRONMENTAL SYSTEMS PROTECTION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Address: 830 EASTERN BYP # 106, RICHMOND, KY, 40475

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $5,221,539,465

Exercised Options: $4,980,576,179

Current Obligation: $4,980,576,179

Actual Outlays: $354,039,697

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline