DoD's $878M Nuclear Reactor Contract with KAPL Inc. Raises Questions on Value and Competition

Contract Overview

Contract Amount: $1,309,642,495 ($1.3B)

Contractor: Kapl Inc

Awarding Agency: Department of Defense

Start Date: 2000-07-05

End Date: 2009-02-01

Contract Duration: 3,133 days

Daily Burn Rate: $418.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: 200011!1700!003066!BZ004 !NAVAL SEA SYSTEMS COMMAND !N0002400C4011 !A!*!* !20000705!20100930!878057330!878057330!834951691!N!04241!KAPL INC !2401 RIVER RD !SCHENECTADY !NY!12309!65508!093!36!SCHENECTADY !SCHENECTADY !NEW YORK !0001!+000135724000!N!N!000000000000!4470!NUCLEAR REACTORS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3443!3!*!*!*!B!A!*!A !N!U!2!004!B!* !A!N!Z!* !* !N!C!*!A!A!A!A!A!A!* !*!N!A!C!N!*!*!*!*!*!

Place of Performance

Location: SCHENECTADY, SCHENECTADY County, NEW YORK, 12309

State: New York Government Spending

Plain-Language Summary

Department of Defense obligated $1.31 billion to KAPL INC for work described as: 200011!1700!003066!BZ004 !NAVAL SEA SYSTEMS COMMAND !N0002400C4011 !A!*!* !20000705!20100930!878057330!878057330!834951691!N!04241!KAPL INC !2401 RIVER RD !SCHENECTADY !NY!12309!65508!093!36!SCHENECTADY !SCH… Key points: 1. The contract awarded to KAPL INC for nuclear reactors represents a significant investment by the Department of Defense. 2. The 'NOT COMPETED' status suggests a lack of competitive bidding, potentially impacting price discovery and value for taxpayers. 3. The long duration of the contract (over 8 years) and its cost-plus-fixed-fee structure warrant scrutiny for potential cost overruns. 4. The sector focus on nuclear reactors for ships indicates a specialized and critical defense need.

Value Assessment

Rating: questionable

The contract's total value of $878,057,330 for nuclear reactors is substantial. Without comparable contracts or detailed cost breakdowns, it's difficult to definitively assess its value. However, the lack of competition raises concerns about whether this price reflects the best possible value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under a 'NOT COMPETED' basis, indicating limited competition. This method of procurement can lead to higher prices and reduced innovation as there is no market pressure to offer the most competitive bid.

Taxpayer Impact: The lack of competitive bidding may result in taxpayers paying more than necessary for these nuclear reactor services.

Public Impact

Taxpayers may be overpaying due to the absence of competitive bidding. The long-term nature of the contract could lead to unforeseen costs and budget impacts. The specialized nature of nuclear reactors means few companies can compete, potentially justifying limited competition but requiring strong oversight.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of competition
Cost-plus-fixed-fee contract type
Long contract duration
Specialized technology

Positive Signals

Critical defense capability
Experienced contractor (implied by sole-source)

Sector Analysis

This contract falls within the Defense sector, specifically concerning nuclear reactors for naval applications. Spending benchmarks for such specialized systems are difficult to ascertain due to their unique nature and limited market.

Small Business Impact

There is no indication that small businesses were involved in this contract, either as prime contractors or subcontractors. The specialized nature of nuclear reactors likely limits opportunities for small business participation.

Oversight & Accountability

Given the 'NOT COMPETED' status and the significant value, robust oversight is crucial to ensure KAPL INC is meeting performance requirements and that costs are justified. The Department of the Navy should actively monitor contract performance and expenditures.

Related Government Programs

Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Lack of competitive bidding
Potential for cost overruns due to CPFF structure
Long contract duration
Single source dependency
Specialized technology with limited market

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.31 billion to KAPL INC. 200011!1700!003066!BZ004 !NAVAL SEA SYSTEMS COMMAND !N0002400C4011 !A!*!* !20000705!20100930!878057330!878057330!834951691!N!04241!KAPL INC !2401 RIVER RD !SCHENECTADY !NY!12309!65508!093!36!SCHENECTADY !SCHENECTADY !NEW YORK !0001!+000135724000!N!N!000000000000!4470!NUCLEAR REACTORS !A3 !SHIPS !2000!NOT DISCERNABLE OR CLASSIFIED !3443!3!*!*!*!B!A!*!A !N!U!

Who is the contractor on this award?

The obligated recipient is KAPL 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 $1.31 billion.

What is the period of performance?

Start: 2000-07-05. End: 2009-02-01.

What specific justifications were provided for not competing this contract, and do they align with federal procurement regulations for sole-source awards?

Federal regulations allow for sole-source contracts under specific circumstances, such as when only one responsible source can provide the required supplies or services. For this contract, the justification would likely center on the highly specialized nature of nuclear reactors for naval use, potentially requiring unique expertise, facilities, or security clearances possessed only by KAPL INC. A thorough review of the official justification documentation is needed to confirm its validity and adherence to procurement laws.

How does the cost-plus-fixed-fee structure impact the government's ability to control costs and ensure contractor efficiency for nuclear reactor services?

Cost-plus-fixed-fee (CPFF) contracts reimburse the contractor for allowable costs plus a fixed fee representing profit. While CPFF can be useful for research and development or when cost uncertainties are high, it shifts much of the cost risk to the government. This structure incentivizes the contractor to incur costs to achieve the fixed fee, potentially leading to less cost efficiency compared to fixed-price contracts. Robust government oversight is essential to scrutinize allowable costs and prevent overruns.

What are the long-term implications of relying on a single source for critical nuclear reactor components or services for the Department of Defense?

Long-term reliance on a single source can create strategic vulnerabilities. It limits the government's negotiating power, potentially leading to higher prices over time. Furthermore, it can stifle innovation and reduce the overall industrial base capacity for such critical technologies. Dependence on one contractor may also pose risks if that contractor faces financial difficulties, operational issues, or changes in strategic direction.

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Bechtel Group, Inc.

Address: 2401 RIVER RD, SCHENECTADY, NY, 12309

Business Categories: Category Business, Not Designated a Small Business

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Timeline