Todd Jacobson
NS&D Monitor
3/21/2014
After three protests and more than 14 months, Babcock & Wilcox-led Nuclear Production Partners (NP2) is giving up its fight for the National Nuclear Security Administration’s Y-12/Pantex contract, the company said this week. NP2 three times protested the NNSA’s selection of Bechtel-led Consolidated Nuclear Security for the $22.8 billion contract, but the Government Accountability Office in late February turned away its last challenge of the contract, limiting the company’s options. NP2 could have continued to fight for the contract in the U.S. Court of Federal Claims, but the company would have had a difficult time stopping transition to CNS. “The current B&W-led teams at Y-12 and Pantex are fully engaged in supporting a smooth transition to the new contractor,” B&W said in a March 19 statement. “B&W is dedicated to ensuring this process is completed on time, safely and securely, with minimal disruption to current missions.”
The NNSA twice awarded the contract to CNS, once in January 2013 and again in November after an initial protest byNP2 forced the NNSA to reopen the solicitation and seek more information from bidders. NP2 unsuccessfully protested the NNSA’s corrective actions during the summer. CNS is in its third week of a four-month transition, and it is slated to take over management of the sites in July. “We are pleased by the news that B&W will not take further action in regard to the Pantex/Y-12 contract award,” CNS spokesman Jason Bohne said March 19. “Their decision is an important step because it allows the workforces at Pantex and Y-12 to move forward with confidence. CNS is working at full speed, and we look forward to continuing to work productively with the B&W-led management teams at both sites to ensure an effective transition.”
‘A Big Blow’
The impact of the decision on B&W, the lead contractor of a team that also includes URS, Northrop Grumman and Honeywell, and its Technical Services Group is expected to be significant. For more than a year, B&W fought the NNSA’s decision, in part because it continued to earn fee as the incumbent contractor at Y-12 and Pantex, but also because the income from the sites represents approximately half of the income for B&W’s Technical Services Group. With the loss of Y-12 and Pantex, B&W no longer has a lead role at any NNSA site. “This is the premier DOE/NNSA contract and not having it is a big blow,” said Will Gabrielski, a financial analyst with Stephens Inc. who closely follows B&W and the DOE/NNSA market. “It’s going to hurt,” Gabrielski added, suggesting that the biggest impact could come in B&W’s ability to hang onto top talent. In the 14 years that B&W was the lead contractor at Y-12 and Pantex, it had been able to use the sites to develop top officials. “That’ll probably be the biggest impact,” Gabrielski said. “How do you hang on to those resources? How does it impact the rest of their business?”
In an interview with NS&D Monitor last year, B&W President and CEO Jim Ferland acknowledged that losing out on Y-12/Pantex would have a significant impact on the company. “If we lose, we probably will have to step back,” he said. “That said, we plan to remain in the marketplace, win or lose. We have an incredibly talented group of people within TSG. We’ll have more people if we lose the Y-12/Pantex rebid. We think that positions us well for opportunities going forward. We remain committed to the marketplace either way. But it is a big deal for that business unit.”
Gabrielski suggested that the impact on URS, which was trying to gain a foothold in the NNSA market, would be even greater. “It’s definitely a bigger disappointment for URS,” he said. “Financially the impact is more significant for Babcock & Wilcox because they had it and lost it. But in terms of URS getting a bigger piece of the DOE pie by expanding beyond environmental work into the NNSA, this is a big disappointment. There are not many avenues where you can get NNSA exposure.”
Federal Court ‘A Pretty Steep Mountain’
In its latest protest, B&W-led NP2 argued that NNSA misevaluated the cost savings it proposed, unfairly allowed CNS to alter its proposal, made mathematical errors in calculating the cost savings contained in its bid, and improperly evaluated CNS’ key personnel, but the GAO found no merit to the team’s claims. If NP2 had chosen to continue to fight the contract in federal court, it would have to request an injunction to prevent transition from beginning, which industry officials and procurement law experts have said would be very difficult in the wake of GAO’s latest decision. “It’s a pretty steep mountain they would have to crawl,” one industry official said, “and the likelihood of success on the merits with GAO ruling against them three times is not good.”
The official suggested NP2 could have had a chance at arguing that continuing with transition could do irreparable harm by ruining its chances at the contract, but also said the government would have a strong argument that it’s in the best interest of the public to move forward. “I think the government makes a pretty good argument that they have to move forward because of work force, security and safety issues,” the official said. “My guess is they had a very reasoned discussion about what would have to happen, and they concluded it wasn’t worth it.”
