Thalle Construction awarded $28.8M for chemical injection building installation, a fixed-price contract with economic price adjustment

Contract Overview

Contract Amount: $28,833,054 ($28.8M)

Contractor: Thalle Construction CO Inc

Awarding Agency: Department of the Interior

Start Date: 2024-02-29

End Date: 2026-05-04

Contract Duration: 795 days

Daily Burn Rate: $36.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Construction

Official Description: INSTALLATION OF A CHEMICAL INJECTION BUILDING

Place of Performance

Location: PUEBLO, PUEBLO County, COLORADO, 81001

State: Colorado Government Spending

Plain-Language Summary

Department of the Interior obligated $28.8 million to THALLE CONSTRUCTION CO INC for work described as: INSTALLATION OF A CHEMICAL INJECTION BUILDING Key points: 1. Contract value of $28.8M for a specialized construction project. 2. Fixed-price contract with economic price adjustment suggests potential for cost fluctuations. 3. Full and open competition indicates a broad market search for qualified bidders. 4. Contract duration of 795 days allows for significant project execution time. 5. Project located in Colorado, impacting regional construction and infrastructure. 6. NAICS code 237110 points to a focus on water and sewer infrastructure construction.

Value Assessment

Rating: fair

The contract value of $28.8 million for the installation of a chemical injection building appears to be within a reasonable range for specialized infrastructure projects of this scale. Benchmarking against similar water and sewer line construction projects (NAICS 237110) would provide a more precise assessment of value for money. The fixed-price nature with economic price adjustment introduces a layer of risk for cost overruns if material prices escalate significantly, but it also provides a baseline for expected expenditure.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, suggesting that the Bureau of Reclamation actively sought bids from all responsible sources. The presence of two bidders indicates a moderate level of competition for this specialized construction project. While two bidders are better than one, a higher number of bids would typically lead to more robust price discovery and potentially lower costs for the government.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it aims to secure the best possible price through a wide search for qualified contractors. However, the limited number of bidders in this instance may mean that the full benefits of competition were not realized.

Public Impact

The primary beneficiaries are likely the residents and industries in Colorado who will benefit from improved water treatment and distribution infrastructure. The project will deliver a critical chemical injection building, essential for water quality management and regulatory compliance. Geographic impact is concentrated in Colorado, supporting local infrastructure development. The construction project will likely create temporary employment opportunities for skilled labor in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Economic price adjustment clause could lead to increased costs beyond the initial fixed price.
Limited number of bidders (2) may indicate potential barriers to entry or a niche market, possibly impacting long-term cost savings.
Fixed-price contracts can sometimes lead to contractors cutting corners on quality if not adequately overseen, though this is a construction project where quality is paramount.

Positive Signals

Awarded under full and open competition, suggesting a fair process and access to qualified contractors.
The project addresses a critical need for water infrastructure, contributing to public health and safety.
The contract duration allows for thorough and potentially higher-quality execution of the construction.

Sector Analysis

This contract falls within the construction sector, specifically focusing on water and sewer infrastructure. The market for such specialized construction is often characterized by a limited number of firms with the requisite expertise and bonding capacity. Comparable spending benchmarks for similar water treatment or injection facility construction projects would be necessary for a more detailed sector analysis. The overall federal spending on water infrastructure construction is substantial, supporting the modernization and expansion of essential public services.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). While there is no direct indication of subcontracting plans for small businesses, large infrastructure projects often involve opportunities for small business participation in various trades and material supply. The absence of a specific small business set-aside means that larger, established construction firms were likely the primary focus for bidding, which is typical for projects of this magnitude and complexity.

Oversight & Accountability

Oversight for this contract will likely be managed by the Bureau of Reclamation, a division of the Department of the Interior. Accountability measures would be embedded in the contract's terms and conditions, including performance standards, payment schedules tied to milestones, and potential penalties for delays or deficiencies. Transparency is generally maintained through contract award databases and public reporting, though specific project-level oversight details may not be publicly available. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Water Infrastructure Improvement Act Projects
Bureau of Reclamation Construction Projects
Federal Water Treatment Facility Contracts
Infrastructure Investment and Jobs Act Funding

Risk Flags

Potential for cost escalation due to Economic Price Adjustment clause.
Limited competition (2 bidders) may impact price discovery.
Contract duration is substantial, increasing exposure to economic fluctuations.

Frequently Asked Questions

What is this federal contract paying for?

Department of the Interior awarded $28.8 million to THALLE CONSTRUCTION CO INC. INSTALLATION OF A CHEMICAL INJECTION BUILDING

Who is the contractor on this award?

The obligated recipient is THALLE CONSTRUCTION CO INC.

Which agency awarded this contract?

Awarding agency: Department of the Interior (Bureau of Reclamation).

What is the total obligated amount?

The obligated amount is $28.8 million.

What is the period of performance?

Start: 2024-02-29. End: 2026-05-04.

What is the typical profit margin for fixed-price construction contracts with economic price adjustment clauses in the water infrastructure sector?

Profit margins for fixed-price construction contracts with economic price adjustment (EPA) clauses can vary significantly based on project complexity, risk, competition, and the specific terms of the EPA. Generally, contractors aim for profit margins in the range of 5-15%. The EPA clause is designed to protect the contractor from significant fluctuations in material and labor costs, which can reduce the contractor's perceived risk and potentially allow for a slightly lower base profit margin compared to a purely fixed-price contract without such adjustments. However, the government also bears some risk of increased costs. Analyzing historical data for similar Bureau of Reclamation projects or consulting industry reports on construction profitability would provide a more precise benchmark. Factors like the duration of the contract (795 days here) and the specific materials covered by the EPA are crucial in determining the ultimate profitability and value for money.

How does the number of bidders (2) compare to similar Bureau of Reclamation construction projects of comparable value?

A competition with only two bidders, as seen in this $28.8 million contract, is on the lower end for federal procurements, especially those designated as 'full and open competition.' For large-scale infrastructure projects managed by agencies like the Bureau of Reclamation, it is not uncommon to see a higher number of interested parties initially. However, the number of actual bidders can be constrained by the specialized nature of the work (chemical injection building), stringent pre-qualification requirements, bonding capacity needs, and the geographic location. Typically, agencies aim for at least three to five responsive, responsible bidders to ensure robust price competition. If the average number of bidders for similar Bureau of Reclamation projects is significantly higher, it might suggest that this particular procurement faced challenges in attracting a wider pool of qualified contractors, potentially impacting the final price achieved for taxpayers.

What are the potential risks associated with the 'Fixed Price with Economic Price Adjustment' contract type for this project?

The 'Fixed Price with Economic Price Adjustment' (FP-EPA) contract type introduces specific risks for both the government and the contractor. For the government, the primary risk is that costs could escalate beyond the initial fixed price due to unforeseen increases in labor, material, or fuel costs, as stipulated in the EPA clause. This means the final cost to the taxpayer could be higher than initially budgeted. The contractor faces the risk of underestimating the potential cost increases or having the EPA formula not fully compensate for actual cost escalations. Effective management of an FP-EPA contract requires diligent monitoring of economic indices used in the adjustment formula and clear definitions of what costs are adjustable. The 795-day duration of this project increases the likelihood of significant economic fluctuations over its life, amplifying this risk.

What is the historical spending pattern for NAICS code 237110 (Water and Sewer Line and Related Structures Construction) by the Department of the Interior?

The Department of the Interior, through agencies like the Bureau of Reclamation, consistently invests in water and sewer infrastructure, aligning with its mission to manage water resources. Historical spending data for NAICS code 237110 by the DOI would likely show significant and recurring contract awards, particularly in Western states where water management is critical. This spending supports the construction, repair, and upgrade of dams, canals, pipelines, treatment facilities, and related structures. Analyzing trends over the past 5-10 years would reveal the scale of investment, common contract types used, and the primary contracting firms. Such analysis is crucial for understanding the agency's capacity and commitment to maintaining and improving water infrastructure, and for benchmarking current contract values against historical spending levels.

How does the contract duration (795 days) compare to the typical project timeline for similar chemical injection building constructions?

A contract duration of 795 days (approximately 26 months) for the installation of a chemical injection building is a substantial period, suggesting a project of considerable complexity or scale. Typical timelines for such specialized construction can range widely, from 12 to 30 months, depending on factors like site preparation, engineering design finalization, equipment procurement lead times, and the specific regulatory environment. A longer duration might be allocated to ensure thoroughness, accommodate potential weather delays (especially if the project is in a region with seasonal challenges), or allow for phased construction and testing. It also provides more time for the contractor to manage potential supply chain issues. However, extended durations can also increase the overall administrative burden and the potential for cost escalation under an EPA clause.

Industry Classification

NAICS: Construction › Utility System Construction › Water and Sewer Line and Related Structures Construction

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCTION OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: 140R6023R0013

Offers Received: 2

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Tully Construction CO - Thalle Construction CO LLC

Address: 900 NC HIGHWAY 86 N, HILLSBOROUGH, NC, 27278

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

Financial Breakdown

Contract Ceiling: $28,833,054

Exercised Options: $28,833,054

Current Obligation: $28,833,054

Actual Outlays: $4,321,597

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline