Centerra Group awarded $61.5M for security services, a sole-source contract with a cost-plus award fee structure

Contract Overview

Contract Amount: $61,496,398 ($61.5M)

Contractor: Centerra Group, LLC

Awarding Agency: Department of Energy

Start Date: 2005-07-01

End Date: 2007-01-24

Contract Duration: 572 days

Daily Burn Rate: $107.5K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS AWARD FEE

Sector: Other

Official Description: SECURITY PROTECTIVE FORCE SERVICES

Place of Performance

Location: LAS VEGAS, SAN MIGUEL County, NEW MEXICO, 87701

State: New Mexico Government Spending

Plain-Language Summary

Department of Energy obligated $61.5 million to CENTERRA GROUP, LLC for work described as: SECURITY PROTECTIVE FORCE SERVICES Key points: 1. The contract utilized a cost-plus award fee structure, which can incentivize performance but also carries inherent cost escalation risks. 2. As a sole-source award, the lack of competition limits price discovery and potentially increases the cost to taxpayers. 3. The contract duration of 572 days (approximately 1.5 years) is relatively short, suggesting potential for re-competition or modification. 4. The North American Industry Classification System (NAICS) code 561612 indicates a focus on security guards and patrol services. 5. The contract was awarded by the Department of Energy, suggesting a need for specialized security at federal facilities. 6. The absence of small business set-aside flags indicates this contract was not specifically targeted to support small businesses.

Value Assessment

Rating: questionable

Benchmarking the value of this contract is challenging due to its sole-source nature and cost-plus award fee structure, which can lead to less predictable final costs compared to fixed-price contracts. Without competitive bids, it's difficult to ascertain if the pricing reflects market rates or if there was an opportunity for cost savings. The award fee component suggests performance incentives, but the overall value proposition is obscured by the lack of a competitive baseline. Further analysis would require access to detailed cost breakdowns and performance metrics.

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 approach is typically used when only one vendor possesses the necessary qualifications, or in urgent situations. The lack of competition means that the government did not benefit from the price reductions and innovation that typically arise from a competitive bidding process. This limits the government's ability to ensure it is receiving the best possible price and service.

Taxpayer Impact: Taxpayers may have paid a premium for these security services due to the absence of competitive pressure to lower bids. The government's negotiating position is weakened without alternative providers.

Public Impact

The primary beneficiaries are the Department of Energy and its facilities, which receive essential protective force services. The contract ensures the security and safety of federal personnel, assets, and sensitive information at designated locations. The geographic impact is localized to New Mexico, where the contract was performed. The contract supports jobs within the security services sector, contributing to the local workforce in New Mexico.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits price discovery and potentially increases costs.
Cost-plus award fee structure can lead to cost overruns if not managed carefully.
Lack of competition may reduce incentive for contractor efficiency.
Limited transparency on specific performance metrics and cost justifications due to sole-source nature.

Positive Signals

Award fee structure provides an incentive for meeting or exceeding performance standards.
Contract ensures critical security services are provided to a federal agency.
The contractor, Centerra Group, likely has specialized expertise in federal security services.

Sector Analysis

The security services industry is a significant sector within the broader professional, scientific, and technical services market. This contract falls under the Security Guards and Patrol Services sub-sector. The federal government is a major consumer of these services, particularly for protecting sensitive facilities and assets. Market size for federal security contracts is substantial, driven by national security needs and the vast inventory of government property requiring protection. Comparable spending benchmarks would typically involve analyzing other federal contracts for similar security services at comparable facilities.

Small Business Impact

This contract does not appear to have a small business set-aside component, as indicated by the 'sb' field being false. Consequently, there are no direct subcontracting implications mandated by a set-aside. The absence of a small business focus means that opportunities for small businesses to participate in this specific contract are limited unless they are prime contractors or choose to subcontract independently. This contract does not directly contribute to the small business ecosystem through mandated participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the contracting officers and program managers within the Department of Energy. The cost-plus award fee structure necessitates close monitoring of costs and performance to ensure the award fee is justified and that costs remain reasonable. Transparency may be limited due to the sole-source nature, but internal government oversight mechanisms should be in place to manage the contract effectively. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Department of Energy Protective Force Contracts
Federal Security Guard Services
Cost-Plus Award Fee Contracts
Sole-Source Federal Procurements

Risk Flags

Sole-source award
Cost-plus award fee structure
Potential for cost overruns
Limited price competition

Frequently Asked Questions

What is this federal contract paying for?

Department of Energy awarded $61.5 million to CENTERRA GROUP, LLC. SECURITY PROTECTIVE FORCE SERVICES

Who is the contractor on this award?

The obligated recipient is CENTERRA GROUP, LLC.

Which agency awarded this contract?

Awarding agency: Department of Energy (Department of Energy).

What is the total obligated amount?

The obligated amount is $61.5 million.

What is the period of performance?

Start: 2005-07-01. End: 2007-01-24.

What is Centerra Group's track record with federal security contracts, particularly with the Department of Energy?

Centerra Group has a significant history of providing security and protective services to various federal agencies, including the Department of Energy. Their experience often involves managing complex security operations at sensitive government facilities, such as nuclear sites or research laboratories. While specific performance details for this particular contract are not publicly detailed, their sustained engagement with federal clients suggests a capacity to meet the demanding requirements of such roles. Analyzing past performance on similar contracts, including any documented issues or commendations, would provide a more comprehensive view of their reliability and effectiveness in fulfilling federal security mandates.

How does the cost-plus award fee (CPAF) structure compare to other contract types for similar security services?

The Cost-Plus Award Fee (CPAF) structure is designed to incentivize contractor performance by allowing the contractor to recover all allowable costs plus a base fee, with the potential for an additional award fee based on meeting or exceeding specific performance objectives. This differs from fixed-price contracts, where the price is set regardless of the contractor's costs, and cost-reimbursement contracts without an award fee. For security services, CPAF can be beneficial when performance standards are complex and difficult to define precisely upfront, or when flexibility is needed. However, it carries a higher risk of cost growth compared to fixed-price contracts, as the government bears the risk of cost overruns. Competitive bidding on fixed-price contracts often yields lower prices, but CPAF may be chosen when quality and performance are paramount and can be objectively measured.

What are the primary risks associated with a sole-source award for security services?

The primary risks associated with a sole-source award for security services include a lack of price competition, which can lead to higher costs for the government and taxpayers. Without multiple bids, there is less incentive for the contractor to offer the most competitive pricing. Furthermore, the government may not be exposed to potentially more innovative or efficient solutions that could have been offered by other qualified vendors. This can also limit the government's leverage in negotiating terms and conditions. In essence, sole-source awards bypass the market's natural price discovery mechanism, potentially resulting in suboptimal value for money.

What is the typical duration for federal security guard contracts, and how does this contract's duration compare?

Federal security guard contracts can vary significantly in duration, often ranging from one to five years, with options for extensions. Shorter durations, like the 572 days (approximately 1.5 years) of this contract, might indicate a need for interim services, a pilot program, or a strategy to re-evaluate requirements and re-compete the contract more frequently. Longer-term contracts can offer stability for both the government and the contractor, potentially leading to better long-term planning and relationship building. However, shorter contracts allow for more frequent market checks and opportunities to incorporate updated security technologies or methodologies through re-competition. This contract's duration is on the shorter side, suggesting a deliberate choice by the agency.

How does the NAICS code 561612 (Security Guards and Patrol Services) define the scope of work for this contract?

The North American Industry Classification System (NAICS) code 561612 specifically covers establishments primarily engaged in providing security guards and patrol services. This typically includes armed and unarmed guards, patrol services, and related security monitoring. Services under this code often involve protecting people and property from hazards such as theft, vandalism, and unauthorized access. For this Department of Energy contract, it implies that Centerra Group is responsible for providing personnel to patrol facilities, monitor security systems, control access, and respond to security incidents, ensuring the physical security of government assets and personnel within its jurisdiction.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Investigation and Security Services › Security Guards and Patrol Services

Product/Service Code: UTILITIES AND HOUSEKEEPING › HOUSEKEEPING SERVICES

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 1

Pricing Type: COST PLUS AWARD FEE (R)

Evaluated Preference: NONE

Contractor Details

Parent Company: G4S PLC (UEI: 737341631)

Address: 7121 FAIRWAY DRIVE, SUITE 301, PALM BEACH GARDENS, FL, 21

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

Financial Breakdown

Contract Ceiling: $63,059,099

Exercised Options: $63,059,099

Current Obligation: $61,496,398

Timeline