Department of Energy's $156.5M Elmwood Office Space Lease: A Decade-Long Commitment with Limited Competition
Contract Overview
Contract Amount: $15,650,280 ($15.7M)
Contractor: Elmwood Office Park LLC
Awarding Agency: Department of Energy
Start Date: 2008-05-01
End Date: 2018-04-30
Contract Duration: 3,651 days
Daily Burn Rate: $4.3K/day
Competition Type: NOT COMPETED
Number of Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT
Sector: Other
Official Description: LEASE OF ELMWOOD OFFICE SPACE
Place of Performance
Location: NEW ORLEANS, JEFFERSON County, LOUISIANA, 70123
Plain-Language Summary
Department of Energy obligated $15.7 million to ELMWOOD OFFICE PARK LLC for work described as: LEASE OF ELMWOOD OFFICE SPACE Key points: 1. The contract represents a significant, long-term commitment for office space, indicating a substantial real estate footprint for the agency. 2. The fixed-price structure with economic price adjustments suggests potential for cost escalation over the contract's duration. 3. The absence of competition raises questions about potential overpayment and the government's ability to secure the best market value. 4. The contract's duration of 10 years is considerably long for a real estate lease, potentially limiting flexibility. 5. The lease is categorized under 'Lessors of Other Real Estate Property,' a broad classification that may obscure specific service details. 6. The contract's value of $156.5 million over 10 years averages to $15.65 million annually, a considerable expenditure for leased space.
Value Assessment
Rating: fair
The annual cost of approximately $15.65 million for leased office space appears substantial. Without comparable lease data for similar government facilities in the same geographic area, it is difficult to definitively benchmark value. The fixed-price with economic price adjustment structure introduces a risk of cost increases over the decade-long term, which could impact overall value for money. The lack of competitive bidding further complicates a precise value assessment, as the government may not have secured the most advantageous terms.
Cost Per Unit: N/A
Competition Analysis
Competition Level: sole-source
This contract was not competed, indicating a sole-source award. The specific reasons for this approach are not detailed in the provided data. Sole-source contracts typically arise when only one vendor can provide the required goods or services, or in situations where competition is deemed impractical or not in the public interest. The lack of competition means there was no opportunity to solicit bids from multiple providers, potentially limiting price discovery and the government's ability to negotiate the most favorable terms.
Taxpayer Impact: Taxpayers may have paid a premium due to the absence of competitive pressure. Without competing offers, it's harder to ensure the government secured the lowest possible price for this long-term lease.
Public Impact
The primary beneficiaries are the Department of Energy (DOE) personnel who will occupy the leased Elmwood office space, enabling agency operations. The contract facilitates the provision of essential office infrastructure and workspace for DOE staff. The geographic impact is localized to Louisiana, where the Elmwood office park is situated. The contract supports the real estate sector by providing revenue to the lessor, Elmwood Office Park LLC.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Lack of competition may lead to higher costs for taxpayers.
- Long-term lease commitment (10 years) reduces flexibility for future real estate needs.
- Economic price adjustments introduce uncertainty regarding future cost escalations.
- Limited transparency into the justification for a sole-source award.
Positive Signals
- Provides a stable, long-term office space solution for the Department of Energy.
- Ensures continuity of operations by securing necessary facilities.
- The fixed-price component offers some predictability in budgeting, aside from economic adjustments.
Sector Analysis
The real estate leasing sector is a significant component of government contracting, encompassing a wide range of property types and durations. Government agencies often lease space to accommodate personnel and operations, particularly when constructing or acquiring government-owned facilities is not feasible or cost-effective. This contract falls within the 'Lessors of Other Real Estate Property' NAICS code (531190), which covers entities that rent or lease non-residential buildings. Benchmarking this lease against other federal real estate acquisitions is challenging without specific location and facility type comparisons, but the annual expenditure of over $15 million is substantial for leased office space.
Small Business Impact
The provided data indicates that small business participation was not a factor in this contract, as the 'ss' (small business set-aside) field is false and the 'sb' (small business) field is also false. This suggests that the lease was not specifically set aside for small businesses, nor does it appear to involve significant subcontracting opportunities for small businesses directly related to the lease itself. The primary focus is on the lease agreement with Elmwood Office Park LLC.
Oversight & Accountability
Oversight for this contract would primarily fall under the Department of Energy's contracting and facilities management divisions. As a lease agreement, specific oversight would focus on ensuring the property is maintained according to the lease terms, that payments are accurate, and that the space continues to meet the agency's operational needs. Transparency is limited by the sole-source nature of the award. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected in the procurement or execution of the lease.
Related Government Programs
- Federal Real Estate Leases
- Department of Energy Facilities Management
- Office Space Acquisition
- Government Property Management
Risk Flags
- Sole-source award lacks competitive justification.
- Long contract duration limits flexibility.
- Economic price adjustment introduces cost uncertainty.
- Limited transparency on performance standards.
Tags
real-estate, office-space, department-of-energy, louisiana, sole-source, fixed-price-economic-price-adjustment, long-term-contract, facilities-management, non-competitive, commercial-real-estate
Frequently Asked Questions
What is this federal contract paying for?
Department of Energy awarded $15.7 million to ELMWOOD OFFICE PARK LLC. LEASE OF ELMWOOD OFFICE SPACE
Who is the contractor on this award?
The obligated recipient is ELMWOOD OFFICE PARK LLC.
Which agency awarded this contract?
Awarding agency: Department of Energy (Department of Energy).
What is the total obligated amount?
The obligated amount is $15.7 million.
What is the period of performance?
Start: 2008-05-01. End: 2018-04-30.
What was the specific justification for awarding this lease on a sole-source basis?
The provided data does not specify the justification for the sole-source award of the Elmwood office space lease. Typically, sole-source contracts are awarded when only one responsible source is available or capable of meeting the agency's needs. This could be due to unique property characteristics, specific location requirements, or a lack of available alternatives within the desired timeframe. Without further documentation from the Department of Energy, the precise rationale remains unclear. This lack of competition raises concerns about whether the government secured the most competitive pricing and terms available in the market for this significant, decade-long commitment.
How does the annual cost of this lease compare to market rates for similar office spaces in Louisiana?
Directly comparing the annual cost of $15.65 million for the Elmwood office space lease to market rates in Louisiana is challenging without more specific details about the facility's size, amenities, and precise location within the state. The NAICS code 531190 (Lessors of Other Real Estate Property) is broad. However, an annual expenditure of this magnitude for leased office space suggests a significant facility. To perform a robust comparison, one would need data on average rental costs per square foot for comparable commercial office buildings in the specific submarket where Elmwood is located, factoring in lease terms, included services, and building class. The absence of competitive bidding makes it difficult to ascertain if this rate represents a market-driven price.
What are the potential risks associated with the 'economic price adjustment' clause over a 10-year period?
The 'economic price adjustment' (EPA) clause in this fixed-price contract introduces a significant risk of cost escalation over the 10-year lease term. EPAs are typically tied to economic indicators such as inflation rates, construction cost indices, or other relevant market factors. Over a decade, these adjustments can lead to substantial increases in the total contract value beyond the initial fixed price. This uncertainty makes long-term budget planning more difficult for the Department of Energy and could result in the government paying considerably more than initially projected if economic conditions lead to significant price increases. The specific index or formula used for the EPA would determine the magnitude of this risk.
What is the historical spending pattern for office space leases by the Department of Energy in Louisiana?
The provided data focuses solely on this single Elmwood office space lease and does not offer historical spending patterns for the Department of Energy (DOE) in Louisiana or for office space leases generally. To analyze historical spending, one would need access to broader contract databases or DOE budget documents that detail expenditures on real estate leases over multiple fiscal years and across different locations. Understanding past leasing activities, including the number of leases, their durations, average costs, and competition levels, would provide crucial context for evaluating the current Elmwood lease's significance and potential value.
Are there any performance metrics or service level agreements associated with this lease?
The provided data summary for the Elmwood office space lease does not include details on specific performance metrics or service level agreements (SLAs). Lease agreements typically outline requirements for building maintenance, security, utilities, and potentially janitorial services. While the contract type is 'FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT,' this primarily addresses the payment structure, not the qualitative aspects of the service delivery. Effective oversight would require clear definitions of expected service standards and mechanisms for addressing deficiencies. Without explicit performance metrics, assessing the lessor's adherence to lease obligations beyond basic payment terms is challenging.
Industry Classification
NAICS: Real Estate and Rental and Leasing › Lessors of Real Estate › Lessors of Other Real Estate Property
Product/Service Code: LEASE/RENT FACILITIES › LEASE/RENTAL OF BUILDINGS
Competition & Pricing
Extent Competed: NOT COMPETED
Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE
Offers Received: 1
Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)
Evaluated Preference: NONE
Contractor Details
Address: 900 COMMERCE RD E, HARAHAN, LA, 01
Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business
Financial Breakdown
Contract Ceiling: $48,165,154
Exercised Options: $27,006,171
Current Obligation: $15,650,280
Contract Characteristics
Multi-Year Contract: Yes
Timeline
Start Date: 2008-05-01
Current End Date: 2018-04-30
Potential End Date: 2028-04-30 00:00:00
Last Modified: 2014-08-13
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