Department of Labor's $58.8M Job Corps Center contract awarded to Serrato Corporation shows fair value with moderate competition

Contract Overview

Contract Amount: $58,766,093 ($58.8M)

Contractor: Serrato Corporation

Awarding Agency: Department of Labor

Start Date: 2012-04-02

End Date: 2019-06-07

Contract Duration: 2,622 days

Daily Burn Rate: $22.4K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 5

Pricing Type: COST PLUS INCENTIVE FEE

Sector: Other

Official Description: THE OPERATION OF THE CLEVELAND OHIO JOB CORPS CENTER.

Place of Performance

Location: CLEVELAND, CUYAHOGA County, OHIO, 44110

State: Ohio Government Spending

Plain-Language Summary

Department of Labor obligated $58.8 million to SERRATO CORPORATION for work described as: THE OPERATION OF THE CLEVELAND OHIO JOB CORPS CENTER. Key points: 1. The contract's value appears reasonable when benchmarked against similar educational service contracts. 2. Competition was robust, with five bidders vying for the contract, suggesting a healthy market. 3. The contract type (Cost Plus Incentive Fee) introduces performance-based incentives but also carries cost overrun risks. 4. The duration of the contract (over 7 years) indicates a long-term commitment to service delivery. 5. The geographic focus on Ohio is specific, potentially limiting broader application of lessons learned. 6. The absence of small business set-aside flags suggests larger firms were the primary participants.

Value Assessment

Rating: fair

The total award amount of $58.8 million over approximately 7 years for operating a Job Corps center suggests a per-year cost of roughly $8.4 million. This aligns with the general cost range for similar large-scale educational and vocational training facilities operated by the federal government. Benchmarking against other Job Corps center contracts indicates that Serrato Corporation's award falls within a typical spending bracket, not appearing excessively high or low. The Cost Plus Incentive Fee (CPIF) structure allows for potential savings if performance targets are exceeded, but also introduces risk if costs escalate beyond projections.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES,' indicating that while full and open competition was intended, certain sources were excluded prior to the solicitation. Five bidders participated in this competition, which is a moderate level of engagement. This suggests that the market for operating Job Corps centers is not overly saturated but also not severely restricted. The exclusion of specific sources, if not fully justified, could potentially limit the most competitive pricing.

Taxpayer Impact: A moderate number of bidders generally allows for price discovery, but the exclusion of sources might have prevented the most competitive offers from emerging, potentially impacting taxpayer savings.

Public Impact

The primary beneficiaries are the students enrolled in the Cleveland, Ohio Job Corps Center, who receive vocational training and educational services. The contract delivers essential services aimed at preparing young adults for skilled trades and employment. The geographic impact is concentrated in Cleveland, Ohio, serving the local workforce development needs. Workforce implications include employment for instructors, administrative staff, and support personnel at the center, as well as the future employment of trained graduates.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in Cost Plus Incentive Fee contracts if performance targets are not met efficiently.
The 'exclusion of sources' in the competition process raises questions about whether the most competitive bids were considered.
Long contract duration could lead to complacency or reduced innovation if not actively managed.
Lack of specific performance metrics in the provided data makes it difficult to assess the 'incentive' aspect of the fee structure.

Positive Signals

Awarding to a single contractor for an extended period provides stability and continuity of services for students.
The presence of five bidders indicates sufficient market interest and capability to operate such a facility.
The Cost Plus Incentive Fee structure, if well-defined, can align contractor incentives with government objectives.
The contract's focus on vocational training directly addresses workforce development needs.

Sector Analysis

The operation of Job Corps centers falls within the broader education and workforce development sector, specifically focusing on vocational training. This sector is characterized by government funding for programs aimed at improving employment outcomes for disadvantaged youth. Comparable spending benchmarks would include other federal and state-funded vocational training initiatives, as well as private educational institutions offering similar trade programs. The market size for such services is substantial, driven by federal mandates to provide pathways to employment.

Small Business Impact

The provided data indicates that small business participation was not a specific set-aside requirement for this contract (ss: false, sb: false). This suggests that the competition was likely dominated by larger, established service providers capable of meeting the extensive requirements of operating a Job Corps center. While there's no explicit mention of subcontracting to small businesses, it's common for large prime contractors to engage small businesses for specialized services, though the extent of this is not detailed here. The lack of a set-aside may limit direct opportunities for small businesses to secure prime contracts in this area.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Labor's Office of the Assistant Secretary for Administration and Management (OASAM), which awarded the contract. Accountability measures are typically embedded within the Cost Plus Incentive Fee (CPIF) structure, linking contractor payment to performance outcomes. Transparency is generally maintained through contract award databases and reporting requirements, although specific performance data and audit reports would provide a fuller picture. The Inspector General for the Department of Labor would have jurisdiction for audits and investigations related to potential fraud, waste, or abuse.

Related Government Programs

Department of Labor Job Corps Program
Workforce Innovation and Opportunity Act (WIOA) Programs
Federal Vocational Training Grants
Adult Education and Literacy Programs

Risk Flags

Competition Level: Moderate competition with potential source exclusions.
Contract Type Risk: CPIF contracts carry inherent risks of cost overruns.
Long Duration: Potential for complacency or inflexibility over 7+ years.
Transparency: Specific performance metrics and exclusion justifications not publicly detailed.

Frequently Asked Questions

What is this federal contract paying for?

Department of Labor awarded $58.8 million to SERRATO CORPORATION. THE OPERATION OF THE CLEVELAND OHIO JOB CORPS CENTER.

Who is the contractor on this award?

The obligated recipient is SERRATO CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Labor (Office of the Assistant Secretary for Administration and Management).

What is the total obligated amount?

The obligated amount is $58.8 million.

What is the period of performance?

Start: 2012-04-02. End: 2019-06-07.

What is Serrato Corporation's track record in managing federal contracts, particularly those related to education or workforce development?

Serrato Corporation has a history of managing federal contracts, including those with the Department of Labor. While specific details on their performance across all contracts require deeper investigation, their ability to secure and manage a significant contract like the Cleveland Job Corps Center suggests a level of capability and experience. Analyzing past performance reviews, contract modifications, and any documented disputes or awards associated with Serrato's previous federal engagements would provide a more comprehensive understanding of their track record. Their experience with Job Corps centers specifically would be a key indicator of their suitability for this type of service delivery.

How does the cost per student or per training hour compare to other Job Corps centers or similar vocational programs?

To benchmark the value-for-money, a detailed cost-per-student or cost-per-training-hour analysis is necessary. This would involve dividing the total contract value ($58.8 million) by the number of students served annually and the total training hours delivered over the contract's duration (approximately 7 years). Comparing these calculated metrics against averages for other Job Corps centers nationwide, as well as against similar vocational training programs funded by other federal agencies or state governments, would reveal whether this contract represents efficient use of taxpayer funds. Without the specific enrollment numbers and training hour data, a precise comparison is not possible from the provided information.

What are the specific performance metrics and incentive targets tied to the Cost Plus Incentive Fee (CPIF) structure for this contract?

The Cost Plus Incentive Fee (CPIF) structure implies that Serrato Corporation's final profit is adjusted based on achieving specific performance targets. These targets are typically defined in the contract's Statement of Work (SOW) and could include metrics such as student graduation rates, job placement rates for graduates, starting salaries of placed graduates, student retention rates, and adherence to budget constraints. The 'incentive' portion means higher profits are earned for exceeding targets, while lower profits (or potentially penalties, depending on the contract specifics) could result from failing to meet them. A thorough review of the contract's SOW and associated exhibits would detail these precise metrics and the associated fee adjustments.

What was the justification for excluding certain sources from the full and open competition?

The contract states 'FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES.' This typically means that while the competition was intended to be open, specific potential bidders were identified and excluded from the solicitation process, often due to reasons such as past performance issues, inability to meet specific technical requirements, or national security concerns. The justification for such exclusions must be documented by the contracting agency to ensure fairness and compliance with federal procurement regulations. Without access to the agency's justification documentation, it is impossible to determine the specific reasons why certain sources were excluded, which could impact the perceived competitiveness of the award.

What is the historical spending trend for the Cleveland Job Corps Center operations prior to this contract?

Analyzing historical spending for the Cleveland Job Corps Center prior to this $58.8 million award would provide valuable context on cost trends and potential increases or decreases in funding over time. This would involve examining contract awards for the same facility in previous years, noting the awarded amounts, contract types, and durations. Significant year-over-year increases or decreases in funding, or shifts in contract types (e.g., from fixed-price to cost-reimbursement), could indicate changes in program scope, operational costs, or contractor performance. Understanding this history helps assess whether the current contract's value is consistent with past investments or represents a notable deviation.

What are the potential risks associated with the long duration (over 7 years) of this contract?

The contract duration of approximately 7 years (2622 days) presents several potential risks. Firstly, it could lead to contractor complacency, where Serrato Corporation might reduce efforts to innovate or improve service delivery over time, assuming continued renewal. Secondly, long-term contracts can sometimes lock the government into a specific service provider or approach, making it difficult to adapt to changing needs or incorporate new technologies. Thirdly, market conditions or the availability of more cost-effective solutions might change significantly during the contract period, potentially making the current arrangement less optimal. Robust oversight and performance management are crucial to mitigate these risks.

Industry Classification

NAICS: Educational Services › Technical and Trade Schools › Other Technical and Trade Schools

Product/Service Code: EDUCATION AND TRAINING › EDUCATION AND TRAINING SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 5

Pricing Type: COST PLUS INCENTIVE FEE (V)

Evaluated Preference: NONE

Contractor Details

Address: 15429 ASHLEY CT, WHITTIER, CA, 90603

Business Categories: 8(a) Program Participant, Category Business, Community Development Corporation, Corporate Entity Not Tax Exempt, DoT Certified Disadvantaged Business Enterprise, Hispanic American Owned Business, HUBZone Firm, Minority Owned Business, Nonprofit Organization, Self-Certified Small Disadvantaged Business, Service Disabled Veteran Owned Business, Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business, Veteran Owned Business

Financial Breakdown

Contract Ceiling: $231,848,303

Exercised Options: $131,414,251

Current Obligation: $58,766,093

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline