DOT awarded $15.2M for Beartooth Highway construction, exceeding initial estimates by 18.8% ($2.4M)

Contract Overview

Contract Amount: $15,232,925 ($15.2M)

Contractor: Oftedal Construction, Inc.

Awarding Agency: Department of Transportation

Start Date: 2007-07-16

End Date: 2009-10-02

Contract Duration: 809 days

Daily Burn Rate: $18.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Transportation

Official Description: WY PRA YELL 12(5), NPS PKG 78546 NORTHEAST ENGRANCT ROAD MT PFH 59-1(2) BEARTOOTH HIGHWAY

Place of Performance

Location: COOKE CITY, PARK County, MONTANA, 59020

State: Montana Government Spending

Plain-Language Summary

Department of Transportation obligated $15.2 million to OFTEDAL CONSTRUCTION, INC. for work described as: WY PRA YELL 12(5), NPS PKG 78546 NORTHEAST ENGRANCT ROAD MT PFH 59-1(2) BEARTOOTH HIGHWAY Key points: 1. Contract value of $15.2M for highway construction. 2. Awarded to Oftedal Construction, Inc. 3. Contract duration of 809 days. 4. Firm Fixed Price contract type. 5. Awarded under full and open competition. 6. Project located in Montana.

Value Assessment

Rating: fair

The contract value of $15.2M for the Beartooth Highway project appears to be within a reasonable range for a large-scale infrastructure project of this nature. However, the final award amount exceeded the initial estimate by approximately $2.4M, or 18.8%. This suggests potential underestimation in the initial budgeting or scope creep during the procurement process. Without more detailed cost breakdowns or benchmarks for similar highway construction projects in mountainous terrain, a precise value-for-money assessment is challenging. The firm fixed-price structure generally offers cost certainty, but the overage warrants further scrutiny.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of 3 bidders suggests a moderate level of competition for this project. While multiple bidders are positive, the specific number (3) doesn't necessarily guarantee the most competitive pricing. Further analysis would be needed to understand the bid spread and whether the winning bid was significantly lower than others, or if it was closer to the upper end of the bids received.

Taxpayer Impact: Full and open competition is generally beneficial for taxpayers as it encourages multiple companies to bid, driving down prices and increasing the likelihood of a fair market value being achieved.

Public Impact

Benefits travelers and residents by improving a key transportation route in Montana. Delivers essential infrastructure improvements to the Beartooth Highway. Geographic impact is concentrated in Montana, specifically along the Beartooth Highway. Supports the construction workforce through employment opportunities during the project duration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns, as evidenced by the award exceeding initial estimates.
Scope creep could have contributed to the increased final cost.
Limited transparency on the specific reasons for the cost increase beyond initial estimates.

Positive Signals

Awarded through full and open competition, promoting a fair bidding process.
Firm Fixed Price contract type provides cost certainty for the government.
Project addresses critical infrastructure needs for a scenic and important highway.

Sector Analysis

The Federal Highway Administration (FHWA) oversees a vast array of construction and maintenance projects across the nation's highway system. This contract for the Beartooth Highway falls within the broader 'Highway, Street, and Bridge Construction' sector. Spending in this sector is substantial, driven by the need to maintain and upgrade aging infrastructure and build new routes. Benchmarks for similar projects would typically consider factors like terrain, project complexity, and material costs. The $15.2M award is a significant but not extraordinary sum for a major highway segment.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a specific set-aside requirement for this contract. Therefore, the direct impact on small businesses through set-asides is likely minimal. However, the prime contractor, Oftedal Construction, Inc., may engage small businesses as subcontractors. The extent of subcontracting to small businesses is not detailed in this data, but it's a common practice in large construction projects to leverage specialized services from smaller firms.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Transportation and the Federal Highway Administration. Accountability measures are inherent in the contract terms, particularly the firm fixed-price structure which aims to cap costs. Transparency is generally facilitated through public contract databases, though detailed project cost breakdowns and justifications for changes may not always be readily accessible. The Inspector General's office within the DOT would have jurisdiction to investigate any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Federal Highway Administration Construction Projects
National Highway System Projects
Infrastructure Improvement Programs

Risk Flags

Cost Overrun: Award amount exceeded initial estimate.
Potential Scope Creep: Implied by cost overrun.
Moderate Competition: Only 3 bidders.

Frequently Asked Questions

What is this federal contract paying for?

Department of Transportation awarded $15.2 million to OFTEDAL CONSTRUCTION, INC.. WY PRA YELL 12(5), NPS PKG 78546 NORTHEAST ENGRANCT ROAD MT PFH 59-1(2) BEARTOOTH HIGHWAY

Who is the contractor on this award?

The obligated recipient is OFTEDAL CONSTRUCTION, INC..

Which agency awarded this contract?

Awarding agency: Department of Transportation (Federal Highway Administration).

What is the total obligated amount?

The obligated amount is $15.2 million.

What is the period of performance?

Start: 2007-07-16. End: 2009-10-02.

What specific factors contributed to the $2.4M increase from the initial estimate to the final award amount?

The $2.4M increase from the initial estimate to the final award amount for the Beartooth Highway project suggests several potential contributing factors. These could include unforeseen site conditions encountered during the bidding or pre-construction phase, such as geological instability, unexpected soil or rock formations, or environmental mitigation requirements that were not fully accounted for in the initial estimate. Changes in material costs, particularly for asphalt, concrete, or specialized construction materials, between the estimation and bidding periods could also play a role. Furthermore, adjustments to the project scope, perhaps driven by updated engineering assessments or stakeholder requirements, might have led to an expanded work effort. It is also possible that the initial estimate was conservative or did not fully capture the complexity of constructing a highway in a challenging mountainous environment. Without access to detailed pre-award and post-award documentation, pinpointing the exact drivers remains speculative, but these are common reasons for such variances in large infrastructure projects.

How does the number of bidders (3) compare to similar highway construction contracts awarded by the FHWA?

A competition level of 3 bidders for a federal highway construction contract of this magnitude ($15.2M) is moderately competitive. For large-scale infrastructure projects, the FHWA typically aims for a robust number of bids to ensure optimal price discovery and value for taxpayers. While 3 bidders indicate that the opportunity was made known and some firms responded, it is not as competitive as situations where 5 or more qualified bidders submit proposals. The level of competition can be influenced by factors such as the project's geographic location, technical complexity, the availability of qualified contractors in the region, and the overall workload of the construction industry at the time of solicitation. A lower number of bidders might suggest barriers to entry, such as highly specialized requirements, or simply a limited pool of capable firms for that specific type of work or location. Further analysis comparing this to similar projects in Montana or the broader Mountain West region would provide more context.

What is the typical profit margin for contractors on firm fixed-price highway construction contracts of this size?

Determining the precise profit margin for contractors on firm fixed-price highway construction contracts is challenging without access to proprietary financial data or detailed bid analyses. However, industry benchmarks and general knowledge suggest that profit margins for large federal construction projects typically range from 5% to 15% of the total contract value. This margin must cover the contractor's overhead, risk, and profit. For a $15.2M contract, this would translate to a potential profit of $760,000 to $2.28 million. The firm fixed-price (FFP) nature of the contract shifts most of the cost risk to the contractor, which often leads them to factor in a higher contingency and profit margin compared to cost-reimbursement contracts. The actual profit realized by Oftedal Construction, Inc. would depend on their project management efficiency, unforeseen costs, and the accuracy of their initial bid.

What are the potential risks associated with constructing a highway in the Beartooth Mountains, and how might they have impacted the contract?

Constructing a highway in the Beartooth Mountains presents significant environmental and logistical risks that could impact contract costs and timelines. These include extreme weather conditions (heavy snowfall, high winds, rapid temperature fluctuations), challenging terrain (steep slopes, unstable soil, rockfall potential), limited accessibility for heavy equipment and materials, and potential environmental sensitivities (wildlife habitats, sensitive ecosystems, water sources). These factors can lead to increased construction costs due to specialized engineering requirements, extended work schedules to account for weather delays, higher material and transportation expenses, and the need for robust safety protocols. The $2.4M cost overrun observed in this contract may reflect the contractor's efforts to mitigate these inherent risks, potentially through more durable materials, specialized construction techniques, or contingency planning that proved necessary during execution.

How has federal spending on highway construction in Montana trended over the past decade, and where does this contract fit?

Federal spending on highway construction in Montana, like in many states, is influenced by federal transportation funding cycles (e.g., the Fixing America's Surface Transportation (FAST) Act and its predecessors) and state-specific infrastructure needs. While precise decade-long trend data for Montana alone isn't provided here, national trends show consistent, substantial federal investment in highway infrastructure. The $15.2M Beartooth Highway contract represents a significant, but not outlier, investment for a major route improvement project within Montana. Such projects are crucial for maintaining connectivity, supporting tourism, and facilitating commerce in the state. The FHWA allocates funds to states based on formulas and specific project needs, and contracts like this are the mechanism through which those funds are deployed for tangible infrastructure development.

Industry Classification

NAICS: Construction › Highway, Street, and Bridge Construction › Highway, Street, and Bridge Construction

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCT NONBUILDING FACILITIES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SEALED BID

Solicitation ID: DTFH7007B00001

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 434 MT 59 N, MILES CITY, MT, 02

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

Financial Breakdown

Contract Ceiling: $15,232,925

Exercised Options: $15,232,925

Current Obligation: $15,232,925

Contract Characteristics

Cost or Pricing Data: NO

Timeline