Millennium Challenge Corporation leases DC office space for over $20M, awarded via full and open competition

Contract Overview

Contract Amount: $20,139,114 ($20.1M)

Contractor: 1401 H Owner LLC

Awarding Agency: Millennium Challenge Corporation

Start Date: 2006-08-25

End Date: 2015-12-31

Contract Duration: 3,415 days

Daily Burn Rate: $5.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: LEASE OF 1401 H STREET, NW WASHINGTON, DC

Place of Performance

Location: WASHINGTON, DISTRICT OF COLUMBIA County, DISTRICT OF COLUMBIA, 20005

State: District of Columbia Government Spending

Plain-Language Summary

Millennium Challenge Corporation obligated $20.1 million to 1401 H OWNER LLC for work described as: LEASE OF 1401 H STREET, NW WASHINGTON, DC Key points: 1. The lease represents a significant investment in administrative infrastructure for the agency. 2. Full and open competition suggests a potentially competitive bidding process, which can lead to better pricing. 3. The long duration of the contract (over 8 years) indicates a stable, long-term need for the space. 4. The fixed-price contract type helps manage cost certainty for the government. 5. The lease is located in the District of Columbia, a common hub for federal agencies. 6. The specific NAICS code points to the lessors of nonresidential buildings sector.

Value Assessment

Rating: fair

The total award amount of over $20 million for a 3,415-day lease suggests a substantial commitment. Benchmarking this against similar federal office leases in Washington D.C. would be necessary for a precise value-for-money assessment. However, the duration and fixed-price nature provide some cost predictability. Without comparable per-square-foot data or lease terms, a definitive value judgment is difficult, but the amount is significant for administrative office space.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit offers. The presence of 3 bids suggests a moderate level of competition for this lease. While multiple bidders are positive, the exact number (3) might not represent the highest possible level of competition for a federal lease in a major metropolitan area like D.C. This level of competition is generally favorable for price discovery.

Taxpayer Impact: Full and open competition with multiple bidders is beneficial for taxpayers as it increases the likelihood of securing competitive pricing and avoids potential overpayment associated with sole-source or limited solicitations.

Public Impact

The primary beneficiary is the Millennium Challenge Corporation, which secures necessary office facilities. The lease provides office space for administrative functions supporting the agency's global development programs. The geographic impact is concentrated in Washington D.C., where the agency's headquarters are located. The contract supports the commercial real estate sector in D.C. through rental income for the lessor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for long-term cost escalation if market rents increase significantly over the lease term, despite fixed price.
Dependence on a single property owner for a critical administrative function.
The significant dollar amount could attract scrutiny regarding efficient use of taxpayer funds for administrative overhead.

Positive Signals

Awarded through full and open competition, suggesting a fair process and potential for competitive pricing.
Fixed-price contract type provides budget certainty for the agency.
The lease duration aligns with long-term operational needs, ensuring stability.
The contract is with a specific entity (1401 H OWNER LLC), implying a clear point of accountability.

Sector Analysis

This contract falls within the commercial real estate sector, specifically the leasing of nonresidential buildings. The market for federal office space in Washington D.C. is substantial, with numerous agencies requiring facilities. Comparable spending benchmarks would involve analyzing average lease rates per square foot for similar government-occupied office spaces in the D.C. metropolitan area, considering factors like building class, amenities, and location.

Small Business Impact

There is no indication that this contract involved small business set-asides. The nature of leasing large commercial office buildings typically involves larger entities. Subcontracting opportunities are unlikely to be a significant component of this lease agreement, as the primary service is the provision of space by the owner.

Oversight & Accountability

Oversight for this lease would typically fall under the Millennium Challenge Corporation's internal contracting and facilities management departments. Accountability is established through the lease agreement itself, outlining terms and conditions. Transparency is facilitated by the contract's public availability through federal procurement databases. Inspector General jurisdiction would apply if any fraud, waste, or abuse related to the lease were suspected.

Related Government Programs

Federal Government Office Leases
General Services Administration (GSA) Real Estate Portfolio
Administrative Support Contracts

Risk Flags

Long-term commitment may reduce flexibility
Potential for above-market rates if market declines
Dependence on lessor for facility maintenance

Frequently Asked Questions

What is this federal contract paying for?

Millennium Challenge Corporation awarded $20.1 million to 1401 H OWNER LLC. LEASE OF 1401 H STREET, NW WASHINGTON, DC

Who is the contractor on this award?

The obligated recipient is 1401 H OWNER LLC.

Which agency awarded this contract?

Awarding agency: Millennium Challenge Corporation (Millennium Challenge Corporation).

What is the total obligated amount?

The obligated amount is $20.1 million.

What is the period of performance?

Start: 2006-08-25. End: 2015-12-31.

What is the average annual cost of this lease, and how does it compare to market rates for similar office spaces in Washington D.C.?

The total award amount is approximately $20.14 million over a period of 3,415 days (approximately 9.35 years). This equates to an average annual cost of roughly $2.15 million. To compare this to market rates, one would need to know the square footage of the leased space and the lease terms (e.g., concessions, escalations). Federal leases in D.C. can vary widely, but average Class A office space rates in prime locations can range from $50 to $80+ per square foot annually, excluding operating expenses. Without the square footage, a direct comparison is difficult, but the annual cost suggests a substantial space requirement.

What is the track record of 1401 H OWNER LLC in providing services to the federal government?

Information regarding the specific track record of '1401 H OWNER LLC' in providing services to the federal government is not readily available from the provided data snippet. As a lessor of nonresidential buildings, their primary business is property ownership and leasing. Their track record would likely be assessed based on their history of managing and maintaining commercial properties, their financial stability, and their ability to meet the specific requirements outlined in the lease agreement. Federal agencies typically conduct due diligence on potential lessors, which may include reviewing past performance on similar contracts or leases.

How does the duration of this lease (3,415 days) compare to typical federal office lease durations?

A lease duration of 3,415 days, approximately 9.35 years, is on the longer side for federal office leases but not uncommon, especially for requirements in high-demand areas like Washington D.C. Federal leases often range from 5 to 15 years. Longer leases can provide cost savings through negotiated rates and stability for the agency's operations, reducing the frequency and cost associated with renegotiating or relocating. However, they also lock the government into a specific space and price for an extended period, potentially missing out on favorable market shifts.

What are the potential risks associated with a long-term lease of administrative office space?

Potential risks associated with a long-term lease include: 1) Market Risk: If market rental rates decrease significantly over the lease term, the government may be paying above-market rates. 2) Obsolescence: The space may become functionally obsolete or inadequate for the agency's evolving needs over time. 3) Flexibility Constraints: A long-term commitment reduces the agency's flexibility to relocate, downsize, or adapt its footprint in response to changing programmatic requirements or budget constraints. 4) Contractor Performance Risk: While less common for pure leases, the lessor's ability to maintain the property to required standards over the long term could be a concern.

What does the NAICS code 531120 (Lessors of Nonresidential Buildings) imply about the nature of this contract?

The NAICS code 531120 signifies that the primary business activity of the contractor, 1401 H OWNER LLC, is the leasing of nonresidential buildings. This means the contract is fundamentally about providing physical office space rather than a service that requires extensive labor or specialized technical expertise beyond property management. The government is essentially acting as a tenant, and the contractor is the landlord. This classification helps in understanding the type of industry the contract belongs to and allows for comparisons with other similar leasing arrangements within the federal government or the private sector.

Industry Classification

NAICS: Real Estate and Rental and Leasing › Lessors of Real Estate › Lessors of Nonresidential Buildings (except Miniwarehouses)

Product/Service Code: LEASE/RENT FACILITIES › LEASE/RENTAL OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: ALTERNATIVE SOURCES

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1401 H STREET, WASHINGTON, DC, 20005

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

Financial Breakdown

Contract Ceiling: $20,139,114

Exercised Options: $20,139,114

Current Obligation: $20,139,114

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Timeline