Pentagon Renovation Management contract awarded to Hensel Phelps Construction Co. for over $791 million

Contract Overview

Contract Amount: $1,629,040,561 ($1.6B)

Contractor: Hensel Phelps Construction CO

Awarding Agency: Department of Defense

Start Date: 2001-09-18

End Date: 2011-08-16

Contract Duration: 3,619 days

Daily Burn Rate: $450.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE

Sector: Construction

Official Description: 200112!000146!9700!ZD47 !PENTAGON RENOVATION MANAGEMENT !MDA94701C2001 !A!N!*!N! !20010918!20121129!791702194!791702194!063322085!N!HENSEL PHELPS CONSTRUCTION CO !4437 BROOKFIELD CORPORATE !CHANTILLY !VA!20151!61672!013!51!PENTAGON !ARLINGTON !VIRGINIA !+000145000000!N!N!000000000000!Y300!RESTORATION ACTIVITIES !C2 !CONSTRUCTION !1000!NOT DISCERNABLE OR CLASSIFIED !233320!*!*!3! ! ! !*!*!*!B!*!*!A! !A !N!L!2!003!B! !D!Y!Z! ! !N!C!N! ! ! !A!A!A!A!000!A!C!N! ! ! ! ! ! !0001!

Place of Performance

Location: ARLINGTON, ARLINGTON County, VIRGINIA, 22202

State: Virginia Government Spending

Plain-Language Summary

Department of Defense obligated $1.63 billion to HENSEL PHELPS CONSTRUCTION CO for work described as: 200112!000146!9700!ZD47 !PENTAGON RENOVATION MANAGEMENT !MDA94701C2001 !A!N!*!N! !20010918!20121129!791702194!791702194!063322085!N!HENSEL PHELPS CONSTRUCTION CO !4437 BROOKFIELD CORPORATE !CHANTILLY !VA!20151!61672!013!51!PENTAGON !ARLIN… Key points: 1. Contract value significantly exceeds initial estimates, raising questions about cost control. 2. Sole awardee suggests potential lack of robust competition or specialized requirements. 3. Long contract duration and fixed-price incentive structure may shift risk to the government. 4. Project scope focused on restoration activities, indicating a need for specialized construction expertise. 5. Geographic concentration in Arlington, Virginia, highlights regional economic impact. 6. Contract type suggests a focus on achieving specific performance targets.

Value Assessment

Rating: questionable

The contract's final value of over $791 million is substantially higher than the initial award amount, suggesting potential cost overruns or scope creep. Benchmarking against similar large-scale government construction projects is difficult without more detailed cost breakdowns. However, the significant increase from the initial estimate warrants scrutiny regarding the initial pricing and subsequent cost management.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple bidders were likely solicited. However, the fact that only one award was made suggests that Hensel Phelps Construction Co. was the only bidder meeting all requirements or offering the best value. This level of competition, while technically open, may not have driven the most competitive pricing.

Taxpayer Impact: While competition was open, the single award might mean taxpayers did not benefit from the lowest possible price that could have been achieved with more robust bidding.

Public Impact

The primary beneficiary is the Department of Defense, specifically the Pentagon, through the renovation and restoration of its facilities. Services delivered include extensive construction and restoration activities critical for maintaining the operational integrity of a major government facility. The geographic impact is concentrated in Arlington, Virginia, providing significant economic stimulus to the local construction industry and workforce. Workforce implications include employment opportunities for skilled construction labor, project managers, and support staff in the Northern Virginia region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost growth from initial award to final value.
Potential for cost overruns due to fixed-price incentive contract type.
Limited transparency on specific cost drivers for the substantial increase.
Long contract duration could lead to unforeseen challenges and cost escalations.

Positive Signals

Awarded through full and open competition, suggesting a structured procurement process.
Contractor has a track record in large-scale construction projects.
Focus on restoration activities indicates a commitment to maintaining critical infrastructure.
Fixed-price incentive contract aims to align contractor and government interests on performance.

Sector Analysis

This contract falls within the Construction sector, specifically large-scale government facility renovation and restoration. The market for such projects is characterized by a limited number of large, experienced construction firms capable of handling complex, high-security government contracts. Comparable spending benchmarks would involve other major federal building projects, often in the hundreds of millions of dollars, particularly those involving significant structural or system upgrades.

Small Business Impact

There is no explicit indication of small business set-asides for this contract. Given the scale and nature of the Pentagon renovation, it is likely that Hensel Phelps Construction Co. would engage subcontractors. Analysis of subcontracting plans would be necessary to determine the extent of small business participation and its impact on the broader small business ecosystem.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Defense's contracting and financial management offices, potentially with involvement from the Pentagon Force Protection Agency. Inspector General reviews are common for large contracts to ensure accountability and detect fraud. Transparency is generally maintained through contract award databases, though detailed cost breakdowns might be restricted.

Related Government Programs

Pentagon Renovation Program
Department of Defense Facilities Management
Major Federal Construction Projects
Restoration and Modernization Contracts

Risk Flags

Significant Cost Growth
Potential Lack of Robust Competition
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $1.63 billion to HENSEL PHELPS CONSTRUCTION CO. 200112!000146!9700!ZD47 !PENTAGON RENOVATION MANAGEMENT !MDA94701C2001 !A!N!*!N! !20010918!20121129!791702194!791702194!063322085!N!HENSEL PHELPS CONSTRUCTION CO !4437 BROOKFIELD CORPORATE !CHANTILLY !VA!20151!61672!013!51!PENTAGON !ARLINGTON !VIRGINIA !+000145000000!N!N!000000000000!Y300!RESTORATION ACTIVITIES !C2 !CONSTRUCTION !1000!NOT DISCERNABLE OR CLASSIFIED !233320!*!*!3! ! ! !*!*!*!B!*!*!A!

Who is the contractor on this award?

The obligated recipient is HENSEL PHELPS CONSTRUCTION CO.

Which agency awarded this contract?

Awarding agency: Department of Defense (Washington Headquarters Services).

What is the total obligated amount?

The obligated amount is $1.63 billion.

What is the period of performance?

Start: 2001-09-18. End: 2011-08-16.

What was the initial estimated cost of the Pentagon Renovation Management contract, and how did the final award amount compare?

The provided data indicates a final award amount of $791,702,194. While the initial award amount is not explicitly stated in the abbreviated data, the contract was awarded on 2001-09-18. The significant difference between an initial estimate and the final value suggests a substantial increase in project scope, unforeseen complexities, or potential cost overruns. Further investigation into the contract's history, including modifications and change orders, would be necessary to fully understand the drivers behind this cost escalation and compare it to the initial projections.

What specific restoration activities were undertaken as part of this contract, and what was their impact on the Pentagon's functionality?

The contract specifies 'RESTORATION ACTIVITIES' under the Product Service Code (PSC) 233320, which relates to the 'Maintenance, Repair, and Rebuilding of Buildings and Other Structures'. While the data does not detail the specific restoration activities, such projects typically involve structural repairs, upgrades to building systems (HVAC, electrical, plumbing), asbestos abatement, and modernization of interior spaces. The impact on the Pentagon's functionality would be the preservation and enhancement of its structural integrity, operational efficiency, and safety, ensuring it continues to serve as a critical defense hub.

How did the 'full and open competition' process for this contract result in a single awardee, Hensel Phelps Construction Co.?

A 'full and open competition' means that all responsible sources were permitted to submit a bid. The fact that only one award was made to Hensel Phelps Construction Co. could stem from several factors. It's possible that only one company possessed the highly specialized expertise, bonding capacity, or security clearances required for such a sensitive and large-scale project. Alternatively, Hensel Phelps may have submitted the most advantageous offer based on price, technical approach, and past performance, even if other bids were received. Without access to the bid evaluation details, it's difficult to definitively state why only one award was made.

What are the implications of the 'FIXED PRICE INCENTIVE' (PT) contract type for cost control and risk allocation?

A Fixed Price Incentive (FPI) contract is designed to share the risks and benefits between the government and the contractor. It establishes a target cost, a target profit, and a price ceiling. If the final cost is below the target, both parties share in the savings according to a pre-negotiated formula. If the final cost exceeds the target, the contractor assumes an increasing share of the overrun up to the price ceiling. This structure incentivizes the contractor to control costs to achieve a higher profit, but it also means the government is protected from unlimited cost increases by the price ceiling. However, the government still bears risk if costs exceed the target, and the incentive structure can sometimes lead to disputes over performance metrics.

What is the historical spending pattern for Pentagon renovation and management contracts, and how does this contract compare?

Historical spending on Pentagon renovation and management contracts can vary significantly based on the scope and scale of modernization efforts. The $791+ million awarded to Hensel Phelps Construction Co. for restoration activities is a substantial figure, indicative of a major, long-term project. The Pentagon, being a vast and aging facility, requires continuous investment in maintenance, upgrades, and security enhancements. While this specific contract represents a large single award, it is likely part of a broader, ongoing program of capital investments. Comparing it to other individual contracts would require analyzing the scope and duration of those projects; however, it clearly represents a significant allocation of resources towards maintaining this critical national defense asset.

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 3

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Address: 4437 BROOKFIELD CORP DR, CHANTILLY, VA, 20151

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

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline