DoD's $68M Hawaii Communications Facility contract awarded to Nan Inc. raises value and competition questions

Contract Overview

Contract Amount: $68,263,359 ($68.3M)

Contractor: NAN Inc

Awarding Agency: Department of Defense

Start Date: 2019-07-26

End Date: 2024-07-24

Contract Duration: 1,825 days

Daily Burn Rate: $37.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: FY18 MCON P-013 COMMUNICATIONS/CRYPTO FACILITY,NCTAMS, HAWAII

Place of Performance

Location: WAHIAWA, HONOLULU County, HAWAII, 96786

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $68.3 million to NAN INC for work described as: FY18 MCON P-013 COMMUNICATIONS/CRYPTO FACILITY,NCTAMS, HAWAII Key points: 1. The contract's value appears high relative to its duration and scope, suggesting potential for cost efficiencies. 2. Limited public data on comparable projects makes a precise value-for-money assessment challenging. 3. The award to Nan Inc., a local Hawaii firm, may indicate a focus on regional capacity, but warrants scrutiny for broader market access. 4. The firm-fixed-price structure offers cost certainty but relies heavily on accurate initial estimates. 5. Performance context is limited, with no readily available data on project milestones or quality. 6. The contract falls within the broader Defense sector, specifically supporting communications infrastructure.

Value Assessment

Rating: fair

The total contract value of approximately $68.3 million over five years averages to about $13.6 million annually. Without specific details on the facility's scope, size, and complexity, it's difficult to benchmark against similar construction projects. However, the annual cost seems substantial for a communications/crypto facility, suggesting a need for detailed justification of the pricing and scope to ensure value for money. Further analysis would require comparing the cost per square foot or per functional unit against industry standards for similar secure facilities.

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 number of bids received (3) is on the lower side for a contract of this magnitude, which could suggest that the market for specialized construction firms capable of handling such projects in Hawaii is limited, or that the solicitation's requirements were highly specific. This level of competition, while present, might not have driven the most aggressive pricing.

Taxpayer Impact: While full and open competition was utilized, the limited number of bidders suggests that taxpayers may not have benefited from the most competitive pricing achievable in a broader market.

Public Impact

The primary beneficiaries are the Department of Defense and its personnel who will utilize the new communications and crypto facility. The contract delivers essential infrastructure for secure communication and data handling critical to national security operations. The geographic impact is concentrated in Hawaii, supporting military operations and potentially local economic activity through construction employment. The project implies a need for skilled construction labor in Hawaii, potentially benefiting the local workforce during the contract duration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (3 bidders) may have resulted in suboptimal pricing for taxpayers.
Lack of detailed performance metrics makes it difficult to assess project success and contractor efficiency.
The high annual cost warrants further investigation into the specific requirements and justification for the budget.
The contract duration of five years for construction could be lengthy, potentially leading to cost overruns if not managed tightly.

Positive Signals

Awarded under full and open competition, adhering to standard procurement practices.
Firm-fixed-price contract provides cost certainty for the government.
The contract is awarded to a local Hawaii firm (Nan Inc.), potentially supporting regional economic development.
The project addresses a critical need for enhanced communications and crypto infrastructure for national security.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, specifically supporting government infrastructure needs. The market for specialized secure facilities like communications and crypto hubs is a niche within the broader construction industry. Benchmarking this spending would involve comparing the cost per square foot or per specialized function against similar government or high-security private sector projects, which are often not publicly detailed. The Department of Defense is a significant investor in such infrastructure globally.

Small Business Impact

The contract data indicates that small business participation was not a specific set-aside (ss: false, sb: false). While Nan Inc. is a local firm, its size classification relative to small business definitions is not provided. There is no explicit information regarding subcontracting plans for small businesses. This suggests that the primary focus was on securing a capable prime contractor, and the impact on the small business ecosystem would depend on Nan Inc.'s own subcontracting practices and whether they engage local small businesses for materials or specialized services.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Navy's contracting and project management offices. Given the construction nature and location, the Naval Facilities Engineering Command (NAVFAC) likely plays a significant role. Inspector General (IG) jurisdiction would apply in cases of fraud, waste, or abuse. Transparency is moderate, with basic contract award details available, but comprehensive performance and cost breakdowns are typically not public.

Related Government Programs

Department of Defense Military Construction
Naval Facilities Engineering Command Projects
Communications Infrastructure Procurement
Secure Facility Construction
Information Technology Infrastructure Support

Risk Flags

Limited competition
Potential for cost overruns due to FFP structure on long-term project
Lack of detailed performance data
High annual cost requires justification

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $68.3 million to NAN INC. FY18 MCON P-013 COMMUNICATIONS/CRYPTO FACILITY,NCTAMS, HAWAII

Who is the contractor on this award?

The obligated recipient is NAN INC.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $68.3 million.

What is the period of performance?

Start: 2019-07-26. End: 2024-07-24.

What is the specific scope of work and detailed breakdown of costs for the FY18 MCON P-013 Communications/Crypto Facility project?

The provided data indicates the contract is for a 'COMMUNICATIONS/CRYPTO FACILITY' in Hawaii, awarded to Nan Inc. for approximately $68.3 million. However, a detailed scope of work, including specific facility size, technological requirements, security certifications, and a line-item cost breakdown, is not publicly available in the abbreviated data. Such details are crucial for a thorough value assessment and understanding the allocation of funds towards materials, labor, specialized equipment, and profit margins. Without this granular information, it's challenging to ascertain if the pricing is competitive or justified against industry benchmarks for similar secure facilities.

How does the cost per square foot or per functional unit of this facility compare to similar government or commercial secure communication centers?

Direct comparison is difficult without knowing the facility's exact square footage, specific technological capabilities (e.g., data center standards, cryptographic levels), and security accreditations. The average annual cost is approximately $13.6 million. If this facility is, for example, a 50,000 sq ft building, that's roughly $272 per square foot annually, which could be high depending on the specialized nature. However, if it includes significant IT infrastructure, power redundancy, and advanced security features, the cost might be justified. Benchmarking requires access to detailed project specifications and cost data from comparable, publicly documented projects, which are scarce for high-security facilities.

What is Nan Inc.'s track record with similar large-scale government construction projects, particularly within the Department of Defense?

Nan Inc. is a Hawaii-based construction company that has a history of working on government contracts, including projects for the Department of Defense and other federal agencies in Hawaii. While the provided data doesn't detail their specific experience with communications or crypto facilities, their past performance on large construction projects would be a key factor in the DoD's decision-making process. A review of their past performance ratings, any past performance issues, and the complexity of previously managed projects would provide further insight into their capability to execute this specific contract successfully and efficiently.

Given the limited number of bidders (3), what factors might have restricted competition for this specialized construction project?

Several factors could have limited competition to three bidders. The project's specific location in Hawaii might restrict the pool of eligible contractors willing or able to mobilize and operate there due to logistical challenges and costs. The specialized nature of a 'Communications/Crypto Facility' likely requires specific technical expertise, security clearances, and experience with government standards that only a few firms possess. Additionally, the contract's value and duration, coupled with the firm-fixed-price structure, might deter some bidders who prefer different contract types or perceive higher risks. The solicitation's requirements themselves could also have been highly prescriptive, inadvertently narrowing the field.

What are the potential risks associated with a firm-fixed-price contract for a project of this scale and duration?

Firm-fixed-price (FFP) contracts offer cost certainty to the government but place the cost risk on the contractor. For a large, multi-year construction project like this, the primary risks include contractor underestimation of costs, unforeseen site conditions, material price escalation, and labor shortages. If Nan Inc. underestimated the project's complexity or faced significant cost increases not covered by contract contingencies, they might seek change orders, potentially increasing the total cost, or face financial strain. Conversely, if their estimate was overly conservative, taxpayers may have overpaid. Effective government oversight is crucial to manage scope creep and ensure the contractor's estimates were reasonable.

How does this $68.3 million contract fit into the broader context of DoD spending on communications infrastructure in the Pacific region?

This $68.3 million contract represents a significant investment in critical communications infrastructure within the Pacific region, specifically Hawaii. The DoD consistently invests billions annually in maintaining and upgrading its global communications networks, which are vital for command and control, intelligence sharing, and operational readiness. Contracts like this are part of a larger strategy to ensure secure and resilient communication capabilities in strategically important areas like the Pacific. Understanding its place requires comparing it to other concurrent or recent infrastructure projects in the region and the overall DoD budget allocation for C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance, and Reconnaissance) systems.

Industry Classification

NAICS: Construction › Nonresidential Building Construction › Commercial and Institutional Building Construction

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCTION OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N6274219R1317

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 636 LAUMAKA ST, HONOLULU, HI, 96819

Business Categories: Asian Pacific American Owned Business, Category Business, Corporate Entity Not Tax Exempt, Minority Owned Business, Not Designated a Small Business, Special Designations, Subchapter S Corporation, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $68,263,359

Exercised Options: $68,263,359

Current Obligation: $68,263,359

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline