State Department awards $71M contract for new embassy compound construction

Contract Overview

Contract Amount: $71,000,000 ($71.0M)

Contractor: Caddell Construction CO., Inc.

Awarding Agency: Department of State

Start Date: 2005-09-26

End Date: 2012-08-13

Contract Duration: 2,513 days

Daily Burn Rate: $28.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: CONSTRUCT NEW EMBASSY COMPOUND.

Plain-Language Summary

Department of State obligated $71.0 million to CADDELL CONSTRUCTION CO., INC. for work described as: CONSTRUCT NEW EMBASSY COMPOUND. Key points: 1. Contract awarded through full and open competition, suggesting a competitive bidding process. 2. The contract duration of 2513 days (approx. 7 years) indicates a long-term, complex project. 3. Fixed-price contract type may offer cost certainty but could limit flexibility for unforeseen issues. 4. The project involves the construction of a new embassy compound, a significant infrastructure undertaking. 5. The North American Industry Classification System (NAICS) code 236220 points to commercial and institutional building construction. 6. The award was made by the Department of State, indicating a focus on diplomatic infrastructure.

Value Assessment

Rating: fair

The contract value of $71 million for constructing a new embassy compound is substantial. Without specific details on the scope of work, size, and location, direct comparison to similar contracts is challenging. However, large-scale government construction projects often involve significant costs. Benchmarking this price against other embassy constructions or similar large institutional buildings would be necessary for a more precise value assessment. The firm fixed-price nature suggests an attempt to control costs upfront.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The data indicates 5 bids were received. This level of competition is generally positive for price discovery and ensuring the government receives competitive pricing. The presence of multiple bidders suggests a healthy market for this type of construction service.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down prices through a competitive bidding process, ensuring that the government is not overpaying for services.

Public Impact

The primary beneficiary is the Department of State, which will gain a new embassy compound. The services delivered include the complete construction of a new facility. The geographic impact is localized to the site of the new embassy compound. The project will likely create jobs in the construction sector, benefiting skilled trades and laborers. The successful completion of the compound will support diplomatic operations and U.S. presence abroad.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long project duration (2513 days) increases the risk of cost overruns due to inflation or unforeseen site conditions.
Firm fixed-price contracts can be risky for contractors if costs escalate beyond initial estimates, potentially leading to disputes or contractor default.
Construction projects of this scale are inherently complex and prone to delays and scope creep if not managed meticulously.

Positive Signals

Awarded through full and open competition, indicating a robust bidding process and potential for competitive pricing.
The firm fixed-price contract type provides cost certainty for the government, assuming the contractor accurately estimated all costs.
The Department of State's involvement suggests a high level of oversight and adherence to established protocols for diplomatic facilities.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, a significant part of the broader construction industry. The market for large-scale government construction, particularly for diplomatic facilities, is specialized and often involves a limited number of experienced contractors capable of meeting stringent security and logistical requirements. Comparable spending benchmarks would involve analyzing other embassy constructions or large federal building projects, which can range from tens to hundreds of millions of dollars depending on size, location, and complexity.

Small Business Impact

The contract was awarded under full and open competition and the data indicates the small business flag (sb) is false, suggesting no specific small business set-aside was applied. There is no explicit information on subcontracting plans for small businesses. Without this information, it's difficult to assess the direct impact on the small business ecosystem, though large prime contractors often utilize small businesses for specialized services.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of State's Bureau of Overseas Buildings Operations (OBO) or equivalent project management office. Accountability measures are typically embedded in the contract terms, including performance milestones, quality control requirements, and payment schedules tied to progress. Transparency is generally maintained through contract award databases and public reporting, though specific project details might be sensitive. Inspector General jurisdiction would apply if any issues of fraud, waste, or abuse arise.

Related Government Programs

Embassy Construction Projects
Department of State Facilities Management
Large-Scale Government Construction Contracts
Diplomatic Infrastructure Development

Risk Flags

Long project duration
Firm Fixed Price contract risk
Potential for cost escalation over project lifecycle

Frequently Asked Questions

What is this federal contract paying for?

Department of State awarded $71.0 million to CADDELL CONSTRUCTION CO., INC.. CONSTRUCT NEW EMBASSY COMPOUND.

Who is the contractor on this award?

The obligated recipient is CADDELL CONSTRUCTION CO., INC..

Which agency awarded this contract?

Awarding agency: Department of State (Department of State).

What is the total obligated amount?

The obligated amount is $71.0 million.

What is the period of performance?

Start: 2005-09-26. End: 2012-08-13.

What specific factors contributed to the $71 million cost of constructing this embassy compound?

The $71 million cost is likely influenced by several factors inherent to constructing an embassy compound. These include the size and complexity of the facility, the specific security requirements mandated by the Department of State (which can significantly increase costs due to specialized materials and systems), the chosen location and associated site preparation needs, the cost of labor and materials in that specific region, and the inclusion of specialized diplomatic functions and amenities. The firm fixed-price nature of the contract suggests that the contractor, Caddell Construction Co., Inc., provided a comprehensive bid covering all anticipated costs, including design, materials, labor, equipment, and profit, based on the defined scope of work at the time of award in 2005.

How does the $71 million contract value compare to other embassy construction projects undertaken by the Department of State?

Comparing the $71 million contract value requires context regarding the size, scope, and location of the embassy. The Department of State's Bureau of Overseas Buildings Operations (OBO) manages numerous construction projects, with costs varying widely. For instance, smaller chancery buildings or consolidations might cost tens of millions, while major new embassy compounds with extensive security features and multiple buildings can easily exceed $100 million, sometimes reaching several hundred million dollars. A $71 million award for a new compound suggests a project of moderate to significant scale, but without knowing the specific project details (e.g., square footage, number of buildings, specific country's construction costs), a precise comparison is difficult. However, it falls within the typical range for substantial diplomatic infrastructure investments.

What are the primary risks associated with a firm fixed-price contract for a long-duration construction project like this?

The primary risk with a firm fixed-price (FFP) contract for a long-duration project like the 2513-day embassy construction is the potential for cost escalation impacting the contractor. While FFP offers cost certainty to the government, the contractor assumes the risk of unforeseen increases in labor, materials, or other direct costs over the project's ~7-year lifespan. If these costs rise significantly beyond the contractor's initial estimates, it could lead to reduced profit margins, financial distress for the contractor, or disputes over change orders. Conversely, if the contractor significantly overestimates costs to mitigate this risk, the government may end up paying a premium. Effective project management, clear contract terms, and contingency planning are crucial to mitigate these risks for both parties.

What does the fact that 5 bids were received under full and open competition imply about the market for embassy construction?

Receiving 5 bids under full and open competition for this $71 million embassy construction contract suggests a reasonably competitive market for large-scale diplomatic facility projects. It indicates that there are multiple construction firms capable of undertaking complex, high-security government projects and willing to compete for them. This level of competition is beneficial for the Department of State as it increases the likelihood of receiving competitive pricing and allows the agency to select the best value proposal. It also implies that the barriers to entry for qualified firms are not insurmountable, although the specialized nature of embassy construction means the pool of bidders is likely more limited than for general commercial construction.

How might the 2005 award date and 2012 completion date impact the assessment of value for money given potential changes in construction costs and technology?

The significant time span between the 2005 award and 2012 completion (over 7 years) means that assessing the value for money requires considering potential shifts in construction costs and technology. If the firm fixed-price contract was well-structured with appropriate escalation clauses or if the contractor's initial estimates were highly accurate, the value for money might still be considered good. However, if construction costs (labor, materials) rose substantially between 2005 and 2012, the contractor might have absorbed significant increases, potentially impacting their long-term viability or leading to disputes. Conversely, if costs decreased or if the contractor secured favorable pricing early on, the government could have benefited. Technology advancements during this period might not have been fully incorporated if the scope was fixed early, potentially leading to a less technologically advanced facility than could be built today for a similar inflation-adjusted cost.

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

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2700 LAGOON PARK DR, MONTGOMERY, AL, 02

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

Financial Breakdown

Contract Ceiling: $71,000,000

Exercised Options: $71,000,000

Current Obligation: $71,000,000

Timeline