VA Palo Alto Psychiatric Facility Construction Contract Exceeds $43.5M, Awarded to McCarthy Building Companies

Contract Overview

Contract Amount: $43,512,526 ($43.5M)

Contractor: Mccarthy Building Companies, Inc.

Awarding Agency: Department of Veterans Affairs

Start Date: 2009-04-30

End Date: 2017-12-31

Contract Duration: 3,167 days

Daily Burn Rate: $13.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: CONSTRUCITION OF AN 80-BED PSYCHIATRIC FACILITY, VA PALO ALTO HEALTH CARE SYSTEM, PALO ALTO, CA

Place of Performance

Location: PALO ALTO, SANTA CLARA County, CALIFORNIA, 94304

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $43.5 million to MCCARTHY BUILDING COMPANIES, INC. for work described as: CONSTRUCITION OF AN 80-BED PSYCHIATRIC FACILITY, VA PALO ALTO HEALTH CARE SYSTEM, PALO ALTO, CA Key points: 1. The contract value of over $43.5 million represents a significant investment in healthcare infrastructure for veterans. 2. Awarded through full and open competition, suggesting a robust market engagement for this construction project. 3. The long duration of the contract (over 8 years) may indicate complex project phases or potential for scope adjustments. 4. The firm fixed-price contract type aims to control costs, but potential for change orders exists in large construction projects. 5. The project's focus on a psychiatric facility highlights a critical need within the VA healthcare system. 6. The contractor, McCarthy Building Companies, Inc., has a substantial contract award, indicating experience in large-scale projects.

Value Assessment

Rating: fair

Benchmarking the value of this construction contract is challenging without detailed project specifications and market data for similar facilities in the Palo Alto region during the contract period. The total award of over $43.5 million for an 80-bed psychiatric facility suggests a substantial per-bed cost. However, the firm fixed-price nature of the contract provides some cost certainty for the government, assuming minimal change orders. The contract's duration, spanning from 2009 to 2017, also implies a lengthy construction process which can impact overall cost-effectiveness.

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 bids. This suggests a competitive bidding process where multiple construction firms likely vied for the project. The number of bids received (10) further supports a healthy level of competition, which is generally expected to drive down prices and improve the quality of proposals. This approach allows the government to select the best value offer based on technical merit and price.

Taxpayer Impact: A full and open competition typically benefits taxpayers by fostering a competitive environment that can lead to more favorable pricing and innovative solutions, ensuring the government receives the best possible value for its investment.

Public Impact

Veterans in the Palo Alto region will benefit from improved access to specialized psychiatric care facilities. The project delivers essential healthcare infrastructure, enhancing the VA Palo Alto Health Care System's capacity. The construction activities likely generated employment opportunities within the local California workforce. The facility aims to provide critical mental health services, addressing a significant need for veteran well-being.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the long contract duration and complexity of specialized construction.
Risk of schedule delays impacting the timely delivery of critical healthcare services.
Ensuring the final facility meets all modern psychiatric care standards and patient safety requirements.
Managing potential scope creep through change orders over the extended performance period.

Positive Signals

Awarded through full and open competition, indicating a potentially competitive pricing structure.
Firm fixed-price contract type provides cost certainty for the government.
The contractor has a significant award, suggesting experience with large-scale construction projects.
The project addresses a critical need for veteran mental healthcare infrastructure.

Sector Analysis

This contract falls within the construction sector, specifically commercial and institutional building construction. The market for healthcare facility construction is substantial, driven by ongoing needs for modernization, expansion, and specialized services. The VA's significant investment in healthcare infrastructure reflects a broader trend of government spending on facilities that serve public needs. Comparable projects would include the construction of hospitals, clinics, and other specialized medical buildings, where costs can vary widely based on size, complexity, and location.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications specifically mandated for small businesses through a set-aside program for this particular award. However, the prime contractor, McCarthy Building Companies, Inc., may engage small businesses as subcontractors based on their own procurement policies and the availability of specialized services required for the project.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Veterans Affairs, likely through its contracting officers and project managers responsible for overseeing construction projects. The firm fixed-price nature of the contract implies a focus on adherence to the agreed-upon scope, schedule, and price. Transparency would be facilitated through contract award data and potentially through VA Inspector General reports if any issues arise. Accountability measures are inherent in the contract terms, with potential penalties for non-performance or delays.

Related Government Programs

VA Medical Facility Construction
Healthcare Infrastructure Projects
Mental Health Service Facilities
Large-Scale Construction Contracts
Federal Building Projects

Risk Flags

Long contract duration may increase risk of cost escalation and schedule delays.
Specialized nature of psychiatric facility construction requires careful oversight for compliance and safety.
High cost per bed may warrant further investigation into value engineering and market comparisons.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $43.5 million to MCCARTHY BUILDING COMPANIES, INC.. CONSTRUCITION OF AN 80-BED PSYCHIATRIC FACILITY, VA PALO ALTO HEALTH CARE SYSTEM, PALO ALTO, CA

Who is the contractor on this award?

The obligated recipient is MCCARTHY BUILDING COMPANIES, INC..

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $43.5 million.

What is the period of performance?

Start: 2009-04-30. End: 2017-12-31.

What was the specific scope of work for the construction of the 80-bed psychiatric facility?

The scope of work for the construction of the 80-bed psychiatric facility at the VA Palo Alto Health Care System involved the complete construction of a new building designed to house psychiatric services. This would typically include site preparation, foundation work, structural framing, installation of all building systems (electrical, plumbing, HVAC), interior finishing, and specialized requirements for a mental health facility, such as secure areas, patient rooms, therapy spaces, administrative offices, and common areas. The project aimed to provide modern, state-of-the-art facilities to enhance the delivery of mental healthcare to veterans.

How does the cost per bed for this facility compare to industry benchmarks for psychiatric hospitals?

Calculating a precise cost per bed requires detailed project cost breakdowns, which are not fully available in the provided data. However, with a total contract value of approximately $43.5 million for an 80-bed facility, the implied cost per bed is roughly $543,750 ($43,512,525.62 / 80). This figure is likely on the higher end compared to national averages for hospital construction, but it must be contextualized by the specific location (Palo Alto, CA, known for high construction costs), the specialized nature of psychiatric facilities (requiring specific security and therapeutic design elements), and the extended construction timeline. Benchmarking against similar VA facilities or high-cost urban areas would provide a more accurate comparison.

What were the primary risks identified for this long-duration construction contract?

For a construction project spanning nearly nine years (April 2009 to December 2017), several risks are inherent. Key risks include potential cost escalation due to inflation or unforeseen material price increases, despite the firm fixed-price contract, through change orders. Schedule delays are also a significant risk, stemming from weather, labor availability, supply chain disruptions, or complex site conditions. Furthermore, ensuring the facility meets evolving healthcare regulations and technological advancements in psychiatric care over such a long period presents a risk. Finally, managing the contractor's performance and ensuring quality control throughout the extended duration requires robust oversight.

What is the track record of McCarthy Building Companies, Inc. with large federal construction projects?

McCarthy Building Companies, Inc. is a well-established construction firm with a significant history of undertaking large-scale projects, including federal and healthcare facilities. While specific details of their past federal contracts are not provided here, their ability to win a contract of this magnitude ($43.5M+) from the Department of Veterans Affairs suggests they possess the necessary experience, financial capacity, and technical expertise to manage complex government construction endeavors. Their portfolio likely includes numerous similar projects, indicating a track record of performance in delivering infrastructure for public and private sector clients.

How did the 'full and open competition' process influence the final contract price?

The 'full and open competition' process is designed to foster a competitive environment among potential bidders. By allowing all responsible sources to submit proposals, the government increases the likelihood of receiving multiple bids, as evidenced by the 10 bids received for this contract. This competition typically drives down prices as contractors strive to offer the most attractive bid to win the contract. While the final price is fixed, the competitive nature of the bidding process is intended to ensure that the government secures the project at a price reflecting market conditions and the best value achievable through a robust bidding process.

What are the implications of the 'firm fixed price' contract type for the VA?

A 'firm fixed price' (FFP) contract type is generally favored by government agencies when the scope of work is well-defined and risks can be reasonably assessed. For the VA, this contract type offers the highest degree of cost certainty, as the contractor assumes most of the risk for cost overruns. The VA agrees to pay a set price regardless of the contractor's actual costs. This protects the government from unexpected cost increases. However, it also means the contractor has less incentive to control costs beyond what is necessary to complete the project within the fixed price, and the VA may pay a premium upfront to account for the contractor's risk.

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: 10

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Mccarthy Holdings Inc. (UEI: 088711643)

Address: 1341 N ROCK HILL RD, SAINT LOUIS, MO, 63124

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

Financial Breakdown

Contract Ceiling: $43,544,631

Exercised Options: $43,544,631

Current Obligation: $43,512,526

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Timeline