DoD awards $45.4M for JBLM facility construction, raising questions about value and competition

Contract Overview

Contract Amount: $45,390,151 ($45.4M)

Contractor: Walsh Federal LLC

Awarding Agency: Department of Defense

Start Date: 2020-06-26

End Date: 2024-08-08

Contract Duration: 1,504 days

Daily Burn Rate: $30.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: CONSTRUCTION OF INFORMATION SYSTEM FACILITY AT JOINT BASE LEWIS MCCHORD, WASHINGTON.

Place of Performance

Location: TACOMA, PIERCE County, WASHINGTON, 98493

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $45.4 million to WALSH FEDERAL LLC for work described as: CONSTRUCTION OF INFORMATION SYSTEM FACILITY AT JOINT BASE LEWIS MCCHORD, WASHINGTON. Key points: 1. The contract's firm-fixed-price structure aims to control costs, but the final price needs benchmarking against similar projects. 2. With only two bids received, the level of competition may have impacted price discovery and potentially inflated costs. 3. The long duration of the contract (over 4 years) could introduce risks related to material cost fluctuations and scope creep. 4. This project supports critical infrastructure at a major military installation, aligning with defense readiness objectives. 5. The award to Walsh Federal LLC requires scrutiny of their past performance and adherence to project timelines and quality standards. 6. The absence of small business set-asides warrants an examination of subcontracting opportunities for smaller firms.

Value Assessment

Rating: fair

The contract's total value of $45.4 million for constructing an information system facility at Joint Base Lewis-McChord appears substantial. Benchmarking this cost against similar-sized government or commercial construction projects for specialized facilities is crucial. The firm-fixed-price (FFP) nature of the award suggests an attempt to cap costs, but without detailed cost breakdowns or comparisons to market rates for labor and materials in Washington state, assessing true value-for-money is challenging. The relatively low number of bids received could indicate that the price may not reflect the most competitive market outcome.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which is generally positive for ensuring a broad range of potential bidders. However, only two bids were received. This limited number of offers raises concerns about whether the competition was truly robust or if factors such as project complexity, bonding requirements, or market conditions deterred more participants. A low number of bidders can sometimes lead to less aggressive pricing as the remaining competitors face less pressure to undercut each other.

Taxpayer Impact: With only two bids, taxpayers may not have benefited from the most competitive pricing possible. The government might have paid more than if a larger pool of bidders had vied for the contract, potentially leading to a less optimal use of public funds.

Public Impact

The primary beneficiaries are the Department of Defense and its personnel at Joint Base Lewis-McChord, who will gain access to a new information system facility. The project delivers essential construction services, contributing to the modernization and operational capabilities of a key military installation. The geographic impact is localized to Joint Base Lewis-McChord in Washington state. The construction phase will likely involve a significant workforce, including skilled trades and project management personnel, providing employment opportunities in the region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Limited competition (2 bids) may have resulted in a higher price than a more competitive scenario.
The long contract duration (over 4 years) increases exposure to potential cost overruns due to market volatility.
Lack of specific details on the facility's IT systems makes it difficult to assess if the construction cost is aligned with technological requirements.
No small business set-aside was utilized, potentially limiting opportunities for smaller firms in the construction ecosystem.

Positive Signals

Firm-fixed-price contract type helps to lock in costs and reduce the risk of cost growth for the government.
Awarded under full and open competition, theoretically allowing any qualified contractor to bid.
The project supports critical infrastructure for a major military installation, enhancing national security capabilities.
The contractor, Walsh Federal LLC, is a known entity in federal contracting, suggesting some level of established capability.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, specifically for a government facility. The market for large-scale federal construction projects is often characterized by significant barriers to entry, including bonding capacity, security clearances, and specialized experience. The Department of Defense is a major client in this sector, awarding numerous contracts for infrastructure development and maintenance. Comparable spending benchmarks would typically involve analyzing the cost per square foot for similar government-occupied buildings or specialized IT facilities in the Pacific Northwest region.

Small Business Impact

This contract did not include a small business set-aside. While awarded under full and open competition, the absence of specific provisions for small businesses means that prime contract opportunities were not exclusively reserved for them. It is important to assess whether the prime contractor, Walsh Federal LLC, has a robust subcontracting plan that includes meaningful participation from small businesses. Without such a plan, the impact on the small business ecosystem could be limited to indirect benefits through the supply chain.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of the Army's contracting and project management offices. The firm-fixed-price nature of the contract places the onus on the contractor to manage costs within the agreed-upon price. Transparency is generally facilitated through contract award databases like FPDS. Accountability measures would involve performance reviews, adherence to contract terms, and potential penalties for non-compliance. The Inspector General for the Department of Defense may also have jurisdiction to investigate any allegations of fraud, waste, or abuse.

Related Government Programs

Military Construction (MILCON)
Department of Defense Facilities Management
Information Technology Infrastructure Projects
General Services Administration (GSA) Public Buildings Service

Risk Flags

Limited Competition
Potential for Cost Overruns (long duration)
Lack of Small Business Participation

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $45.4 million to WALSH FEDERAL LLC. CONSTRUCTION OF INFORMATION SYSTEM FACILITY AT JOINT BASE LEWIS MCCHORD, WASHINGTON.

Who is the contractor on this award?

The obligated recipient is WALSH FEDERAL LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $45.4 million.

What is the period of performance?

Start: 2020-06-26. End: 2024-08-08.

What is Walsh Federal LLC's track record with similar large-scale federal construction projects, particularly for IT facilities?

Walsh Federal LLC has a history of performing federal construction contracts. A review of their past performance indicates experience with various types of government facilities. However, specific details regarding their experience with constructing specialized information system facilities of this scale and complexity would require a deeper dive into their project portfolio and client feedback. Examining past performance evaluations (e.g., Contractor Performance Assessment Reporting System - CPARS) would provide insights into their reliability, quality of work, and adherence to schedule and budget on previous federal projects. Understanding their success rate with firm-fixed-price contracts of similar magnitude is also important for assessing their capability to deliver this project successfully within the agreed-upon terms.

How does the awarded price compare to industry benchmarks for similar construction projects in Washington state?

Directly comparing the $45.4 million award to industry benchmarks requires detailed project specifications, such as square footage, specific technological requirements for the information system facility, and the level of finish. However, general benchmarks for commercial and institutional building construction in Washington state can provide a preliminary assessment. Factors like the cost per square foot for similar government facilities, prevailing labor rates for skilled trades in the JBLM area, and material costs specific to the region are critical. Given the specialized nature of an 'information system facility,' costs might be higher than standard office buildings due to requirements for power, cooling, security, and specialized infrastructure. A more precise benchmark would involve consulting construction cost estimating databases or engaging with industry experts familiar with federal facility construction in the Pacific Northwest.

What are the primary risks associated with the long contract duration (1504 days)?

The contract's duration of approximately 1504 days (over 4 years) presents several key risks. Firstly, there is an increased risk of material cost escalation. Over such a long period, fluctuations in the prices of construction materials (steel, concrete, specialized IT hardware components) can significantly impact project costs, even under a firm-fixed-price contract if contingencies are not adequately managed. Secondly, labor costs can also be subject to change, with potential for wage inflation or shortages of skilled labor over time. Thirdly, the extended timeline increases the likelihood of scope creep, where changes or additions to the original requirements may be requested, potentially leading to change orders and cost increases if not managed strictly. Finally, prolonged projects are more susceptible to regulatory changes or evolving technological standards that might necessitate design modifications.

What is the potential impact of having only two bidders on the final price and overall value for taxpayers?

Having only two bidders in a full and open competition scenario significantly reduces the competitive pressure that typically drives down prices. When multiple companies vie for a contract, they are incentivized to offer their most competitive bids to win the work. With only two participants, the winning bidder may have had less motivation to offer the lowest possible price, knowing their main competitor was also limited. This situation can lead to taxpayers potentially paying a higher price than if, for example, five or more bids had been submitted. It also raises questions about whether the government received the best possible value, as the limited competition might have precluded potentially more innovative or cost-effective solutions from other firms that did not bid.

Are there any specific performance metrics or milestones tied to this contract that allow for tracking progress and success?

While the provided data does not detail specific performance metrics or milestones, firm-fixed-price contracts typically include a schedule of performance and payment. For a construction project of this magnitude, it is standard practice to define key milestones such as design completion, site preparation, foundation work, structural completion, interior fit-out, and final commissioning. Progress payments are usually tied to the achievement of these milestones. The contract likely includes clauses for inspection and acceptance of work at various stages. Robust oversight would involve regular site inspections, progress reports from the contractor, and verification that the work meets the specified quality standards and technical requirements for an information system facility. The effectiveness of the contract's success hinges on the government's diligence in monitoring these milestones and enforcing quality control.

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: W912DW19R0025

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 929 W ADAMS ST, CHICAGO, IL, 60607

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

Financial Breakdown

Contract Ceiling: $45,456,351

Exercised Options: $45,390,151

Current Obligation: $45,390,151

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline