Messer Construction awarded $122.4M for building renovation, facing limited competition and potential cost overruns

Contract Overview

Contract Amount: $122,395,679 ($122.4M)

Contractor: Messer Construction CO

Awarding Agency: Department of Defense

Start Date: 2023-05-09

End Date: 2027-01-29

Contract Duration: 1,361 days

Daily Burn Rate: $89.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: RENOVATE/REPAIR BUILDING 10262, PHASE 1

Place of Performance

Location: WRIGHT PATTERSON AFB, MONTGOMERY County, OHIO, 45433

State: Ohio Government Spending

Plain-Language Summary

Department of Defense obligated $122.4 million to MESSER CONSTRUCTION CO for work described as: RENOVATE/REPAIR BUILDING 10262, PHASE 1 Key points: 1. The contract's firm-fixed-price structure aims to control costs, but the duration and scope present inherent risks. 2. Limited competition suggests potential for higher pricing than a more robust bidding process might yield. 3. The project's significant scale and multi-year timeline increase the likelihood of unforeseen challenges and cost adjustments. 4. Performance context is critical, as successful renovation hinges on effective project management and adherence to specifications. 5. This contract falls within the broad commercial and institutional building construction sector, a common area for federal procurement. 6. The relatively high bid-buy ratio warrants scrutiny to ensure value for taxpayer dollars.

Value Assessment

Rating: fair

The awarded amount of $122.4 million for renovating Building 10262, Phase 1, appears substantial. Benchmarking against similar large-scale federal building renovation projects is challenging without more specific details on the scope of work and building condition. However, the bid-buy ratio of 89.9% (89931 / 122395679) suggests that the winning bid was competitive relative to the government's estimate, but the absolute cost warrants careful monitoring throughout the project's duration. The firm-fixed-price contract type provides cost certainty, but the long performance period increases the risk of cost escalation if not managed diligently.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. While the data indicates two bids were received, the specific number of bidders does not inherently reflect the level of competition. A low number of bids, even under full and open competition, can sometimes signal market limitations or specific technical requirements that restrict participation. Further analysis would be needed to determine if the competition was robust enough to ensure optimal price discovery.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages multiple companies to bid, driving down prices. However, if only a few bids were submitted, the potential cost savings for taxpayers may be limited compared to scenarios with broader participation.

Public Impact

The primary beneficiaries are the Department of the Army, which will receive a renovated facility essential for its operations. The contract delivers critical infrastructure improvements, ensuring the continued functionality and modernization of federal facilities. The geographic impact is concentrated in Ohio, potentially creating local employment opportunities during the construction phase. Workforce implications include job creation for construction workers, engineers, and project managers in the Ohio region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration (over 3 years) increases risk of scope creep and cost overruns.
Potential for unforeseen structural issues or hazardous materials during renovation could significantly increase costs.
Dependence on a single contractor for a large-scale, multi-phase project carries inherent performance risks.
Limited competition, even if 'full and open', may have resulted in a higher-than-optimal price.
Firm-fixed-price contracts can incentivize contractors to cut corners on quality if not rigorously overseen.

Positive Signals

Firm-fixed-price contract provides cost certainty for the government.
Awarded under full and open competition, theoretically maximizing the pool of potential bidders.
The contractor, Messer Construction Co., likely has experience with large-scale construction projects.
The project aims to modernize critical federal infrastructure, ensuring long-term operational capability.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, a significant segment of the U.S. economy. Federal spending in this area supports the maintenance and upgrade of government facilities nationwide. Comparable spending benchmarks for large-scale federal building renovations can vary widely based on project complexity, size, and location. The $122.4 million award is substantial, indicating a major renovation project rather than routine maintenance.

Small Business Impact

The contract data indicates that small business participation was not a specific set-aside (ss: false, sb: false). This suggests that small businesses may not have been the primary target for this large prime contract. However, the prime contractor, Messer Construction Co., may engage small businesses as subcontractors to fulfill portions of the work. The extent of small business subcontracting will be a key factor in assessing the contract's impact on the small business ecosystem.

Oversight & Accountability

Oversight for this contract will likely be managed by the contracting officer and the relevant Department of the Army project management office. Accountability measures are embedded in the firm-fixed-price contract terms, which stipulate specific deliverables and quality standards. Transparency is typically facilitated through contract award databases and reporting requirements. The potential for an Inspector General review exists, particularly if performance issues or allegations of impropriety arise during the contract's execution.

Related Government Programs

Federal Building Renovations
Military Construction Projects
Department of Defense Facilities Management
Commercial Building Construction Contracts
Infrastructure Modernization Programs

Risk Flags

Potential for cost overruns due to long duration and unforeseen site conditions.
Risk of performance issues given the scale and complexity of the renovation.
Limited competition may have impacted price competitiveness.
Need for robust oversight to ensure quality and adherence to scope under FFP.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $122.4 million to MESSER CONSTRUCTION CO. RENOVATE/REPAIR BUILDING 10262, PHASE 1

Who is the contractor on this award?

The obligated recipient is MESSER CONSTRUCTION CO.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $122.4 million.

What is the period of performance?

Start: 2023-05-09. End: 2027-01-29.

What is the track record of Messer Construction Co. on similar federal contracts?

Messer Construction Co. has a history of performing large-scale construction projects, including those for federal agencies. Analyzing their past performance on similar federal building renovation or construction contracts would involve reviewing contract databases for awards, performance ratings (e.g., Past Performance Information Retrieval System - PPIRS), and any documented disputes or terminations. A review of their portfolio would indicate their experience with firm-fixed-price contracts, project complexity, and adherence to schedules and budgets on government work. Without specific past performance data readily available for this exact type of project, a general assessment suggests they are a capable entity for such work, but detailed due diligence on their specific federal track record is recommended.

How does the $122.4 million cost compare to similar federal building renovations?

Benchmarking the $122.4 million cost requires detailed comparison with similar federal building renovation projects, considering factors like square footage, scope of work (e.g., structural, MEP, finishes), age and condition of the building, and geographic location. Large-scale renovations of institutional or commercial buildings can range from hundreds to thousands of dollars per square foot. Given the contract's firm-fixed-price nature and the bid-buy ratio of approximately 89.9%, the government likely received competitive bids relative to its estimate. However, without specific project details, it's difficult to definitively state if the price is high or low compared to market rates for comparable federal projects. Further analysis of the Statement of Work (SOW) and building specifics would be necessary for a precise comparison.

What are the primary risks associated with this contract?

The primary risks associated with this contract include: 1. **Performance Risk:** The long duration (over three years) and complexity of renovating an existing building increase the likelihood of encountering unforeseen issues (e.g., structural problems, hazardous materials, outdated systems) that could lead to delays and cost overruns, even with a fixed-price contract. 2. **Cost Risk:** While firm-fixed-price aims to cap costs, significant unforeseen issues could necessitate contract modifications or claims, potentially increasing the total expenditure. 3. **Schedule Risk:** Delays in material procurement, labor availability, or unexpected site conditions can impact the project timeline. 4. **Contractor Viability:** Ensuring the contractor maintains financial stability and operational capacity throughout the multi-year project is crucial. 5. **Scope Creep:** Changes or additions to the original scope of work, if not managed carefully, can escalate costs and extend timelines.

How effective is the firm-fixed-price contract type for this type of renovation?

The firm-fixed-price (FFP) contract type is generally preferred by the government for renovation projects when the scope of work can be clearly defined and risks are understood. For this project, FFP provides cost certainty, transferring most of the cost overrun risk to the contractor. This incentivizes the contractor to manage costs efficiently and complete the work within budget. However, for complex renovations where unforeseen conditions are highly probable, FFP can sometimes lead to contractors bidding higher to account for potential risks, or potentially cutting corners on quality if oversight is insufficient. The success of FFP here depends heavily on the thoroughness of the initial scope definition and the rigor of government oversight during execution.

What is the historical spending pattern for building renovations by the Department of the Army in Ohio?

Analyzing historical spending patterns for building renovations by the Department of the Army in Ohio would require accessing federal procurement databases (like FPDS-NG or SAM.gov) and filtering for contracts awarded by the Army within Ohio for 'renovation' or 'repair' of buildings over a specific period. This would reveal the frequency, average contract values, and types of contractors typically engaged. Such an analysis could identify trends, potential budget fluctuations, and whether this $122.4 million contract represents a significant outlier or a typical investment for facility upgrades in the region. Without performing this specific data query, it's difficult to provide precise historical context.

What are the implications of receiving only two bids under 'full and open competition'?

Receiving only two bids under 'full and open competition' can have several implications. Firstly, it might suggest that the market for this specific type of large-scale renovation is limited, or that the technical requirements were highly specialized, deterring broader participation. Secondly, while competition is present, fewer bidders generally mean less downward pressure on pricing compared to a scenario with numerous competitive offers. This could potentially lead to a higher final price for the government. Thirdly, it raises questions about whether all potential qualified contractors were aware of the opportunity or able to bid. It warrants an examination of the solicitation process and market research conducted prior to the award to ensure maximum feasible competition was achieved.

Industry Classification

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

Product/Service Code: MAINT, REPAIR, ALTER REAL PROPERTY › MAINT, ALTER, REPAIR NONBUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: W912QR22R0028

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 643 W COURT ST, CINCINNATI, OH, 45203

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

Financial Breakdown

Contract Ceiling: $122,395,679

Exercised Options: $122,395,679

Current Obligation: $122,395,679

Actual Outlays: $6,192,687

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline