RKJ Construction Inc. awarded $18.7M for building renovations, exceeding initial estimates by over 2500%

Contract Overview

Contract Amount: $18,695,381 ($18.7M)

Contractor: RKJ Construction Inc

Awarding Agency: Department of Defense

Start Date: 2007-09-30

End Date: 2009-10-11

Contract Duration: 742 days

Daily Burn Rate: $25.2K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: RENOVATE BUILDING 2000 & 2007

Place of Performance

Location: SAN ANTONIO, BEXAR County, TEXAS, 78234

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $18.7 million to RKJ CONSTRUCTION INC for work described as: RENOVATE BUILDING 2000 & 2007 Key points: 1. Value for money appears questionable given the significant cost overrun. 2. The contract was awarded under full and open competition, suggesting a broad market search. 3. Risk indicators include the substantial deviation from the estimated price. 4. Performance context shows a firm fixed-price contract, which typically shifts risk to the contractor. 5. This contract falls within the Commercial and Institutional Building Construction sector.

Value Assessment

Rating: questionable

The final award price of $18.7 million is substantially higher than the initial estimate of $251,960, representing an overrun of over 7300%. This extreme deviation raises serious concerns about the accuracy of the initial estimate, the contractor's bidding process, or potential scope creep. Without further details on the project's evolution, it is difficult to benchmark the value effectively, but the magnitude of the overrun suggests poor initial planning or unforeseen complexities that were not adequately managed.

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 significant price difference between the estimate and the final award suggests that either the initial estimate was highly inaccurate, or the competitive process did not effectively drive down costs to a reasonable level. The presence of multiple bidders is generally positive for price discovery, but the outcome here is concerning.

Taxpayer Impact: Taxpayers may have overpaid due to a potentially flawed initial estimate or a competitive process that did not yield a cost-effective outcome relative to the final price.

Public Impact

The primary beneficiaries are RKJ CONSTRUCTION INC, who received the contract. The services delivered involve the renovation of Buildings 2000 & 2007. The geographic impact is localized to Texas, where the contract was performed. Workforce implications would include construction labor and management roles associated with the renovation project.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost overrun from initial estimate.
Potential for inaccurate initial cost estimations.
Lack of transparency regarding the reasons for the large price increase.

Positive Signals

Awarded through full and open competition.
Firm fixed-price contract structure.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, a broad category encompassing the renovation and construction of non-residential buildings. The market for such services is competitive, with numerous firms capable of undertaking projects of this nature. Benchmarking this specific contract's value is challenging due to the extreme cost overrun, but typical renovation projects of this scale would aim for more predictable cost outcomes.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (sb: false). There is no information provided regarding subcontracting plans or their impact on the small business ecosystem. Therefore, the direct impact on small businesses through this specific award is not discernible from the provided data.

Oversight & Accountability

Oversight mechanisms for this contract would typically involve the contracting officer and potentially agency-level oversight bodies within the Department of the Army. Accountability measures are inherent in the firm fixed-price structure, which places cost risk on the contractor. Transparency regarding the significant cost overrun would be crucial for assessing the effectiveness of oversight and accountability.

Related Government Programs

Military Base Construction
Federal Building Renovations
Department of Defense Facilities Management

Risk Flags

Significant Cost Overrun
Potential Estimation Inaccuracy
Lack of Detailed Justification for Price Increase

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $18.7 million to RKJ CONSTRUCTION INC. RENOVATE BUILDING 2000 & 2007

Who is the contractor on this award?

The obligated recipient is RKJ CONSTRUCTION INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $18.7 million.

What is the period of performance?

Start: 2007-09-30. End: 2009-10-11.

What were the specific reasons for the substantial cost overrun from the initial estimate to the final award price?

The provided data indicates a stark discrepancy between the initial estimate ($251,960) and the final award amount ($18,695,380.66) for the renovation of Buildings 2000 & 2007. This represents an overrun of over 7300%. Without additional documentation, the precise reasons remain unclear. Potential factors could include a severely underestimated initial scope of work, unforeseen structural issues discovered during the planning or execution phases, significant changes in material costs, or a flawed initial bidding process by the government. It is also possible that the initial estimate was a placeholder or a preliminary figure that did not reflect the true project requirements. Further investigation into the contract modifications, change orders, and project justifications would be necessary to pinpoint the exact causes of this dramatic cost escalation.

How does the final award price compare to similar building renovation contracts awarded by the Department of the Army or other federal agencies?

Benchmarking this contract's final award price of $18.7 million against similar federal building renovation projects is challenging due to the extreme cost overrun. If the initial estimate of approximately $250,000 were accurate, it would represent a very small renovation project. However, the final award suggests a project of significant scale and complexity. To provide a meaningful comparison, one would need to identify comparable renovation projects in terms of building size, type (e.g., barracks, administrative, industrial), scope of work (e.g., HVAC, structural, cosmetic), and geographic location. Without such comparable data, it is difficult to definitively state whether $18.7 million is high, low, or reasonable for the actual work performed. The massive deviation from the estimate, however, strongly suggests that the initial expectation of value was not met.

What are the potential risks associated with a firm fixed-price contract that experiences such a large cost overrun?

While a firm fixed-price (FFP) contract is designed to shift cost risk to the contractor, a massive overrun from the initial estimate, even under FFP, can still present risks. If the overrun is due to unforeseen government-driven changes or scope creep, the government may face pressure to approve modifications that significantly increase the contract value, potentially negating the intended cost control of FFP. If the overrun is due to contractor mismanagement or poor estimation, it could signal a contractor struggling with project execution, potentially leading to delays, quality issues, or even contractor default. In this specific case, the extreme difference between the estimate and award price raises questions about the initial bidding process and whether the FFP was set at a realistic level from the outset. The risk for the government lies in potentially paying a significantly inflated price for the completed work.

What does the 'AW: DO' award action code signify in the context of this contract?

The 'AW: DO' award action code typically signifies 'Department of Defense' as the awarding agency or a specific internal designation within the Department of Defense related to the award process. In this context, it reinforces that the contract was administered and awarded under the purview of the Department of Defense. While it confirms the agency involved, it does not provide specific details about the procurement method, competition level beyond what is stated elsewhere (e.g., 'FULL AND OPEN COMPETITION'), or the nature of the award itself. It serves as a high-level identifier for the originating department.

How does the contract duration (742 days) relate to the scope of work and the final cost?

A contract duration of 742 days (approximately two years) for building renovations can be substantial, depending on the complexity of the work. When correlated with the final award price of $18.7 million, it suggests a project of considerable scale. However, the initial estimate of $251,960 for a 742-day project seems incongruous, implying a very minor scope or a severe underestimation. If the 742-day duration is accurate for the work performed, and the final cost is $18.7 million, the average daily cost would be approximately $25,196. This figure needs to be contextualized against the specific tasks performed (e.g., demolition, structural repairs, system installations, finishing). Without a detailed breakdown of the work performed over those two years, it's difficult to definitively assess if the duration and cost align appropriately, but the initial estimate remains a significant outlier.

Industry Classification

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

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Solicitation ID: W9126G04R0013

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 604 W AVE C, LAMPASAS, TX, 11

Business Categories: Category Business, Small Business

Financial Breakdown

Contract Ceiling: $19,299,900

Exercised Options: $18,695,381

Current Obligation: $18,695,381

Contract Characteristics

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: W9126G04D0026

IDV Type: IDC

Timeline