VA awards $21.6M contract for boiler replacement at Canandaigua Medical Center, with a 2.69M difference from the benchmark

Contract Overview

Contract Amount: $21,627,110 ($21.6M)

Contractor: Serviam Construction LLC

Awarding Agency: Department of Veterans Affairs

Start Date: 2024-09-27

End Date: 2026-12-10

Contract Duration: 804 days

Daily Burn Rate: $26.9K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: REPLACE BOILERS CANANDAIGUA VA MEDICAL CENTER

Place of Performance

Location: CANANDAIGUA, ONTARIO County, NEW YORK, 14424

State: New York Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $21.6 million to SERVIAM CONSTRUCTION LLC for work described as: REPLACE BOILERS CANANDAIGUA VA MEDICAL CENTER Key points: 1. The contract value of $21.6M is 14.3% above the benchmark of $18.9M, indicating potential overspending. 2. The award was made under full and open competition, suggesting a competitive bidding process. 3. With 3 bidders, the competition level was moderate, potentially impacting price negotiation. 4. The contract duration of 804 days suggests a significant project scope. 5. The fixed-price contract type shifts risk to the contractor, but the final price may still exceed initial estimates. 6. The benchmark price of $18.9M suggests a potential overage of $2.7M. 7. The contractor, Serviam Construction LLC, is relatively new to federal contracting, with this being one of their larger awards.

Value Assessment

Rating: questionable

The contract's final price of $21.6M significantly exceeds the benchmark of $18.9M by approximately $2.7M, or 14.3%. This substantial difference raises concerns about the value for money achieved in this procurement. While benchmark data can vary in accuracy, such a large deviation warrants scrutiny. Comparing this to similar HVAC replacement projects for federal facilities of comparable size and complexity would be necessary to determine if the pricing is justified by market conditions or if it represents an overpayment.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under 'full and open competition after exclusion of sources,' indicating that the solicitation was broadly advertised, and all responsible sources were permitted to submit offers. Three bids were received, which represents a moderate level of competition. While more bidders generally lead to better price discovery, three offers suggest that the market had sufficient interest and that the government had options to choose from. The specific exclusion of sources clause needs further investigation to understand if it limited the pool of potential bidders.

Taxpayer Impact: The moderate competition level means taxpayers likely received a reasonably competitive price, but the significant difference from the benchmark suggests that even more aggressive competition might have yielded better savings.

Public Impact

Veterans receiving care at the Canandaigua VA Medical Center will benefit from improved infrastructure and reliable heating, cooling, and plumbing systems. The project will ensure the continued operational capacity of a critical healthcare facility for veterans in New York. The geographic impact is localized to the Canandaigua, NY area, serving the veteran population in that region. The contract is expected to create or sustain jobs in the construction and skilled trades sector, particularly in plumbing, heating, and air-conditioning. The successful completion of this project will enhance the quality of life and care environment for patients and staff at the medical center.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential overspending indicated by the $2.7M difference between the award amount and the benchmark.
The 'after exclusion of sources' clause in the competition type warrants further review to ensure maximum competition was achieved.
The contractor, Serviam Construction LLC, has a limited track record with federal contracts, potentially introducing execution risks.
The fixed-price contract type, while shifting risk, could still lead to cost overruns if not managed tightly.

Positive Signals

Awarded under full and open competition, indicating a broad solicitation process.
The contract is firm-fixed-price, which generally provides cost certainty for the government.
The project addresses critical infrastructure needs for a VA medical center, ensuring continued service delivery.
The contract duration is substantial, allowing ample time for project completion and quality assurance.

Sector Analysis

This contract falls within the Construction and Facilities Maintenance sector, specifically focusing on mechanical systems (HVAC, plumbing, heating). The North American Industry Classification System (NAICS) code 238220, Plumbing, Heating, and Air-Conditioning Contractors, represents a significant segment of the construction industry. Federal spending on facility maintenance and upgrades for critical infrastructure like VA hospitals is substantial, often involving large, complex projects. Benchmarking against similar projects for federal agencies or large healthcare institutions would provide further context on the pricing and scope.

Small Business Impact

This contract was not set aside for small businesses, and the data indicates no small business subcontracting goals were specified (sb: false). The prime contractor, Serviam Construction LLC, is a small business itself, but the award was not a small business set-aside. This means opportunities for other small businesses to participate as subcontractors may be limited unless voluntarily pursued by the prime contractor. The impact on the broader small business ecosystem depends on Serviam's subcontracting practices.

Oversight & Accountability

Oversight for this contract will primarily be managed by the Department of Veterans Affairs (VA) contracting officers and project managers. The contract is a definitive contract, suggesting it will have specific terms and conditions for oversight. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected. The fixed-price nature of the contract requires diligent monitoring of performance and adherence to specifications to ensure accountability.

Related Government Programs

VA Medical Facility Construction and Renovation Projects
Federal HVAC and Plumbing Contracts
Infrastructure Modernization Programs
Department of Veterans Affairs Capital Asset Fund

Risk Flags

Potential Overpayment
Limited Contractor Experience
Competition Level Concerns

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $21.6 million to SERVIAM CONSTRUCTION LLC. REPLACE BOILERS CANANDAIGUA VA MEDICAL CENTER

Who is the contractor on this award?

The obligated recipient is SERVIAM CONSTRUCTION LLC.

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 $21.6 million.

What is the period of performance?

Start: 2024-09-27. End: 2026-12-10.

What is the track record of Serviam Construction LLC with federal contracts, particularly regarding performance and past issues?

Serviam Construction LLC appears to be a relatively new entity in the federal contracting space, with this $21.6 million award being one of its most significant to date. A review of available federal procurement data suggests limited prior contract history for this specific entity. Without a substantial history of completed federal projects, it is challenging to definitively assess their track record for performance, adherence to schedules, and quality of work on large-scale government contracts. Further investigation into any past performance evaluations, debriefings, or potential disputes would be necessary to gain a more comprehensive understanding of their reliability as a federal contractor. The current award's success will be a key indicator of their future capabilities.

How does the $21.6M award compare to similar boiler replacement projects at other VA medical centers or federal facilities?

The $21.6M award for boiler replacement at the Canandaigua VA Medical Center is substantial. A key point of comparison is the benchmark price of $18.9M, which indicates the award is approximately $2.7M (14.3%) higher. To provide a more robust comparison, data on similar projects at other VA facilities or comparable federal buildings would be needed. Factors such as the size of the facility, the complexity of the existing systems, the age of the infrastructure, and regional labor and material costs significantly influence project pricing. Without specific comparable project data, it's difficult to definitively state whether this price is market-competitive, though the deviation from the internal benchmark is a notable concern.

What are the primary risks associated with this contract, given the contractor's profile and the project's scope?

The primary risks associated with this contract include potential cost overruns, despite the firm-fixed-price structure, if unforeseen issues arise during the extensive 804-day project duration. A significant risk stems from the contractor, Serviam Construction LLC, having a limited federal contracting history; this could translate to inexperience in navigating federal regulations, project management challenges, or potential performance issues. The substantial difference between the award amount and the benchmark ($2.7M) also presents a risk of overpayment if the benchmark was accurate and the final price is not justified by market conditions. Furthermore, the 'after exclusion of sources' clause in the competition type, while not inherently a risk, warrants scrutiny to ensure it did not unduly limit competition and potentially inflate the price.

How effective is the firm-fixed-price contract type in managing costs for a project of this scale and duration?

The firm-fixed-price (FFP) contract type is generally considered effective for managing costs on projects where the scope of work is well-defined and risks can be reasonably anticipated. For a boiler replacement project of this scale and duration (804 days), FFP shifts the primary cost risk to the contractor, Serviam Construction LLC. This incentivizes the contractor to control costs and manage the project efficiently to maximize profit. However, FFP is not foolproof against cost increases. If unforeseen site conditions, design changes, or material price escalations occur that are beyond the contractor's control and are covered by contract clauses, the government might still face increased costs. Diligent oversight by the VA is crucial to ensure the contractor adheres to the scope and manages risks effectively.

What is the historical spending pattern for boiler replacements or similar HVAC upgrades at the Canandaigua VA Medical Center?

Historical spending data specifically for boiler replacements or similar HVAC upgrades at the Canandaigua VA Medical Center is not directly provided in the given data. The current award of $21.6M is a significant investment. To understand historical patterns, one would need to access past contract awards for this specific facility or for the VA network broadly concerning infrastructure maintenance. Analyzing previous expenditures on similar projects, their scope, and their final costs would reveal trends in spending, identify potential cost escalations over time, and help contextualize the current award's value. Without this historical perspective, it's challenging to determine if this $21.6M represents a typical investment or an outlier.

What does the 'after exclusion of sources' clause mean for the competition level and potential price outcomes?

The 'after exclusion of sources' clause in the contract type ('FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES') means that while the competition was intended to be full and open, certain potential sources were intentionally excluded from the bidding process. The reasons for exclusion must be justified and documented, often due to specific technical requirements, security concerns, or prior performance issues with certain contractors. In this case, three bidders submitted offers. While this indicates some level of competition, the exclusion of specific sources could have potentially limited the number of bidders and, consequently, the intensity of price competition. This might have led to a less competitive price than if all potential sources had been allowed to bid, although the specific impact depends on who was excluded and why.

Industry Classification

NAICS: Construction › Building Equipment Contractors › Plumbing, Heating, and Air-Conditioning Contractors

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SEALED BID

Solicitation ID: 36C24224R0032

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 2304 BROAD AVE, ALTOONA, PA, 16601

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Economically Disadvantaged Women Owned Small Business, Limited Liability Corporation, Self-Certified Small Disadvantaged Business, Service Disabled Veteran Owned Business, Small Business, Special Designations, U.S.-Owned Business, Veteran Owned Business, Woman Owned Business, Women Owned Small Business

Financial Breakdown

Contract Ceiling: $21,627,110

Exercised Options: $21,627,110

Current Obligation: $21,627,110

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline