Hensel Phelps Construction Co. awarded $144M for NIH building conversion, facing scrutiny over value and competition

Contract Overview

Contract Amount: $144,045,451 ($144.0M)

Contractor: Hensel Phelps Construction CO

Awarding Agency: Department of Health and Human Services

Start Date: 2024-09-30

End Date: 2028-12-20

Contract Duration: 1,542 days

Daily Burn Rate: $93.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 3

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: ADDITIONAL FUNDS TO REQ #7011484 - C107641 POOLESVILLE A&B CONVERSION DESIGN-BUILD CONTRACT, BLDG 102, JOSE MOREL LOPEZ [24-005745]

Place of Performance

Location: POOLESVILLE, MONTGOMERY County, MARYLAND, 20837

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $144.0 million to HENSEL PHELPS CONSTRUCTION CO for work described as: ADDITIONAL FUNDS TO REQ #7011484 - C107641 POOLESVILLE A&B CONVERSION DESIGN-BUILD CONTRACT, BLDG 102, JOSE MOREL LOPEZ [24-005745] Key points: 1. The contract's value proposition is being assessed against similar construction projects. 2. Competition dynamics are under review to understand pricing impacts. 3. Potential risk indicators are being monitored throughout the project lifecycle. 4. Performance context is being established by comparing to industry benchmarks. 5. The contract's positioning within the broader healthcare construction sector is being analyzed. 6. The firm-fixed-price structure aims to control costs, but requires careful oversight.

Value Assessment

Rating: fair

The awarded amount of $144 million for the Poolesville A&B Conversion Design-Build Contract appears substantial. Benchmarking against similar large-scale institutional building construction projects is crucial to determine if this represents a fair market price. Without detailed cost breakdowns or comparisons to other NIH or similar agency projects of comparable scope and complexity, assessing the true value-for-money is challenging. The firm-fixed-price nature suggests an attempt to cap costs, but the initial award amount requires validation against industry standards.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that multiple bidders were likely considered. The presence of three bidders suggests a degree of market interest. However, the specific number of bids received and the range of pricing offered are critical to understanding the effectiveness of the competition. A robust competitive process should ideally lead to price discovery and ensure the government receives competitive pricing.

Taxpayer Impact: Full and open competition is generally favorable for taxpayers as it encourages multiple firms to bid, potentially driving down costs and increasing the likelihood of selecting the most cost-effective solution.

Public Impact

The primary beneficiaries are the National Institutes of Health (NIH), which will gain upgraded facilities for its operations. The contract will deliver design and construction services for Building 102 at the Poolesville campus. The geographic impact is concentrated in Poolesville, Maryland, with potential indirect economic benefits to the local area. The project will likely involve a significant construction workforce, creating employment opportunities in the skilled trades.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen site conditions arise, despite the firm-fixed-price structure.
Ensuring the design meets all functional and future operational needs of the NIH.
Managing the complexity of a design-build project to maintain schedule and budget.
Adequate oversight is needed to ensure quality of construction and adherence to specifications.

Positive Signals

Awarded to a reputable contractor with a history in large-scale construction.
Firm-fixed-price contract provides cost certainty for the government.
Full and open competition suggests a competitive bidding process was utilized.
The project aims to modernize critical NIH infrastructure.

Sector Analysis

The contract falls within the Commercial and Institutional Building Construction sector, a significant segment of the broader construction industry. This sector encompasses the building of non-residential structures like laboratories, research facilities, and administrative buildings. The NIH's need for specialized facilities, particularly for research and development, often commands higher costs due to stringent requirements for safety, environmental controls, and specialized equipment integration. Comparable spending benchmarks would involve analyzing other large federal or private sector laboratory construction projects.

Small Business Impact

The provided data indicates that small business participation (ss: false, sb: false) was not a primary set-aside criterion for this specific contract. While the prime contractor, Hensel Phelps Construction Co., is a large entity, the implications for small businesses lie in potential subcontracting opportunities. It is crucial to ascertain if the prime contractor has a robust subcontracting plan that includes small businesses, particularly those local to the Maryland region, to ensure broader economic impact and compliance with federal subcontracting goals.

Oversight & Accountability

Oversight for this contract will likely be managed by the relevant contracting officers and project managers within the National Institutes of Health. Accountability measures are embedded in the firm-fixed-price contract terms, which penalize deviations from agreed-upon costs. Transparency will depend on the NIH's public reporting practices regarding project milestones and expenditures. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected during the contract's performance.

Related Government Programs

NIH Capital Fund
Federal Buildings Fund
General Services Administration (GSA) Public Buildings Service
Construction of Research Facilities
Design-Build Contracts

Risk Flags

Potential for scope creep despite firm-fixed-price.
Complexity of design-build delivery method.
Long project duration increases risk exposure.
Need for specialized facility requirements.
Adequacy of initial site assessments.
Contractor's past performance on similar projects.

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $144.0 million to HENSEL PHELPS CONSTRUCTION CO. ADDITIONAL FUNDS TO REQ #7011484 - C107641 POOLESVILLE A&B CONVERSION DESIGN-BUILD CONTRACT, BLDG 102, JOSE MOREL LOPEZ [24-005745]

Who is the contractor on this award?

The obligated recipient is HENSEL PHELPS CONSTRUCTION CO.

Which agency awarded this contract?

Awarding agency: Department of Health and Human Services (National Institutes of Health).

What is the total obligated amount?

The obligated amount is $144.0 million.

What is the period of performance?

Start: 2024-09-30. End: 2028-12-20.

What is Hensel Phelps Construction Co.'s track record with similar federal design-build projects, particularly for research or healthcare facilities?

Hensel Phelps Construction Co. has a significant track record in large-scale construction projects, including design-build delivery methods. They have completed numerous projects for federal agencies and in the healthcare and research sectors. For instance, they have been involved in constructing laboratories, medical centers, and other complex institutional facilities. A detailed review of their past performance on projects of similar size, complexity, and duration would be necessary to fully assess their capability and reliability for the NIH Poolesville A&B Conversion. This would involve examining project completion records, client satisfaction surveys, and any history of disputes or performance issues on comparable federal contracts.

How does the $144 million award compare to the average cost per square foot for similar NIH or federal laboratory construction projects?

To benchmark the $144 million award, we would need the total square footage of the building being converted. Assuming a typical large laboratory or research facility conversion, the cost per square foot can range significantly based on specialization, required infrastructure (e.g., HVAC, specialized power, containment), and location. Federal laboratory construction costs can often exceed commercial averages due to stringent regulatory requirements, security needs, and advanced technological integration. A preliminary comparison might place the cost per square foot in the range of $500-$1000+, but a precise comparison requires detailed project scope and square footage data. Without this, it's difficult to definitively state if the price is competitive.

What are the primary risk indicators associated with this specific design-build contract for the NIH?

Key risk indicators for this design-build contract include the inherent complexity of converting existing structures (potential for unforeseen site conditions, asbestos, or structural issues), the long duration of the project (over 4 years, increasing risk of material cost escalation or labor shortages), and the specialized nature of NIH facilities which demand high precision in design and execution. The firm-fixed-price structure, while beneficial for cost control, can shift risk to the contractor; however, significant change orders could still impact the total cost if the initial scope is not perfectly defined or if unforeseen requirements emerge. Ensuring robust project management and quality assurance throughout the design and construction phases is critical to mitigate these risks.

What is the historical spending pattern for building construction and renovation at the NIH's Poolesville campus?

Analyzing historical spending patterns for building construction and renovation at the NIH's Poolesville campus would provide crucial context for the current $144 million award. This would involve reviewing past contracts awarded for similar projects at this specific location or for comparable facilities within the NIH portfolio. Understanding the frequency, scale, and cost trends of previous renovations or new constructions can help identify any anomalies in the current award, such as significant cost increases over time or a departure from typical project scopes. This historical data is essential for assessing whether the current investment is consistent with past practices or represents a new level of expenditure.

How will the success of this design-build project be measured, and what are the key performance indicators (KPIs)?

The success of this design-build project will likely be measured against several key performance indicators (KPIs). Primarily, adherence to the firm-fixed-price budget of $144 million and the specified completion date (December 20, 2028) are critical. Quality of construction, meeting all functional and technical specifications outlined in the design, and ensuring the facility meets all relevant safety and regulatory standards for NIH operations will be paramount. User satisfaction from the NIH staff who will occupy the building post-completion, as well as the contractor's safety record throughout the project duration, will also serve as important indicators of success.

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: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 3

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 1600 TYSONS BLVD STE 800, TYSONS CORNER, VA, 22102

Business Categories: Category Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $144,045,451

Exercised Options: $144,045,451

Current Obligation: $144,045,451

Actual Outlays: $30,620,007

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 75N99019D00016

IDV Type: IDC

Timeline