NIH awards $94.7M for electrical substation upgrade, raising questions about competition and value

Contract Overview

Contract Amount: $94,725,184 ($94.7M)

Contractor: Potomac Electric Power CO

Awarding Agency: Department of Health and Human Services

Start Date: 2024-09-30

End Date: 2028-05-31

Contract Duration: 1,339 days

Daily Burn Rate: $70.7K/day

Competition Type: NOT AVAILABLE FOR COMPETITION

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: C107469 ELECTRICAL SUBSTATION UPGRADE PHASE 1A

Place of Performance

Location: BETHESDA, MONTGOMERY County, MARYLAND, 20892

State: Maryland Government Spending

Plain-Language Summary

Department of Health and Human Services obligated $94.7 million to POTOMAC ELECTRIC POWER CO for work described as: C107469 ELECTRICAL SUBSTATION UPGRADE PHASE 1A Key points: 1. Contract awarded on a sole-source basis, limiting price discovery and potentially increasing costs. 2. Significant investment in critical infrastructure for NIH facilities in Maryland. 3. Long performance period of nearly four years suggests a complex and extensive project. 4. Lack of competition raises concerns about whether the government secured the best possible value. 5. Fixed-price contract type aims to control costs, but initial award price needs benchmarking. 6. The project's success hinges on effective project management and contractor performance over its duration.

Value Assessment

Rating: questionable

The contract's value of $94.7 million for an electrical substation upgrade requires careful benchmarking against similar projects. Without competitive bids, it is difficult to ascertain if this price represents fair market value. The fixed-price nature of the contract provides some cost certainty, but the absence of competition means the government may not have benefited from potential cost savings that a competitive bidding process could have yielded. Further analysis of the scope of work and the contractor's proposed costs is needed to fully assess value for money.

Cost Per Unit: N/A

Competition Analysis

Competition Level: sole-source

This contract was awarded on a sole-source basis, meaning only one vendor was solicited. This approach bypasses the standard competitive bidding process, which typically involves multiple vendors submitting proposals. While sole-source awards can be justified in specific circumstances (e.g., unique capabilities, urgent needs), they inherently limit the government's ability to explore a wider range of pricing and technical solutions. The lack of competition here means potential cost savings and innovative approaches from other qualified contractors were not considered.

Taxpayer Impact: Sole-source awards can lead to higher prices for taxpayers as the government does not benefit from the downward pressure that competition usually creates. This limits the government's leverage in negotiating the best possible price for goods and services.

Public Impact

The primary beneficiaries are the National Institutes of Health (NIH) facilities in Maryland, which will receive upgraded electrical infrastructure. The project will ensure reliable power supply, crucial for sensitive research and operations at NIH. The upgrade is geographically focused within Maryland, impacting local utility infrastructure and potentially local construction jobs. While not explicitly a job creation contract, the long duration may support a consistent workforce for the awarded contractor.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Sole-source award limits competitive pressure, potentially leading to higher costs for taxpayers.
Long contract duration increases the risk of cost overruns or scope creep if not managed tightly.
Dependence on a single contractor for critical infrastructure upgrades poses a risk if performance issues arise.

Positive Signals

Fixed-price contract type provides cost certainty for the awarded amount.
The project addresses a critical infrastructure need, ensuring operational continuity for NIH.
The upgrade is expected to modernize and improve the reliability of essential power systems.

Sector Analysis

This contract falls within the broader energy and utilities sector, specifically focusing on electrical infrastructure upgrades. The market for such services involves specialized engineering firms and utility companies capable of handling large-scale power system projects. The spending benchmark for similar substation upgrades can vary significantly based on size, complexity, and location, but a $94.7 million award indicates a substantial project. This contract represents a significant investment in maintaining and modernizing critical federal infrastructure.

Small Business Impact

There is no indication that this contract includes small business set-asides or subcontracting requirements. As a sole-source award to a large utility provider, it is unlikely to directly benefit the small business ecosystem. Further investigation into the prime contractor's subcontracting plan would be necessary to determine any indirect impact on small businesses.

Oversight & Accountability

Oversight for this contract will likely be managed by the contracting officer and program officials within the National Institutes of Health. The fixed-price nature of the contract provides a degree of financial oversight by setting a ceiling on costs. Transparency regarding the justification for the sole-source award and the detailed project milestones should be available through federal procurement databases. Inspector General involvement would typically be triggered by allegations of fraud, waste, or abuse.

Related Government Programs

Federal Buildings and Facilities
Utility Services
Infrastructure Modernization Programs
Department of Health and Human Services Capital Investments

Risk Flags

Sole-source award
Long performance period
Lack of publicly available justification for sole-source award

Frequently Asked Questions

What is this federal contract paying for?

Department of Health and Human Services awarded $94.7 million to POTOMAC ELECTRIC POWER CO. C107469 ELECTRICAL SUBSTATION UPGRADE PHASE 1A

Who is the contractor on this award?

The obligated recipient is POTOMAC ELECTRIC POWER 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 $94.7 million.

What is the period of performance?

Start: 2024-09-30. End: 2028-05-31.

What is the specific justification for awarding this contract on a sole-source basis?

The provided data does not specify the justification for the sole-source award. Typically, sole-source contracts are awarded when only one responsible source is available or capable of meeting the government's needs. This could be due to unique technical requirements, proprietary technology, or an urgent and compelling need where competition is not feasible. A thorough review of the contract file and associated documentation would be required to understand the precise rationale behind bypassing the competitive bidding process for this $94.7 million electrical substation upgrade.

How does the $94.7 million award compare to similar electrical substation upgrade projects at other federal facilities?

Benchmarking this $94.7 million award against similar federal electrical substation upgrades is challenging without more specific details on the project's scope, complexity, and location. However, for context, large-scale substation projects can range from tens of millions to hundreds of millions of dollars. Factors influencing cost include the voltage levels, capacity requirements, integration with existing systems, environmental considerations, and the specific technologies employed. Given the sole-source nature, a direct comparison to competitively bid projects would be most insightful to assess potential price differences.

What are the key performance indicators (KPIs) and milestones for this contract, and how will NIH monitor progress?

The provided data does not detail the specific Key Performance Indicators (KPIs) or milestones for this contract. However, for a project of this nature and duration (nearly four years), typical KPIs would likely include adherence to project schedules, quality of work, safety compliance, and successful integration of new equipment. NIH program officials and the Contracting Officer's Representative (COR) would be responsible for monitoring progress through regular site visits, progress reports from the contractor, and review of deliverables against the contract's statement of work and schedule. The fixed-price nature also implies milestones tied to payment tranches.

What is the track record of Potomac Electric Power Co. (PEPCO) in performing similar large-scale electrical infrastructure projects for the federal government?

Potomac Electric Power Co. (PEPCO) is a major utility provider primarily serving the Washington D.C. metropolitan area, including Maryland. While PEPCO's core business is electricity distribution and service, its experience with large-scale infrastructure projects, particularly those involving federal facilities, would need specific verification. Federal procurement databases (like SAM.gov or FPDS) would contain records of past federal contracts awarded to PEPCO. Assessing their past performance, including on-time delivery, budget adherence, and quality of work on similar projects, is crucial for understanding their capability to execute this $94.7 million upgrade.

What are the potential risks associated with a nearly four-year performance period for an electrical substation upgrade?

A performance period of nearly four years for an electrical substation upgrade presents several potential risks. Firstly, the extended timeline increases the likelihood of unforeseen site conditions or changes in regulatory requirements that could impact costs and schedule. Secondly, technological advancements in electrical systems might occur during this period, potentially making the newly installed infrastructure outdated sooner than anticipated. Thirdly, managing a project over such a long duration requires sustained oversight to prevent scope creep and ensure consistent contractor performance and quality. Finally, economic factors like inflation could affect the cost of materials and labor over the contract's life, even with a fixed-price structure, if not adequately accounted for.

Industry Classification

NAICS: Utilities › Electric Power Generation, Transmission and Distribution › Other Electric Power Generation

Product/Service Code: UTILITIES AND HOUSEKEEPING › UTILITIES

Competition & Pricing

Extent Competed: NOT AVAILABLE FOR COMPETITION

Solicitation Procedures: ONLY ONE SOURCE

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 701 9TH ST NW, WASHINGTON, DC, 20068

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

Financial Breakdown

Contract Ceiling: $94,725,184

Exercised Options: $94,725,184

Current Obligation: $94,725,184

Actual Outlays: $12,821,768

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: 47PA0420D0064

IDV Type: IDC

Timeline