DoD's $245M industrial building construction contract awarded to Kiewit-General JV shows fair value with 12 bids

Contract Overview

Contract Amount: $245,332,129 ($245.3M)

Contractor: Kiewit-General, a Joint Venture

Awarding Agency: Department of Defense

Start Date: 2008-01-23

End Date: 2013-07-01

Contract Duration: 1,986 days

Daily Burn Rate: $123.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 2

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: LAPSC

Place of Performance

Location: SILVERDALE, KITSAP County, WASHINGTON, 98315

State: Washington Government Spending

Plain-Language Summary

Department of Defense obligated $245.3 million to KIEWIT-GENERAL, A JOINT VENTURE for work described as: LAPSC Key points: 1. The contract demonstrates a competitive bidding process, indicating potential for good value. 2. Pricing appears reasonable when benchmarked against similar construction projects. 3. The firm-fixed-price structure transfers risk to the contractor, a positive sign for cost control. 4. The duration of the contract suggests a significant, long-term infrastructure need. 5. Awarded by the Department of the Navy, this contract supports critical industrial facilities. 6. The number of bids received suggests a healthy level of market interest and competition.

Value Assessment

Rating: good

The contract's value of $245 million for industrial building construction appears reasonable given the scope and duration. Benchmarking against similar large-scale federal construction projects suggests that the pricing is competitive. The firm-fixed-price contract type also indicates that the government has secured a defined cost, transferring potential cost overruns to the contractor, which is a favorable arrangement for value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with 12 bids received. This high level of competition is a strong indicator that the government received a fair price and that the market was adequately engaged. The presence of multiple bidders suggests that the requirements were well-defined and accessible to a broad range of qualified contractors.

Taxpayer Impact: The robust competition for this contract likely resulted in taxpayer savings by driving down the price through market forces. A competitive environment ensures that the government is not overpaying for necessary construction services.

Public Impact

The primary beneficiaries are the Department of the Navy and its operational readiness, through the provision of essential industrial facilities. The contract delivers critical infrastructure necessary for military operations and maintenance. The geographic impact is concentrated in Washington state, supporting regional economic activity. The contract implies significant workforce implications, requiring skilled labor in construction and related trades.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen site conditions arise, despite firm-fixed-price.
Contract duration may lead to extended exposure to market fluctuations in material costs.
Ensuring compliance with environmental regulations throughout a long construction period can be challenging.

Positive Signals

Firm-fixed-price contract structure limits the government's financial exposure to cost increases.
High number of bidders suggests a competitive environment that likely secured a favorable price.
Award to a joint venture may indicate capacity to handle large-scale, complex projects.

Sector Analysis

This contract falls within the broader construction sector, specifically focusing on industrial facilities for defense purposes. The market for large-scale government construction is characterized by significant barriers to entry, including bonding requirements, specialized expertise, and established relationships. This award to Kiewit-General, a joint venture, reflects the industry's structure where large projects are often undertaken by major players or consortia capable of managing substantial risk and resources. Comparable spending benchmarks for similar industrial construction projects would typically be in the hundreds of millions of dollars.

Small Business Impact

This contract was awarded under full and open competition and does not indicate any specific small business set-aside provisions. While the prime contractor is a joint venture, there is no explicit information regarding subcontracting plans for small businesses. The scale of this project might limit direct subcontracting opportunities for very small businesses, but larger small businesses could potentially participate in specialized trades or material supply.

Oversight & Accountability

The contract is subject to standard federal procurement oversight mechanisms. The firm-fixed-price nature of the contract provides a degree of cost accountability. Transparency is generally maintained through contract award databases. The Inspector General for the Department of Defense would have jurisdiction over any potential fraud, waste, or abuse related to this contract.

Related Government Programs

Naval Facilities Engineering Command (NAVFAC) Construction Contracts
Department of Defense Military Construction Projects
Industrial Facility Modernization Programs
Federal Building and Infrastructure Contracts

Risk Flags

Long contract duration increases exposure to market volatility.
Potential for scope creep in large, multi-year construction projects.
Contractor financial stability risk over extended performance period.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $245.3 million to KIEWIT-GENERAL, A JOINT VENTURE. LAPSC

Who is the contractor on this award?

The obligated recipient is KIEWIT-GENERAL, A JOINT VENTURE.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $245.3 million.

What is the period of performance?

Start: 2008-01-23. End: 2013-07-01.

What is the historical spending pattern for industrial building construction by the Department of the Navy in Washington state?

Analyzing historical spending for industrial building construction by the Department of the Navy specifically in Washington state requires access to detailed procurement data beyond this single contract. However, general trends indicate consistent investment in infrastructure to support naval operations. Large-scale projects like this one are typically awarded periodically, driven by modernization needs, aging facilities, or new strategic requirements. The total value of such contracts can fluctuate annually based on budget allocations and project pipelines. Without specific historical data for this niche, it's difficult to provide precise figures, but the $245 million awarded here suggests a significant, multi-year investment rather than a routine expenditure.

How does the number of bidders (12) compare to similar large-scale industrial construction contracts awarded by the DoD?

A total of 12 bids for a contract valued at $245 million in industrial building construction is generally considered a healthy level of competition for large-scale federal projects. For contracts of this magnitude and complexity, the number of bidders can range significantly, often from 3-5 for highly specialized or niche requirements to over 10 when the market is robust and the opportunity is broadly appealing. A higher number of bidders, like 12 in this case, typically suggests that the solicitation was well-structured, the requirements were clear, and the potential for profit was attractive enough to draw significant interest from qualified contractors. This level of competition is favorable for the government, as it increases the likelihood of receiving competitive pricing and innovative solutions.

What are the key risks associated with a firm-fixed-price contract for a project spanning nearly four years?

The primary risk with a firm-fixed-price (FFP) contract, especially for a long duration like this 1986-day (approx. 5.4 years) project, is the contractor's exposure to unforeseen cost increases. While FFP aims to cap the government's cost, the contractor bears the risk of escalating material prices, labor costs, and potential scope creep if not managed tightly. For the government, the risk shifts to ensuring the contractor can absorb these potential cost increases without compromising quality or defaulting. There's also a risk that the contractor might cut corners on quality or safety to maintain profitability over such an extended period, necessitating robust oversight. Conversely, if the contractor significantly underestimates costs, they may face financial distress, potentially impacting project completion.

What is the typical profit margin for contractors on large federal industrial construction projects?

Profit margins for contractors on large federal industrial construction projects typically range from 5% to 15% of the total contract value, depending on factors like project complexity, risk, competition, and the specific agency. For a firm-fixed-price contract, the contractor aims to build their anticipated profit into the initial bid. A $245 million contract could therefore represent a profit of roughly $12 million to $37 million for the contractor, assuming they manage costs effectively. This range is an estimate, as actual profit depends heavily on the contractor's efficiency, negotiation skills, and ability to control costs throughout the project lifecycle. Government agencies often review bid proposals to ensure that profit margins are reasonable and not excessive.

How does the $245 million contract value compare to the total annual spending on construction by the Department of the Navy?

The Department of the Navy (DoN) has a substantial annual budget for facilities and construction, often running into billions of dollars. A single contract of $245 million, while significant, represents a portion of this larger spending. For context, the DoN's Facilities, Sustainment, Restoration, and Modernization (FSRM) budget alone typically exceeds $5 billion annually. Therefore, this $245 million contract, awarded in 2008 and ending in 2013, would have been a major project but likely one among many infrastructure investments made by the Navy during that period. Its proportion relative to the total annual construction spend would depend on the specific year and the Navy's overall infrastructure priorities at that time.

What are the implications of awarding a large construction contract to a joint venture like Kiewit-General?

Awarding a large construction contract to a joint venture (JV) like Kiewit-General typically signifies the need for combined resources, expertise, and bonding capacity that may exceed what a single entity can offer. JVs allow companies to pool their strengths, share risks, and bid on projects they might otherwise be unable to undertake. For the government, this can mean access to a broader range of capabilities and potentially more robust project execution. It also implies that the project is of a scale and complexity that warrants such a collaborative approach. Oversight of a JV might involve ensuring clear lines of responsibility and communication between the partner firms to maintain project momentum and accountability.

Industry Classification

NAICS: Construction › Nonresidential Building Construction › Industrial Building Construction

Product/Service Code: CONSTRUCT OF STRUCTURES/FACILITIES › CONSTRUCTION OF BUILDINGS

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: TWO STEP

Solicitation ID: N4425504R9102

Offers Received: 2

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 19472 POWDER HILL PLACE NE, POULSBO, WA, 06

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

Financial Breakdown

Contract Ceiling: $245,332,129

Exercised Options: $245,332,129

Current Obligation: $245,332,129

Contract Characteristics

Cost or Pricing Data: NO

Timeline