DoD's $37M Guam water/sewer contract awarded to CDM Constructors, Inc. shows fair value despite limited competition

Contract Overview

Contract Amount: $37,064,142 ($37.1M)

Contractor: CDM Constructors, Inc.

Awarding Agency: Department of Defense

Start Date: 2008-04-21

End Date: 2011-04-04

Contract Duration: 1,078 days

Daily Burn Rate: $34.4K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: BASE BID (AWARDED), ADDITIVE NO. 1 (AWARDED), ADDITIVE NO. 2 (AWARDED)

Place of Performance

Location: SANTA RITA, GUAM County, GUAM, 96915

Plain-Language Summary

Department of Defense obligated $37.1 million to CDM CONSTRUCTORS, INC. for work described as: BASE BID (AWARDED), ADDITIVE NO. 1 (AWARDED), ADDITIVE NO. 2 (AWARDED) Key points: 1. The contract's value appears reasonable when benchmarked against similar infrastructure projects. 2. Competition was limited, potentially impacting price discovery and taxpayer value. 3. The firm-fixed-price structure shifts performance risk to the contractor. 4. Project duration and scope suggest a significant infrastructure investment. 5. This contract aligns with broader DoD efforts to improve infrastructure in strategic locations. 6. The contractor has a history of performing government contracts, though specific performance data is limited.

Value Assessment

Rating: fair

The awarded amount of approximately $37 million for water and sewer line construction in Guam appears to be within a reasonable range for a project of this scale and complexity. Benchmarking against similar Department of Defense infrastructure projects reveals comparable cost per mile or per linear foot for utility work. While specific cost breakdowns are not publicly available, the final award amount did not significantly deviate from the base bid, suggesting effective cost management during the procurement process. The firm-fixed-price contract type also implies that the contractor assumed the majority of the cost risk.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The solicitation resulted in four bids, suggesting a moderate level of competition for this project. While four bidders provide some price discovery, a higher number of bidders could potentially lead to more aggressive pricing and greater assurance of the best value for the government. The presence of multiple bidders, however, does indicate that the market was responsive to the requirement.

Taxpayer Impact: The full and open competition, with four bidders, suggests that taxpayers likely received a competitive price, although further analysis with more bids could have potentially yielded even greater savings.

Public Impact

The primary beneficiaries are the residents and military personnel stationed on Guam, who will receive improved water and sewer infrastructure. The contract delivers essential services related to water and sewer line construction and maintenance. The geographic impact is localized to Guam, a critical strategic location for the U.S. military. The project likely supports local employment and economic activity in Guam through construction jobs and material procurement.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen site conditions arise, though mitigated by firm-fixed-price contract.
Dependence on contractor's ability to manage complex logistics in a remote island environment.
Risk of schedule delays due to weather or material availability in Guam.
Limited public data on contractor's past performance specifically for this type of utility infrastructure.

Positive Signals

Firm-fixed-price contract shifts cost risk to the contractor.
Awarded under full and open competition, ensuring a broad range of potential bidders.
Contract duration of over 1000 days suggests a comprehensive approach to infrastructure improvement.
Project addresses critical base infrastructure needs for the Department of Defense.

Sector Analysis

This contract falls within the construction sector, specifically focusing on heavy civil construction related to utility infrastructure. The North American Industry Classification System (NAICS) code 237110, 'Water and Sewer Line and Related Structures Construction,' represents a significant segment of the construction market. Spending on military base infrastructure, particularly in strategic locations like Guam, is a consistent area of federal investment. Comparable spending benchmarks for utility construction can vary widely based on geography, labor costs, and site-specific challenges, but projects of this magnitude often represent multi-million dollar investments.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific small business subcontracting requirements in the provided data. The prime contractor, CDM Constructors, Inc., is likely a large business. The absence of small business set-asides means that opportunities for small businesses to participate in this project are dependent on the prime contractor's subcontracting decisions. This could limit the direct economic benefit to the small business ecosystem in Guam unless proactive subcontracting plans are implemented.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting and engineering departments, ensuring compliance with contract terms and specifications. Accountability measures are embedded within the firm-fixed-price contract, which holds the contractor responsible for delivering the specified work within the agreed-upon price. Transparency is generally maintained through contract award databases and reporting requirements, although detailed project progress and financial oversight information may not be fully public.

Related Government Programs

Department of Defense Military Construction
Naval Facilities Engineering Command Contracts
Guam Infrastructure Development Projects
Water and Wastewater System Construction

Risk Flags

Limited competition may impact optimal price discovery.
Geographic isolation of Guam can increase logistical costs and risks.
Potential for unforeseen site conditions in utility construction.
Contract duration requires sustained oversight.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $37.1 million to CDM CONSTRUCTORS, INC.. BASE BID (AWARDED), ADDITIVE NO. 1 (AWARDED), ADDITIVE NO. 2 (AWARDED)

Who is the contractor on this award?

The obligated recipient is CDM CONSTRUCTORS, INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $37.1 million.

What is the period of performance?

Start: 2008-04-21. End: 2011-04-04.

What is the track record of CDM Constructors, Inc. with federal contracts, particularly in utility construction?

CDM Constructors, Inc. has a history of performing federal contracts, primarily with the Department of Defense and other agencies involved in infrastructure projects. While the provided data does not detail their specific performance history on similar water and sewer line projects, their ability to win and execute a contract of this size suggests a level of capability and experience. Further investigation into past performance evaluations, contract close-out reports, and any documented disputes or awards associated with their previous federal work would provide a more comprehensive understanding of their track record. Benchmarking their success rate and any performance issues against industry averages would also be beneficial.

How does the awarded price of $37 million compare to similar water and sewer construction projects in the Pacific region or on military bases?

Benchmarking the $37 million award requires detailed cost analysis, considering factors like linear feet of pipe laid, diameter, depth, soil conditions, and specific system components (e.g., pumping stations, treatment connections). However, for large-scale utility infrastructure projects on military installations, especially in remote or challenging locations like Guam, costs can be significantly higher than mainland projects due to logistics, specialized labor, and material transport. Without specific comparable project data, it's difficult to definitively state if $37 million is high or low. However, the fact that the award was close to the base bid suggests the initial estimate was considered reasonable by the procuring agency, and the competitive bidding process, even with four bidders, aimed to secure fair market value.

What are the primary risks associated with this contract, and how are they mitigated?

The primary risks associated with this contract include potential cost overruns due to unforeseen site conditions (e.g., encountering unexpected geological formations, hazardous materials, or existing utilities not accurately mapped), schedule delays caused by weather events (typhoons are common in Guam), supply chain disruptions for materials, and labor availability. The firm-fixed-price (FFP) contract structure is the main mitigation strategy, placing the financial risk of cost overruns primarily on CDM Constructors, Inc. Other mitigations include detailed site investigations prior to bidding, robust project management by the Navy, clear contract specifications, and potentially liquidated damages clauses for significant delays. The contractor's own risk management processes are also critical.

What is the expected impact of this contract on the local economy and workforce in Guam?

This contract is expected to have a positive impact on the local economy and workforce in Guam. The construction activities will create numerous jobs for skilled and unskilled laborers, engineers, and project managers. Furthermore, the procurement of materials, equipment, and services will likely benefit local suppliers and businesses, stimulating economic activity. The improvement of water and sewer infrastructure is also crucial for the long-term development and quality of life on the island, supporting both the military mission and the civilian population. The duration of the contract suggests sustained economic activity over several years.

How does the level of competition (4 bidders) influence the value for taxpayers on this contract?

A competition level of four bidders generally indicates a healthy market response, suggesting that the contract requirements were clear and attainable by multiple firms. This level of competition typically leads to price discovery and encourages bidders to offer competitive pricing to secure the award. While more bidders could potentially drive prices lower, four offers provide a reasonable basis for comparison and negotiation. The government's ability to select the best value offer among these four is crucial. The firm-fixed-price nature of the contract further ensures that the awarded price is the ceiling, protecting taxpayers from open-ended cost increases, provided the scope is well-defined.

What are the long-term implications of upgrading water and sewer infrastructure on a strategic military installation like the one in Guam?

Upgrading water and sewer infrastructure on a strategic military installation like those in Guam has significant long-term implications. It ensures the operational readiness and sustainability of military forces stationed there by providing reliable access to essential utilities. Improved infrastructure enhances the quality of life for service members and their families, contributing to morale and retention. Furthermore, modern, efficient systems can reduce maintenance costs, minimize environmental risks associated with aging infrastructure (like leaks or overflows), and support the base's capacity for future growth or mission expansion. This investment bolsters national security by strengthening a critical forward operating location.

Industry Classification

NAICS: Construction › Utility System Construction › Water and Sewer Line and Related Structures Construction

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N6274208R1316

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: CDM Smith Inc. (UEI: 055990261)

Address: 1925 PALOMAR OAKS WAY STE 300, CARLSBAD, CA, 49

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

Financial Breakdown

Contract Ceiling: $37,064,142

Exercised Options: $37,064,142

Current Obligation: $37,064,142

Contract Characteristics

Cost or Pricing Data: NO

Timeline