DoD Awards $84.9M Firm Fixed Price Contract for Hickam AFB Construction, Facing Potential Cost Overruns

Contract Overview

Contract Amount: $84,871,429 ($84.9M)

Contractor: NAN Inc

Awarding Agency: Department of Defense

Start Date: 2011-06-06

End Date: 2018-04-30

Contract Duration: 2,520 days

Daily Burn Rate: $33.7K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 10

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: FY11 MCON P-005, CONSTRUCT POW / MIA ACCOUNTING COMMAND, HICKAM AIR FORCE BASE, HAWAII

Place of Performance

Location: HICKAM AFB, HONOLULU County, HAWAII, 96853

State: Hawaii Government Spending

Plain-Language Summary

Department of Defense obligated $84.9 million to NAN INC for work described as: FY11 MCON P-005, CONSTRUCT POW / MIA ACCOUNTING COMMAND, HICKAM AIR FORCE BASE, HAWAII Key points: 1. The contract awarded to Nan Inc. for construction at Hickam Air Force Base is a significant investment in military infrastructure. 2. While the contract was awarded under full and open competition, the significant duration and potential cost increases warrant scrutiny. 3. The project's completion date is well past the initial award, raising concerns about project management and potential cost escalations. 4. The construction sector is highly competitive, but specific project complexities can lead to unforeseen expenses.

Value Assessment

Rating: questionable

The contract value of $84.9 million is substantial for a single construction project. The reported 'br' (budgeted risk?) of $33.6 million suggests a significant contingency or potential for cost growth, which is concerning for a firm fixed-price contract.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, indicating a broad search for qualified bidders. However, the extended duration and potential for cost increases suggest that the initial price discovery may not have fully accounted for all project risks.

Taxpayer Impact: Taxpayers are impacted by the base contract value and any potential cost overruns that may arise due to project complexities or management issues.

Public Impact

Military families and personnel at Hickam Air Force Base will benefit from improved facilities. Local construction firms may have been subcontractors, contributing to the regional economy. The project's extended timeline could cause disruptions to base operations. Government oversight is crucial to ensure the project stays within budget and meets quality standards.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extended contract duration beyond initial estimates.
Significant 'budgeted risk' or contingency noted.
Potential for cost overruns on a fixed-price contract.

Positive Signals

Awarded through full and open competition.
Supports critical military infrastructure needs.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, a vital part of the defense industrial base. Spending in this sector is often driven by infrastructure upgrades and modernization efforts, with typical contract values varying widely based on project scope and complexity.

Small Business Impact

While the contract was awarded to Nan Inc., it is unclear if small businesses were involved as subcontractors. Further analysis would be needed to determine the extent of small business participation in this large-scale construction project.

Oversight & Accountability

The Department of the Navy, under the Department of Defense, is responsible for overseeing this contract. Given the project's extended duration and potential cost concerns, robust oversight is essential to ensure accountability and prevent unnecessary expenditure of taxpayer funds.

Related Government Programs

Commercial and Institutional Building Construction
Department of Defense Contracting
Department of the Navy Programs

Risk Flags

Extended contract duration.
High budgeted risk/contingency.
Potential for cost overruns.
Long project timeline impacting value.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $84.9 million to NAN INC. FY11 MCON P-005, CONSTRUCT POW / MIA ACCOUNTING COMMAND, HICKAM AIR FORCE BASE, HAWAII

Who is the contractor on this award?

The obligated recipient is NAN 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 $84.9 million.

What is the period of performance?

Start: 2011-06-06. End: 2018-04-30.

What specific factors contributed to the significant 'budgeted risk' or contingency of $33.6 million on this firm fixed-price contract?

The substantial budgeted risk suggests that the initial cost estimates may have underestimated unforeseen challenges such as complex site conditions, material price volatility, or potential design changes. Firm fixed-price contracts aim to shift risk to the contractor, but a high contingency indicates the government anticipated significant potential for cost increases, possibly due to the project's complexity or the contractor's historical performance.

How does the extended contract duration (awarded 2011, ended 2018) impact the overall value and effectiveness of this construction project?

An extended duration, especially for construction, can lead to increased costs due to inflation, extended labor, and potential rework if materials or standards change. It also delays the intended benefits of the new facilities. While some long projects are unavoidable, a significant extension beyond initial projections raises questions about initial planning, project management, and whether the final delivered facility meets the most current operational needs effectively.

What measures were in place to ensure cost control and prevent significant overruns, given the large contingency noted on this project?

Despite being a firm fixed-price contract, the large contingency implies a recognized risk of cost growth. Effective oversight would involve regular progress reviews, strict change order management, and performance monitoring. The government likely had mechanisms to scrutinize any requests for additional funding or contract modifications, ensuring that any approved increases were justified and directly related to unforeseen, unavoidable project requirements.

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: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: N6274210R1305

Offers Received: 10

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 636 LAUMAKA ST, HONOLULU, HI, 96819

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

Financial Breakdown

Contract Ceiling: $84,877,309

Exercised Options: $84,871,429

Current Obligation: $84,871,429

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline