State Department awards $214M embassy construction contract to Pernix Group, Inc. after full and open competition

Contract Overview

Contract Amount: $214,175,559 ($214.2M)

Contractor: Pernix Group, Inc.

Awarding Agency: Department of State

Start Date: 2016-03-07

End Date: 2021-08-11

Contract Duration: 1,983 days

Daily Burn Rate: $108.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: CONTRACT FOR THE CONSTRUCTION OF THE NEW EMBASSY COMPOUND IN MAPUTO, MOZAMBIQUE IGF::OT::IGF

Plain-Language Summary

Department of State obligated $214.2 million to PERNIX GROUP, INC. for work described as: CONTRACT FOR THE CONSTRUCTION OF THE NEW EMBASSY COMPOUND IN MAPUTO, MOZAMBIQUE IGF::OT::IGF Key points: 1. Contract awarded through full and open competition, suggesting a robust market for embassy construction services. 2. The contract duration of 1983 days indicates a significant, long-term construction project. 3. The firm-fixed-price contract type shifts cost risk to the contractor, potentially stabilizing final costs. 4. The award to a single entity, Pernix Group, Inc., highlights the specialized nature of large-scale international construction. 5. The project's geographic focus on Mozambique suggests specific geopolitical and development considerations. 6. The absence of small business set-asides indicates the scale and nature of the work may not be conducive to smaller firms.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without comparable embassy construction projects in similar regions. The firm-fixed-price structure provides cost certainty, but the total cost of $214 million is substantial. Further analysis would require comparing the cost per square foot or per functional unit against similar international construction projects, considering factors like labor costs, material availability, and security requirements in Mozambique.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple qualified contractors had the opportunity to bid. The presence of 4 bidders (as indicated by 'no': 4) suggests a reasonable level of competition for this significant project. This competitive process is expected to drive more favorable pricing and terms for the government compared to sole-source or limited competition scenarios.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to lower prices and better quality services. It ensures that the government is not limited to a single provider, maximizing the potential for cost savings and innovation.

Public Impact

The primary beneficiary is the U.S. Department of State, which will gain a new, modern embassy compound in Maputo, Mozambique. The contract delivers construction services for a major diplomatic facility, enhancing U.S. presence and operations in the region. The geographic impact is concentrated in Maputo, Mozambique, potentially creating local employment opportunities during the construction phase. The project may indirectly benefit local Mozambican businesses through subcontracting opportunities and the procurement of local materials and services.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns if unforeseen site conditions or geopolitical instability arise in Mozambique, despite the fixed-price contract.
Contractor performance risk associated with delivering a complex, large-scale project in an international location with potentially different regulatory and logistical challenges.
Long project duration increases exposure to market fluctuations in material costs and labor rates, even with a fixed-price agreement.

Positive Signals

Firm-fixed-price contract structure provides cost certainty and shifts risk to the contractor.
Full and open competition with multiple bidders suggests a healthy market and potential for competitive pricing.
Award to an established contractor (Pernix Group, Inc.) may indicate a track record of successfully executing similar projects.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, specifically for large-scale government facilities abroad. The market for constructing diplomatic compounds is specialized, often involving stringent security, logistical, and architectural requirements. Spending in this niche can be significant, but it is highly dependent on geopolitical needs and infrastructure development priorities. Comparable benchmarks would include other embassy constructions or large international government building projects.

Small Business Impact

The data indicates this contract was not set aside for small businesses (ss: false, sb: false). The substantial dollar value and complexity of constructing an embassy compound typically favor larger, experienced firms capable of managing extensive resources, supply chains, and international logistics. While direct set-asides were not utilized, there may be opportunities for small businesses to participate as subcontractors to the prime contractor, Pernix Group, Inc., depending on their subcontracting plan and needs.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Department of State's Bureau of Overseas Buildings Operations (OBO) and its contracting officers. The Inspector General of the Department of State would also have jurisdiction to investigate potential fraud, waste, or abuse. Transparency is facilitated through contract award databases, but detailed project progress and financial reporting are typically internal to the agency and contractor.

Related Government Programs

Embassy Construction Projects
Overseas Building Operations
Department of State Facilities Management
International Construction Contracts
Fixed-Price Construction Contracts

Risk Flags

Potential for cost escalation due to long project duration
Geopolitical risks in the host country
Contractor performance on complex international projects
Site-specific challenges in Mozambique

Frequently Asked Questions

What is this federal contract paying for?

Department of State awarded $214.2 million to PERNIX GROUP, INC.. CONTRACT FOR THE CONSTRUCTION OF THE NEW EMBASSY COMPOUND IN MAPUTO, MOZAMBIQUE IGF::OT::IGF

Who is the contractor on this award?

The obligated recipient is PERNIX GROUP, INC..

Which agency awarded this contract?

Awarding agency: Department of State (Department of State).

What is the total obligated amount?

The obligated amount is $214.2 million.

What is the period of performance?

Start: 2016-03-07. End: 2021-08-11.

What is Pernix Group, Inc.'s track record with large-scale international construction projects, particularly for government entities?

Pernix Group, Inc. has a history of undertaking significant construction projects globally. While specific details on their track record for embassy construction require deeper investigation into their past performance reports and project portfolios, their selection for this $214 million Department of State contract suggests they possess the requisite experience and capabilities. Analyzing their past performance on similar-sized projects, especially those involving complex logistical challenges, security requirements, and international regulatory environments, would provide a clearer picture of their reliability and expertise in executing such critical infrastructure developments.

How does the awarded price of $214 million compare to similar embassy construction projects in comparable regions?

Directly comparing the $214 million award to similar embassy construction projects is challenging without access to a comprehensive database of international embassy construction costs, adjusted for regional economic factors, security requirements, and specific project scopes. However, the scale of the project, involving a new embassy compound, suggests a significant investment. Factors such as the size of the facility, the complexity of its design, the security features mandated, and the local cost of labor and materials in Maputo, Mozambique, would all influence the final price. A thorough value assessment would involve benchmarking against projects of similar size and complexity in other developing regions, considering the 'cost per square foot' or 'cost per functional unit' metrics.

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

The primary risks for this contract include potential cost overruns due to unforeseen site conditions or geopolitical instability in Mozambique, despite the firm-fixed-price structure. Contractor performance risk is also significant, given the complexity and international nature of the project. Mitigation strategies likely involve robust contract oversight by the Department of State, detailed site investigations prior to construction, contingency planning for logistical challenges, and adherence to strict security protocols. The firm-fixed-price nature itself is a mitigation tool, transferring significant cost risk to Pernix Group, Inc. However, the long duration of the project (1983 days) inherently increases exposure to market fluctuations.

How effective is the full and open competition process in ensuring value for money for this type of specialized construction?

The full and open competition process is generally effective in ensuring value for money for specialized construction projects like embassy compounds. By allowing all qualified contractors to bid, it fosters a competitive environment that can drive down prices and encourage innovation. The fact that four bidders participated indicates a healthy level of market interest. This process helps the government secure competitive pricing and ensures that the contract is awarded to the offeror providing the best overall value, considering technical capabilities, past performance, and price. However, the effectiveness is contingent on the clarity of the solicitation requirements and the rigor of the evaluation process.

What is the historical spending pattern for embassy construction by the Department of State, and how does this contract fit within that trend?

Historical spending on embassy construction by the Department of State, particularly through the Bureau of Overseas Buildings Operations (OBO), has been substantial and cyclical, driven by infrastructure modernization needs, security upgrades, and geopolitical priorities. Contracts for new embassy compounds are typically large, multi-year endeavors. This $214 million contract for the Maputo embassy fits within the expected range for such projects, reflecting ongoing investment in diplomatic facilities worldwide. Analyzing past OBO spending trends would reveal the average cost per project, the frequency of new construction awards, and the geographical distribution of these investments, providing context for the significance and scale of the Maputo project.

Industry Classification

NAICS: Construction › Nonresidential Building Construction › Commercial and Institutional Building Construction

Product/Service Code: ARCHITECT/ENGINEER SERVICES › ARCH-ENG SVCS - CONSTRUCTION

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Solicitation ID: SAQMMA14F0073

Offers Received: 4

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 151 E 22ND ST, LOMBARD, IL, 60148

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

Financial Breakdown

Contract Ceiling: $214,175,559

Exercised Options: $214,175,559

Current Obligation: $214,175,559

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline