VA's $126.5M Palo Alto Healthcare System project awarded to Walsh/D'Maria Joint Venture

Contract Overview

Contract Amount: $126,493,873 ($126.5M)

Contractor: Walsh'demaria Joint Venture V

Awarding Agency: Department of Veterans Affairs

Start Date: 2011-09-30

End Date: 2020-08-31

Contract Duration: 3,258 days

Daily Burn Rate: $38.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 7

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: PALO ALTO HEALTHCARE SYSTEM CAPITOL IMPROVEMENT PROJECT.

Place of Performance

Location: PALO ALTO, SANTA CLARA County, CALIFORNIA, 94304

State: California Government Spending

Plain-Language Summary

Department of Veterans Affairs obligated $126.5 million to WALSH'DEMARIA JOINT VENTURE V for work described as: PALO ALTO HEALTHCARE SYSTEM CAPITOL IMPROVEMENT PROJECT. Key points: 1. The contract value represents a significant investment in healthcare infrastructure. 2. The project was awarded under full and open competition, suggesting a robust bidding process. 3. The firm-fixed-price contract type shifts cost risk to the contractor. 4. The project duration of over 3200 days indicates a long-term, complex undertaking. 5. The project is located in California, a state with substantial healthcare construction needs. 6. The absence of small business set-aside flags suggests a focus on large prime contractors.

Value Assessment

Rating: fair

The contract value of $126.5 million for a healthcare system capital improvement project in California appears within a reasonable range for large-scale construction. However, without specific benchmarks for comparable projects in the Palo Alto region or detailed cost breakdowns, a precise value-for-money assessment is challenging. The firm-fixed-price structure provides cost certainty for the government, but the final cost is heavily dependent on the contractor's efficiency and management of unforeseen issues over the project's extended duration.

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 a bid. The presence of 7 bidders suggests a healthy level of competition for this significant healthcare construction project. This competitive environment is generally favorable for price discovery and can lead to more cost-effective outcomes for the government.

Taxpayer Impact: The full and open competition likely resulted in a more competitive bid, potentially saving taxpayer dollars compared to a sole-source or limited competition award.

Public Impact

The primary beneficiaries are veterans in the Palo Alto region, who will receive improved healthcare facilities. The project delivers essential construction services for a major healthcare system. The geographic impact is concentrated in Palo Alto, California. The project will likely create numerous jobs in the construction sector within California.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Extended project duration (3258 days) increases the risk of cost overruns due to inflation and potential scope creep.
Firm-fixed-price contracts can lead to disputes if unforeseen conditions arise that were not adequately addressed in the initial scope.
Reliance on a single joint venture for such a large project concentrates risk.
Lack of specific details on sustainability or green building practices could be a missed opportunity.

Positive Signals

Awarded under full and open competition, indicating a competitive bidding process.
Firm-fixed-price contract provides cost certainty for the government.
The project addresses critical healthcare infrastructure needs for veterans.
The contractor is a joint venture, potentially bringing diverse expertise.

Sector Analysis

This contract falls within the Commercial and Institutional Building Construction sector, specifically for healthcare facilities. The market for healthcare construction is substantial, driven by the need to modernize aging infrastructure, expand capacity, and adopt new medical technologies. Projects of this scale are typically awarded through competitive bidding processes to large, experienced construction firms or joint ventures capable of managing complex, long-term undertakings.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the primary award went to a large joint venture. While there is no direct information on subcontracting plans, large construction projects often involve significant subcontracting opportunities for smaller firms, though the extent to which these are specifically allocated to small businesses is not detailed here.

Oversight & Accountability

Oversight for this project would typically be managed by the Department of Veterans Affairs' contracting officers and project managers. The firm-fixed-price nature of the contract implies that the government's primary oversight will focus on ensuring the project adheres to the defined scope, schedule, and quality standards. Transparency would be facilitated through contract award data and potentially through public reporting on project milestones, though specific details on IG involvement or detailed public dashboards are not provided.

Related Government Programs

VA Major Medical Facility Lease Program
VA Capital Asset Realignment and Enhancement Act (CAREA)
Department of Defense Construction Projects
Public Healthcare Infrastructure Development

Risk Flags

Long project duration increases risk of cost escalation and performance degradation.
Firm-fixed-price contract for extended duration may expose contractor to significant financial risk.
Potential for disputes over scope changes or unforeseen conditions over an 8+ year period.
Lack of specific small business subcontracting goals noted.

Frequently Asked Questions

What is this federal contract paying for?

Department of Veterans Affairs awarded $126.5 million to WALSH'DEMARIA JOINT VENTURE V. PALO ALTO HEALTHCARE SYSTEM CAPITOL IMPROVEMENT PROJECT.

Who is the contractor on this award?

The obligated recipient is WALSH'DEMARIA JOINT VENTURE V.

Which agency awarded this contract?

Awarding agency: Department of Veterans Affairs (Department of Veterans Affairs).

What is the total obligated amount?

The obligated amount is $126.5 million.

What is the period of performance?

Start: 2011-09-30. End: 2020-08-31.

What is the historical spending pattern for similar healthcare capital improvement projects by the Department of Veterans Affairs?

The Department of Veterans Affairs (VA) has a history of significant capital investment in healthcare infrastructure. Historically, the VA has undertaken numerous large-scale construction and renovation projects across its network of medical centers. Spending patterns vary based on congressional appropriations, infrastructure needs assessments, and strategic realignment initiatives like the Capital Asset Realignment and Enhancement Act (CAREA). Projects often involve multi-year timelines and substantial budgets, similar to the Palo Alto project. Analyzing past VA capital spending data, particularly for projects of comparable size and scope (e.g., new hospital wings, major renovations), would provide context for the $126.5 million awarded here. This analysis would help determine if this contract represents a typical investment or an outlier in terms of cost and duration for the VA's infrastructure modernization efforts.

How does the awarded price compare to industry benchmarks for commercial and institutional building construction in California?

Benchmarking the $126.5 million contract against industry standards for commercial and institutional building construction in California requires detailed cost data and project specifics. Factors such as square footage, complexity of systems (e.g., medical gas, advanced imaging suites), materials used, and prevailing labor rates significantly influence construction costs. General construction cost indices for California are typically higher than the national average due to labor and material costs. For a project of this magnitude and type, cost per square foot can range widely, from a few hundred dollars to over a thousand dollars, depending on the factors mentioned. Without knowing the exact scope and specifications of the Palo Alto Healthcare System project, a precise comparison is difficult. However, the firm-fixed-price nature suggests the contractor believes this price is competitive and covers all anticipated costs and profit.

What are the potential risks associated with a firm-fixed-price contract for a project spanning over 3200 days?

A firm-fixed-price (FFP) contract is generally advantageous for the government as it shifts cost risk to the contractor. However, for a project with an exceptionally long duration of 3258 days (over 8 years), an FFP contract introduces significant risks. The primary risk is contractor insolvency or default if unforeseen cost increases (e.g., material price escalation, labor rate hikes) erode their profit margin over the extended period. Conversely, if costs decrease unexpectedly, the contractor might be incentivized to cut corners on quality. Another risk is contractor motivation and performance degradation over such a long timeline. The government's ability to enforce strict adherence to the original scope without scope creep or change orders becoming contentious is also a challenge. The contractor must meticulously forecast costs and contingencies for an extended period, which is inherently difficult and may lead to higher initial bids to cover perceived risks.

What is the track record of Walsh/D'Maria Joint Venture on similar large-scale government construction projects?

Assessing the track record of Walsh/D'Maria Joint Venture is crucial for understanding their capability to execute the Palo Alto Healthcare System project. Information on their past performance, particularly on large-scale federal or healthcare construction contracts, would indicate their experience with similar project scopes, complexities, and regulatory environments. Key aspects to review include their history of on-time and on-budget delivery, safety records, quality of work, and any history of contract disputes or litigation. As a joint venture, understanding the individual track records of Walsh and D'Maria, as well as their collaborative performance, is important. Government contract databases and past performance reviews (if publicly available) would provide insights into their reliability and expertise in managing projects of this magnitude and type.

How does the competition level (7 bidders) impact the final price and value for taxpayers?

A competition level of 7 bidders for a contract of this size and scope is generally considered robust and is a positive signal for taxpayers. Higher numbers of bidders typically lead to more competitive pricing as firms vie for the contract by offering their best terms. This increased competition helps ensure that the government is receiving fair market value for the services rendered. It reduces the likelihood of inflated pricing that might occur in a less competitive environment. Furthermore, a competitive process allows the government to select not only based on price but also on technical qualifications and past performance, thereby enhancing the overall value proposition and reducing performance risks, which ultimately benefits taxpayers through a successful project delivery.

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

Offers Received: 7

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Parent Company: Walsh Group Ltd., the (UEI: 121476675)

Address: 929 W ADAMS ST, CHICAGO, IL, 60607

Business Categories: Category Business, Emerging Small Business, Not Designated a Small Business, Partnership or Limited Liability Partnership, Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $126,493,873

Exercised Options: $126,493,873

Current Obligation: $126,493,873

Subaward Activity

Number of Subawards: 1216

Total Subaward Amount: $1,932,689,112

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: YES

Timeline