DoD's $85.5M F-35 Weather Shelter Contract Awarded to Watterson Construction, Facing Cost Overruns

Contract Overview

Contract Amount: $85,503,488 ($85.5M)

Contractor: Watterson Construction CO

Awarding Agency: Department of Defense

Start Date: 2018-06-05

End Date: 2021-03-19

Contract Duration: 1,018 days

Daily Burn Rate: $84.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Defense

Official Description: EIE382-CONSTRUCT F-35A AIRCRAFT WEATHER SHELTER, SQUAD #2, EIELSON AFB, AK

Place of Performance

Location: EIELSON AFB, FAIRBANKS NORTH STAR County, ALASKA, 99702

State: Alaska Government Spending

Plain-Language Summary

Department of Defense obligated $85.5 million to WATTERSON CONSTRUCTION CO for work described as: EIE382-CONSTRUCT F-35A AIRCRAFT WEATHER SHELTER, SQUAD #2, EIELSON AFB, AK Key points: 1. The contract's final cost exceeded initial estimates, indicating potential value-for-money concerns. 2. Full and open competition was utilized, suggesting a robust bidding process. 3. The definitive contract type and firm fixed price structure aim to control costs, but overruns occurred. 4. Performance context is crucial, as the project involved constructing a weather shelter for F-35A aircraft at Eielson AFB. 5. The project falls within the Defense sector, specifically supporting aircraft maintenance infrastructure. 6. The contractor, Watterson Construction Co., has a track record that warrants review for similar projects. 7. The duration of the contract (1018 days) suggests a complex construction project.

Value Assessment

Rating: questionable

The final award amount of $85.5 million for the F-35A aircraft weather shelter appears to be significantly higher than the initial bid benchmark of $8.4 million. This substantial increase suggests potential cost overruns or scope changes during the contract's execution. Without detailed justification for the cost escalation, it is difficult to definitively assess the value for money. Comparing this to similar large-scale military construction projects would be necessary to determine if the final price is within market norms for such specialized facilities.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. Five bids were received, suggesting a healthy level of competition for this project. This competitive environment is generally expected to drive down prices and encourage efficiency. However, the significant cost overrun raises questions about whether the competitive process fully mitigated risks or if unforeseen issues drove up the final price.

Taxpayer Impact: A competitive bidding process is beneficial for taxpayers as it typically leads to more favorable pricing and encourages contractors to offer their best value. The presence of multiple bidders suggests that taxpayer funds were likely used more efficiently than in a sole-source scenario.

Public Impact

The primary beneficiaries are the U.S. Air Force units operating F-35A aircraft at Eielson Air Force Base, Alaska, by providing essential weather protection for the aircraft. The services delivered include the construction of a specialized weather shelter designed to house and protect advanced fighter jets. The geographic impact is localized to Eielson Air Force Base in Alaska, a critical strategic location. The project likely involved a significant construction workforce, contributing to employment in the region during the construction period.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost increase from initial benchmark to final award amount.
Long contract duration (1018 days) may indicate project complexities or delays.
Potential for scope creep or unforeseen site conditions impacting final cost.

Positive Signals

Awarded under full and open competition, indicating broad market engagement.
Firm fixed price contract type aims to establish cost certainty.
Multiple bidders (5) suggest a competitive marketplace for this type of construction.

Sector Analysis

This contract falls within the Defense construction sector, specifically supporting military aviation infrastructure. The market for constructing specialized aircraft shelters is niche, often involving contractors with experience in government and military projects. Comparable spending benchmarks would involve analyzing other large-scale construction projects for military bases, particularly those involving aircraft hangars or protective structures for advanced aircraft like the F-35. The size of this contract suggests a significant investment in base infrastructure.

Small Business Impact

The data indicates this contract was awarded under full and open competition and does not specify any small business set-aside. Therefore, there is no direct indication of small business participation as the prime contractor. Subcontracting opportunities may have existed, but this information is not provided. The impact on the small business ecosystem would depend on whether small businesses were involved as subcontractors.

Oversight & Accountability

The contract was awarded by the Department of the Army, part of the Department of Defense. Oversight mechanisms would typically involve contracting officers, project managers, and potentially the Defense Contract Audit Agency (DCAA) to monitor performance and costs. Transparency is generally facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

F-35 Program Support Contracts
Military Construction Projects
Air Force Base Infrastructure
Aircraft Hangar Construction
Department of Defense Facilities

Risk Flags

Significant Cost Overrun
Potential for Inaccurate Initial Cost Estimation
Long Contract Duration

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $85.5 million to WATTERSON CONSTRUCTION CO. EIE382-CONSTRUCT F-35A AIRCRAFT WEATHER SHELTER, SQUAD #2, EIELSON AFB, AK

Who is the contractor on this award?

The obligated recipient is WATTERSON CONSTRUCTION CO.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $85.5 million.

What is the period of performance?

Start: 2018-06-05. End: 2021-03-19.

What is Watterson Construction Co.'s track record with similar large-scale defense construction projects?

Watterson Construction Co. has a history of undertaking significant construction projects, including those for government and military clients. To assess their track record for this specific F-35 weather shelter contract, a deeper dive into their past performance on similar projects would be necessary. This would involve reviewing past contract awards, performance evaluations (e.g., CPARS reports), and any history of cost overruns or disputes on comparable military construction projects. Understanding their experience with specialized aircraft facilities and adherence to stringent military specifications is crucial for evaluating their capability and reliability in executing such complex contracts.

How does the final cost of $85.5 million compare to the initial bid benchmark of $8.4 million, and what factors contributed to this difference?

The final cost of $85.5 million represents a substantial increase from the initial bid benchmark of $8.4 million. This nearly tenfold difference is highly unusual and warrants thorough investigation. Potential contributing factors could include significant scope creep, unforeseen site conditions (e.g., permafrost issues in Alaska), changes in material costs, extended project timelines leading to increased labor and overhead, or errors in the initial cost estimation. Without detailed documentation from the contracting agency explaining the justification for this escalation, it is difficult to ascertain the precise reasons. A review of contract modifications, change orders, and any independent cost analyses would be needed to understand this discrepancy.

What are the primary risks associated with a firm fixed price contract that experiences significant cost overruns?

While a firm fixed price (FFP) contract is designed to shift cost risk to the contractor, significant cost overruns in such a contract typically indicate that the initial price was not adequately established or that unforeseen circumstances necessitated contract modifications. The primary risks are that the contractor may incur substantial losses if they absorb the overruns, potentially impacting their financial stability and future bidding capacity. Alternatively, if the overruns are addressed through contract modifications (e.g., change orders), the government may end up paying more than initially anticipated, negating the cost-saving benefit of the FFP structure. This situation also raises concerns about the initial pricing accuracy and the effectiveness of contract oversight in managing project costs.

How effective was the full and open competition in ensuring competitive pricing for this weather shelter project?

The fact that the contract was awarded under full and open competition with five bidders suggests that the process was designed to encourage competitive pricing. However, the significant cost overrun from the initial benchmark to the final award price raises questions about the ultimate effectiveness of this competition in securing the best possible price for the government. It's possible that while the initial bids were competitive, unforeseen project complexities or changes led to cost escalations that were not fully anticipated or mitigated during the bidding phase. Further analysis would be needed to determine if the initial bids accurately reflected the project's true cost or if external factors drove up the final expenditure despite the competitive process.

What is the historical spending pattern for similar F-35 support infrastructure at other Air Force bases?

Historical spending patterns for similar F-35 support infrastructure, such as aircraft shelters and maintenance facilities, can vary widely based on location, specific requirements, and the prevailing economic conditions at the time of construction. Generally, constructing specialized facilities for advanced aircraft like the F-35 involves significant costs due to the need for precise environmental controls, robust security measures, and specialized structural integrity. To establish a benchmark, one would need to analyze contracts for similar facilities at other bases, considering factors like square footage, materials used, technological integration, and the year of award. A comparison with projects awarded during similar timeframes and in comparable geographic or climatic regions would provide a more accurate context for the Eielson AFB weather shelter contract's expenditure.

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: W911KB18R0014

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6500 INTERSTATE CIR, ANCHORAGE, AK, 99518

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

Financial Breakdown

Contract Ceiling: $89,403,488

Exercised Options: $85,503,488

Current Obligation: $85,503,488

Actual Outlays: $54,601

Subaward Activity

Number of Subawards: 32

Total Subaward Amount: $54,459,625

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline