Army awards $28.9M for Traverse City fish passage, exceeding initial estimates by 14M

Contract Overview

Contract Amount: $28,893,883 ($28.9M)

Contractor: Spence Brothers

Awarding Agency: Department of Defense

Start Date: 2020-10-13

End Date: 2026-05-25

Contract Duration: 2,050 days

Daily Burn Rate: $14.1K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 5

Pricing Type: FIRM FIXED PRICE

Sector: Construction

Official Description: BI-DIRECTIONAL FISH PASSAGE UNION STREET TRAVERSE CITY, MICHIGAN

Place of Performance

Location: TRAVERSE CITY, GRAND TRAVERSE County, MICHIGAN, 49684

State: Michigan Government Spending

Plain-Language Summary

Department of Defense obligated $28.9 million to SPENCE BROTHERS for work described as: BI-DIRECTIONAL FISH PASSAGE UNION STREET TRAVERSE CITY, MICHIGAN Key points: 1. The contract's final value significantly surpassed initial projections, raising questions about cost control. 2. Competition was robust, with five bidders vying for the project, suggesting market interest. 3. The project's extended duration and fixed-price nature may introduce cost risks if unforeseen issues arise. 4. This contract falls within heavy civil engineering, a sector prone to complex logistical and environmental challenges. 5. The project's success hinges on effective environmental mitigation and adherence to construction timelines.

Value Assessment

Rating: fair

The final award of $28.9 million is substantially higher than the initial estimated value of $14.9 million, indicating potential cost overruns or scope changes. Benchmarking against similar large-scale civil engineering projects is difficult without more granular cost breakdowns, but the nearly doubling of the price warrants scrutiny. The firm fixed-price contract type suggests the contractor bears cost overruns, but the initial underestimation is a concern for value.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, attracting five bids. This level of competition is generally positive, suggesting a healthy market and potentially driving competitive pricing. However, the significant difference between the initial estimate and the final award price, despite robust competition, raises questions about the accuracy of the initial budgeting or the bidding process itself.

Taxpayer Impact: A competitive bidding process is beneficial for taxpayers as it typically leads to better pricing. However, the substantial increase from the initial estimate to the final award suggests that either the initial estimate was inaccurate or unforeseen complexities significantly increased costs, potentially impacting the overall value for taxpayer funds.

Public Impact

The project aims to improve fish passage on the Union Street in Traverse City, Michigan, benefiting local aquatic ecosystems. This infrastructure improvement is expected to enhance ecological connectivity for fish populations in the region. The project will likely create temporary construction jobs in the Traverse City area. Successful completion will contribute to environmental restoration goals for the Great Lakes region.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Significant cost increase from initial estimate to final award.
Potential for schedule delays impacting environmental benefits.
Complexity of civil engineering projects can lead to unforeseen costs.

Positive Signals

Awarded through full and open competition, indicating market interest.
Firm fixed-price contract shifts cost risk to the contractor.
Project addresses critical environmental infrastructure needs.

Sector Analysis

This contract falls within the heavy and civil engineering construction sector, which includes infrastructure projects like bridges, dams, and environmental remediation. The market for such projects is often characterized by large, specialized firms capable of handling complex logistics and regulatory requirements. Spending in this sector is driven by government infrastructure initiatives and environmental protection mandates. Comparable benchmarks would involve other large-scale water management or environmental construction projects.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of subcontracting requirements for small businesses in the provided data. This suggests that the primary contractor, Spence Brothers, is likely a larger entity. The absence of small business participation could limit opportunities for smaller firms in this specific project, though larger infrastructure projects often involve complex scopes that may not be divisible for smaller contractors.

Oversight & Accountability

The contract is a definitive contract awarded by the Department of the Army, implying oversight from the agency. As a firm fixed-price contract, financial oversight would focus on adherence to the agreed-upon price and scope. Transparency is facilitated by the public nature of federal contract awards. Specific Inspector General jurisdiction would depend on the nature of any potential fraud, waste, or abuse related to the contract's execution.

Related Government Programs

Army Corps of Engineers Civil Works Projects
Great Lakes Restoration Initiative
Environmental Infrastructure Projects
Fish and Wildlife Service Habitat Restoration

Risk Flags

Cost Growth
Schedule Risk
Potential for Unforeseen Conditions

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $28.9 million to SPENCE BROTHERS. BI-DIRECTIONAL FISH PASSAGE UNION STREET TRAVERSE CITY, MICHIGAN

Who is the contractor on this award?

The obligated recipient is SPENCE BROTHERS.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $28.9 million.

What is the period of performance?

Start: 2020-10-13. End: 2026-05-25.

What factors contributed to the nearly doubling of the contract's value from the initial estimate to the final award?

The significant increase from an estimated $14.9 million to an awarded $28.9 million suggests several potential factors. It's possible the initial estimate was overly optimistic or did not fully account for the project's complexities, such as unforeseen site conditions, material costs, or specialized labor requirements. Scope creep, where project requirements expanded after the initial estimate, could also be a contributor. Alternatively, the competitive bidding process, while robust with five bidders, may have revealed higher-than-anticipated market costs for executing the project as specified. Without detailed documentation on the estimation process and any change orders, it's difficult to pinpoint the exact cause, but it warrants further investigation into the accuracy of initial budgeting for similar large-scale civil engineering projects.

How does the firm fixed-price contract structure mitigate risk for the government in this project?

A firm fixed-price (FFP) contract is designed to provide the government with cost certainty. Under an FFP agreement, the contractor, Spence Brothers, is obligated to complete the work for a predetermined price, regardless of their actual costs. This means that if the project runs over budget due to unforeseen difficulties or inefficient management by the contractor, the additional costs are borne by Spence Brothers, not the government. This structure incentivizes the contractor to manage costs effectively and efficiently. However, it's crucial to note that the initial underestimation of the project's cost by the government could still represent a poor value if the final price, though fixed, is excessively high compared to the true market cost or benefit.

What are the potential implications of the extended contract duration (2050 days) on project costs and outcomes?

The contract duration of 2050 days, approximately 5.6 years, is substantial for a construction project. Such a long timeline increases the risk of cost escalation due to inflation in material and labor prices, even under a fixed-price contract, if not adequately accounted for in the initial pricing. It also extends the period during which unforeseen site conditions or environmental factors could cause delays and necessitate contract modifications, potentially impacting the final cost. Furthermore, a prolonged duration can lead to contractor resource allocation challenges and potential loss of key personnel. For the government and taxpayers, a longer duration means the benefits of the fish passage improvement are delayed, and the funds are tied up for an extended period. Effective project management and scheduling are critical to mitigate these risks.

How does this contract compare to other federal spending on similar heavy and civil engineering construction projects?

Comparing this $28.9 million contract requires context within the broader landscape of federal heavy and civil engineering construction. Projects of this scale are common, particularly those involving environmental infrastructure, water management, or transportation. The Department of Defense, through the Army Corps of Engineers, frequently awards contracts in this category for various purposes, including navigation, flood control, and environmental restoration. While $28.9 million is a significant sum for a single project, it is not unusual within the context of large federal infrastructure investments. Benchmarking would involve analyzing the cost per unit of work (e.g., per linear foot of passage, per cubic yard of excavation) against similar Army Corps projects or those funded by agencies like the Bureau of Reclamation or the Department of Transportation to assess value for money.

What is the track record of the contractor, Spence Brothers, on federal contracts, particularly those involving environmental construction?

Spence Brothers, based in Saginaw, Michigan, has a history of undertaking significant construction projects, including those for government entities. While specific details on their track record with federal environmental construction projects are not provided in this data snippet, their involvement in a project of this scale suggests they possess the necessary experience and capacity. A deeper dive into their past performance ratings on federal contracts (e.g., through the Contractor Performance Assessment Reporting System - CPARS) would reveal their reliability, quality of work, and adherence to schedules and budgets on previous projects. This information is crucial for assessing the risk associated with their current contract.

Industry Classification

NAICS: Construction › Other Heavy and Civil Engineering Construction › Other Heavy and Civil Engineering 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: W911XK20R0011

Offers Received: 5

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 203 S WASHINGTON AVE STE 360, SAGINAW, MI, 48607

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

Financial Breakdown

Contract Ceiling: $28,893,883

Exercised Options: $28,893,883

Current Obligation: $28,893,883

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES PROCEDURES NOT USED

Cost or Pricing Data: NO

Timeline