The cover story, “New Marching Orders,” in the most recent edition of Constructor, published by McGraw-Hill Construction, highlights a trend in military construction that should concern small to mid-size general contractors.  In the past, many projects for construction of military housing and other facilities were procured as individual contracts through sealed bid solicitations issued by the U.S. Army Corps of Engineers.  Small and mid-size contractors, familiar with the local market conditions, were well positioned to compete for, win, and perform these contracts.  E. Michael Powers reports that today, however, the Corps is focusing its procurement efforts on multiple-award construction contracts and indefinite delivery/indefinite quantity contracts with task orders.  These contracts tend to be for greater volumes of work, resulting in contracts that exceed the bonding capacity of many small to mid-size firms.

Powers also notes that a contract to build fifty buildings at a cost of $10 million per building, spread across a large geographic area, might not even appeal to firms that have the bonding capacity to bid on such a large contract.  In addition, where so much work is included in one contract, there is only one prime contractor, whereas before there could have been as many as fifty contractors performing fifty separate projects.

These large procurements are often the subject of negotiated procedures under FAR, Part 15, where price is no longer the controlling factor in determining who receives the contract.  In these “best value” procurements, the experience and past performance of a larger contractor may be decisive in the Corps’ award decision.

Another trend that Powers reports on is the increasing use of design-build contracts. Quoting Doug Barnhart of San Diego’s Barnhart, Inc., Powers notes that “NAVFAC is now letting 80 to 85% of its projects as design-build – There were some design-build jobs in the past, but it has changed rapidly over the past five or six years.”  Powers also notes that the Army is working to adopt standard designs and the Corps is considering a switch to modular construction.  These changes in the procurement process flow from the rapidly changing needs of the military as worldwide redeployments bring troops back from overseas and Base Realignment and Closure (BRAC) related work is performed, says Powers.

As vital and important as this expedited work is, it may be coming at too high a price because it is ultimately reducing the competitive opportunities for small and mid-size general contractors.  As the volume of work for small and mid-sized contractors declines, so will their bonding capacity.  The resulting snowball effect will not inure to the benefit of the government in the long run.  This trend may not be limited to military construction, moreover, as can be seen in the extensive use of negotiated IDIQ contracts in the civil works projects being solicited by the Corps of Engineers regarding the Hurricane Katrina reconstruction effort.