Use of the "Turn-Key" Procurement Method by the Department of Defense in Contracting for Construction of Family Housing

Published by the Government Accountability Office on 1971-09-24.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

    S-l?0403                   ,


           ~iO~c??*r\h~   e
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             Attention:                Assistant    Secretary                       of Defense

    Iknr     Xr.      Secretary:

            The  Ckneral Accounting                  Office has retieucd        tbc use of tbr "turn-key"
    procure~~n~,~p~ctmd                bv thcJ&z~cnt -~..~nr~,,,z-..--,-n.cP-i,r;
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                                             cu            We cxmiined     into     the initial         DOD teat
I   of this method, which was made at three locations:                                tbe U. S. naval B.w.c,
    Philadelphia,            Pennsylvania;          Ent Air Force Eiase, Colorado Spiaga,                      Golo-
    mdo; and Oak Knoll Naval Aospital,                        Oakland, California.              Competitive
    negotiated         procurement            was used, with the contracts              awarded to the con-
    tractor     subtitting             the proposal determined         to have the beet overall
    co&inatinn          of price and quality.

             Our observations                are summarized                         below.

           We found it cost less to build houses under the -turn-key method than
    it would have had they been conventionally                built.      The estimated     savings
    were being realized    without     significant       loss of quality        or features     nor-
    mally found in conventional        housing.       In fact,       at two of the locations--
    Oak Knoll and Philadelphia--the          turn-key      projects     generally    provided more
    living   space.   At Philadelphia,        garages and basements were protided.
    These I'eaturea are not usually        offered      under conventional        procurement.

i .          ,
      . ..            .

                                 At     the Oak Knoll and Philsxielphia        projects,   sites selected prescctcd
                          special.      problems.    The one selected       at Gak Knoll was the si"ti of a former
                          hospital,        located on a hill.        Several concrete footinga,    wh.ich had sup-
                          ported      the former hospital,       were still    buried In the ground and complicated
                          gmding.          This discouraged    some potential      bidders from submitting   proposals
                          becnusc       of the uncertain    terrain.

                                 The site selected   for the Philadelphia  project   requA.red up to '(O-foot
                          TllinGs   to support the weight of the housing    uxitc.    As in the case of
                          O&k E~oll,    site problem    appear to have been a deterrent    to som potential

                                   Tn turn-key       construction,       the contractor      is expected to complete the
                          project      with tininum participation              from agency personnel.           Unusual  or
                          particularly       difficult       terrain     problem      are likely     to not only delay con-:
                          struction       but also, understandably,              to increase agency concern over the
                          contractor's       effective       resolution      of the problems.          This, in turn, can
                          lead to greater          involvement       on the part of agency representatives.               BID
                          criteria      for turn-key        construction      provide no specific          guidance on this
                          Latter.       We suggest that you consider               mending the criteria          to point out
                          the desirability,           when using this procurement            rriethod, of selecting      sites
                          that do not require            unusual or extensive          work on the part of the hollie

                          Identification       of evaluation                       BEST     DQCUMEN-~        A~A~~i4~~E
                          fat tors

                                  T'i-13DOD criteria    state     that "numerical      weights   (a6Signed   technical
                          evaluations)        and x&hod of      relating    cost to technical       points,  shall not
                          be included       in the Request      for Proposal     (RPP)."      The technicaL,    or
                          quality      faCtOr6,    cwer such      thintp   6~ ln&ntity      of design and matetials
                          to be uocd w-d are employed             by local. evhluntian'bcmtio        to oeleck thb hat
                          overall      propssal~
        In this connection,       som local residential         builders   who hnd bren fur-
rz shed the RF? for the Oak lQ-1011 project            did not subrzit a proposal.            Some
~CZCLSOAS  given were lack of knotrledge and uncetiainty               over factors       to be
considered      in evaluating     proposals.     They felt    that the probability          of
,,,cir bein,- ,-1 sclccted   under such    c~rcwn.;i~n~~s   did not jil~tif;[         the cost of
   . , -~*
F:t.;?Q*-Lng  4-i pro,?osnl.   WC bciSevc -Lhat r.ucil cor~ccrn is Uij~l$l.StAll~i~.b3.C      0

               "Conceding that t'ne solicitation              adequately     ident-lficd       the
                evaluation        criteria,      it in nevertheless      obvious that no
                indication        is given in the RF? as to ChF relative                 inport-
                ancc of each factor.               We have, as you know, repeatedly
                stressed       the need for such identification.               E.g., 49 Comp.
                Gen. 229 (1969);            47 id. 252 (1967); cf. 50 id. 59 (1970).
                Koreover,        we believethat        in this co?&xt      iTis      particu-
                larly    critical        that offerors     be apprised of the evaluation

        As you know from your revjew of the Acting Comptroller        General’s letter
of Au:,-ust 26, 1971, (B-170220, B-170731, B-171015) requesting         your comments
on the necessity     of disclosing     the scoring scheme, this matter is of par-
ticular    in&&rest  to us.     We note, however, in response to the August 26
letter    by Kr. Glenn V. Gibson, Deputy Assistant      Secretary   of Defense, that                   \
DOD does not deem it necessary to identify         for proposers  the actual uei@ts
assigned the evaluation       factors.

        For the reasons discussed        above and after       consideration       of the reasons
offered    in support of the DOD position,           we still    believe that it is import-
ant to disclose       the relative     importance    of the evaluation        factors    so that
offerors     zxight better    understand    how their proposal will          be judged.
Pdrthermore,       we believe    that appropriate     revisions     to the DOD criteria        would
tend to t;;inimize misgivings         some potential     ahd actual bidders may have re-
garding fair tZCeatmc?zht in this ITSget.



                    T%cx-eT-0r-c , the provisions    of section   236 of the Legislative     Reorganization
                    Act of 1370 apply.        We shall apprecidx      receiving    copies of t'xae statemnta
                    that you furnish      to the specified     comdttees     in accordance with these



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                                         L?ozp.r*      sons     for   the Philadclphin                 and C;ak Knoll            pro;ccts         eaccnliaily         are

                                those      prepared          by Naval     Facilities             Engineering          Command fl.eld              personnel.          The

                                cm at Ent k‘as made by housing                           personnel          obp Air    Force        headquarters.               wt? made

                                some changes               to the computations                 to make them more comparable.                          For instance,

                                at Ga.k Knoll              and Philadelphia,             we added a factor                 for    cost      escalation          between

                                the time          of contract         award for          the turn-key            project         and the earlier              award

                                for     the conventional              one--the          Air     Force      included        such R factor             in its


                                         At Philadelphia,              we compared              the cost        and features             of the NC-unit

                                turn-key          project      with    those      for         a 400-unit        Capehart         housing      project         built

                                adjacent          to the ru'aval Shipyard                during         1962-1$4.           We adjusted            the Capehart

                                costs      to reflect           1969 construction                prices       prevailing          at the time              the con-

                                tract      for      the turn-key        project          was awarded.

                                         At Ent,           a comparison        was made between                 the estimated             costs      for     the

                                401un!t          project      which    went out for              bid     initially         In April         1967 under          the
at t:ic tAri.   k'e applied   COG%escnlation      I"nctors   to the conventionally-built
pro:ectc,   wince the contrncts    were nwnrdcd     prior    ta the turn-key     miard.
         ,   .

                     igo'   - 1964

                                                Average    per house       Total

                                                                         $1, egG, 000

                                                          N/A                X/A
                                                            100              10,000
                                                          1,021             102,100

                     Square feet     per unit             Square feet     per unit

                                                           (60 units):      1,042
                                                           (40 units)       1,100

                                        1,061                               1,250
                                        1,265                               L2.50

                                        1,188                                2,106
                                        1,452                                2,106
                                                                                                   (iru 11n1ts)
                                                                        Convcntj    m-is1

   Construction      costs

                             QUtX-b2   X-G                                                                   WI

                             Sub-total                                                             $1,010,        b84
                                                                             3%775                           30,775
                             Total                                     $4197,252                   $,~5~,059
   Per Unit                                                             $    29,932                $         26,251.

  Conventional   per unit cost
  -n-key     per unit cost
       Estimated  Savings

a/ April   lc$7 bid amount.
b/ Cost escalation        from April         1967 to January        1969.
c/ Eat included      in   1967 bid.          OrigUally      planned      a6 Colonel'6       quarters.
d/ April   1967 cost      - does not reflect;            any cost     escalation.
                                           Eyi ‘61
                                           gi4 ’61s

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