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Contracting to meet the national emergency--the Pentagon Restoration story. (Remember 9/11).

On January 16, 2002, the Washington, D.C., Chapter hosted Michael Sullivan, deputy program manager of the Pentagon Renovation Office (PenRen). That evening was the kickoff of the new year's program, giving an inside look at the challenges and innovative contracting approaches seized by the "Center of the U.S. Military Universe," the Pentagon. Sullivan's presentation garnered so much interest that the president of the Washington, D.C., Chapter still received questions days after the presentation.

Because of the interest piqued by Sullivan's presentation, the PenRen office agreed to do an interview. The answers presented here relates story of how the PenRen contracting team quickly went into action and began restoring the damaged wedge hours of the attack. The interviewer is Rosa M. Ortis (RMO) of the D.C. Chapter and the interviewee is Diane Hoag (DH) of the PenRen Office.

(RMO) What does the PenRen Office normally do, 9/11 events aside?

(DH) The mission of the Pentagon Renovation Program is to, first, remove all the existing engineering systems in the building (mechanical, electrical, plumbing) down to the base structure and abate all hazardous materials (Wedge-1 alone contained 2,000 tons of asbestos which had to be removed). Then the rebuilding includes providing all new engineering systems, sprinkler systems, vertical transportation, IT infrastructure and management systems, lighting, furniture, and improvements in ADA code compliance, fire and life safety systems.

All this activity occurs in increments of approximately 1 million square feet (a "wedge," of which there are five in the building, each housing approximately 5,000 people). Prior to commencing any construction, each wedge will be emptied of tenants and isolated from the remainder of the building (which is, of course, still operating as the headquarters of the Department of Defense).

After the completion of a wedge (typically, three years of actual construction work), the wedge is repopulated, and the work moves on to the next wedge. In addition to the renovation itself, the program also acts as a construction agent for other non-renovation projects on the Pentagon, such as the construction of the new remote delivery facility and the new metro entrance facility. We have also partnered with the army in modernization of the building IM&T systems.

It's important to understand what the work environment was like in PenRen pre-9/11 to understand why we've operated as successfully as we have in the wake of the attack. We're a very streamlined organization with a very complex, high-visibility public construction mission and a limited budget. We're a small, independent OSD activity not affiliated with a military service or defense agency (our program manager reports directly to the deputy secretary of defense). We have no acquisition regulatory supplements--we're bound by the FAR and DFARS only. Our contracting officers are, for the most part, GS-14s, and are expected to operate fairly independently and utilize their expertise, experience, and discretion to support the mission and their project leaders. We're organized in integrated project teams, and we use taxpayers' funds in the wisest possible manner to execute the mission in a very challenging environment. This requires the ability to solve very complex problems in new ways because the traditional const ruction approach is not efficient or effective. We can't afford to be anything other in our approach.

(RMO) What type of contracting did PenRen do before 9/11?

(DH) The Acquisition & Contracting Group here provides cradle-to-grave services for all PenRen requirements. In addition to issuing and administering our A/E and construction contracts, we also contract for all our support services, supplies, and information technology.

The program as a whole has been evolving under the leadership of its current program manager, Walker Lee Evey, who came on board in 1997. Starting with the acquisition processes, he has reshaped and revolutionized how construction is managed. He took this organization from a stodgy, risk-averse, fixed price low-bid environment to a lean, agile, entrepreneurial state-of-the-art acquisition organization that isn't afraid to take prudent risks. This organization can operate effectively in new and unknown situations and react quickly to changing conditions.

We now employ a sophisticated source selection approach that relies heavily on open interaction with industry, past performance assessments, merit and confidence scoring, most probable cost analyses, oral proposals, and best value decisions based primarily on technical and management superiority. Design-build construction is the default acquisition strategy now. Our construction contracts utilize a fixed-price incentive (firm target) or award-fee multiple incentive arrangement, that most heavily incentivizes customer satisfaction, innovation, and quality, but also rewards cost efficiency and effectiveness. We do not reward or sustain marginal performance and contractors that routinely engage in buying-in or adversarial relationships with the government are not successful in winning work here.

For the year and a half leading up to September 2001, PenRen had been engaged in a source selection for the remainder of the renovation program--wedges 2-5, roughly 4.5 million square feet of renovation estimated at over $700 million (without inflation). This acquisition was the culmination of all the improvements the program had made to its processes over the preceding three years. It was a design-build arrangement with performance-based requirements and a comprehensive multiple incentive. It was widely tracked in the construction industry during the competition, and the award was anticipated with some interest.

(RMO) How is it different now?

(DH) Interestingly enough, it's not fundamentally different--there's just a lot more of it, and it's still taking shape while we execute it. Our workload now includes not only our original mission to renovate the building, but the reconstruction of the damaged portion, and a lot of new projects that are security-related in the wake of September 11. Our total obligation authority for fiscal year 2002 was estimated, pre-9/11, to be around $200 million. It's now estimated to be over $1 billion. All our projects are fast-tracked: The deteriorated conditions of the unrenovated Pentagon, security concerns, and the displacement of mission-critical tenants due to the attack all make time of critical essence.

Congress recently appropriated additional funds to the program, so we could accelerate the already-aggressive schedule for completion of the renovation and take measures to ensure greater force protection measures in the newly constructed areas. This is critical, to ensure that the building offers the safest environment as quickly as possible for its tenants, who are engaged in the essential business of fighting the war on terrorism.

More to the point, the program has always been lean, flexible, and extremely effective. In construction more so than most other industries, time is indeed money. We take measured risks and make progress accordingly, much as a private organization would. We empower individuals to make decisions at the lowest level, so we're not encumbered with excessive local regulations or required local procedures--this translates into a high-paced, aggressive work environment.

We've been very successful because of that, and I believe that's why some of the new security or post-9/11 projects have been assigned to PenRen. People know we can get the job done quickly and effectively. Now, we are not only focussed on progress for economic reasons, but also for a matter of national security.

(RMO) Did the PenRen office need authority for contingency contracting? If so, what?

(DH) Immediately after the attack, I sat down with some of my staff. We brainstormed what special authorities we might need to support the immediate rescue, recovery, and investigation activity at the crash site. In the end, we didn't need any additional authority at any level to proceed. We employed no techniques that required any approvals at a level higher than the head of the contracting activity, who happens to be our deputy program manager. We did employ all the emergency techniques at our disposal--verbal and letter contracts, for instance. But employing these tools is a matter of business judgement, not higher level approval; they're certainly not preferred, but when the building is on fire and people may be trapped in it, what's important is to get the job done.

(RMO) What was the first thing the PenRen office did after the attack?

(DH) The plane struck the building at a 40-degree angle, entering Wedge 1 and traversing into Wedge 2. Construction on the renovation of Wedge 1 was five days from completion, so Wedge 1 was not fully re-populated. Those tenants that had been moved back into Wedge 1 had been moved Out of Wedge 2. All that means is the two wedges were under-populated, which probably resulted in fewer fatalities. As it was, there were about 2,600 people in the immediate area of impact (from building corner to corner). The attack took 125 innocent lives, caused 110 injuries, and displaced 4,600 tenants from their work-places. Within minutes of the attack, PenRen personnel and the construction contractors working on the Wedge-1 site were at the scene of the crash, providing important information and actual physical assistance. Because these contractors had not yet demobilized, they had heavy equipment to move earth and debris. Also, PenRen had detailed drawings depicting the spaces in the affected areas and, due to our work movin g tenants in and out of the Wedge work areas, we had a consolidated source of information about which spaces were occupied and by which tenant agencies.

As you can imagine, the scene was pretty chaotic. The building had collapsed at the actual site of the impact, and there were several fires burning, fed by the jet fuel. Fire and rescue crews were trying to assist survivors in the most adverse conditions imaginable. Workers were struggling hour by hour searching for survivors, trying to get the fires under control, and keeping the building from collapsing in the meantime. Our deputy program manager, Mike Sullivan (who also happens to be our head of the contracting activity), was on the site shortly after the impact. He verbally directed the Wedge-1 renovation contractor to provide assistance to the fire and rescue crews using their equipment and other resources. By the next day, the PenRen office had established a 24-hour command post in our home office about a half mile away to provide more organized support to the on-site operations. We had contracting personnel on-site that day and for many days thereafter to keep track of the specific verbal directions gi ven to our contractors and to coordinate requirements on site with the PenRen command center, where contracting officers were making credit card purchases to provide logistical support. By this time, we had also entered into a verbal contract with an engineering firm. This firm is preeminent in the field in recovery from catastrophic structural damage. They were there, providing input to shore up the damaged portions of the building and assess the structural safety of the environment. They worked 24 hours a day for some time, sleeping on recliners in the lightly damaged heliport near the site of the impact.

In the meantime, back at the command center, we had contracting officers on duty around-the-clock, providing any and all logistical support to the rescue, recovery, and investigation activity. For the most part, this activity was executed using the government purchase card. We put about $60,000 on our cards held by contracting officers in the six weeks following the attack, buying or leasing cots, tents, lights, safety equipment, generators, and whatever else was needed. Interestingly, many vendors didn't want to be paid for their services. We were flooded with offers of donated services and supplies, as well as offers to divert other services off of more lucrative efforts onto this project.

Even after the immediate danger of fire and collapse was mitigated, there was still a tremendous sense of urgency to complete the recovery of remains and the FBI investigation, which was on-going almost immediately after the attack. A related factor was the necessity to start recovery of spaces that were not heavily damaged (such as those that incurred water or smoke damage, but not structural). As I mentioned previously, 4,600 tenants were displaced as a result of the attack, some of them essential to the war-planning now also underway. The building could not be turned over to PenRen for commencement of recovery and reconstruction until the FBI investigation was completed. In the end, the FBI completed their investigation several months ahead of schedule, a feat they credited largely to the logistical support provided by PenRen via these on-site support efforts of our construction contractors, and the smaller items procured using the government purchase card.

(RMO) What types of contracts were placed and with whom?

(DH) Late in the day on Friday, September 14, 2001, in the midst of the emergency activity, we issued the $700 million+ contract for the balance of the Pentagon renovation. Although this contract was for renovation and not for recovery, it was important to continue with the planned award and put a vehicle in place to complete work in Wedge 2. We immediately modified the contract, under a sole source justification based on unusual and compelling urgency, to include work to recover damaged interior spaces in Wedge 2. The contract is a fixed-price incentive (firm target) with an award-fee arrangement and has performance-based requirements as the foundation of the design-build delivery method. For those not involved in construction, design-build is an approach where the contract is placed with one party that is responsible for developing and constructing the design. This is in contrast to the more traditional and less successful design-bid-build approach, where the government contracts with an A/E firm for a desi gn, and then contracts with a general contractor for the construction of the design.

On the evening of Saturday, September 15, 2001, we issued two letter contracts valued to be (and not to exceed) $530 million. These were the first steps in formalizing the verbal contracts that had been issued immediately after the attack. A $520 million not-to-exceed contract was issued for the emergency repair and restoration of the damaged Wedge 1 interior spaces, and the demolition and reconstruction of those portions of Wedges 1 and 2 that were structurally damaged. We issued this contract on a sole source basis, due to unusual and compelling urgency. The other letter contract we issued that Saturday was reduced in writing from a verbal contract we had entered into on the day of the attack, not to exceed $10 million. Three days later, we issued five additional specialized architectural/engineer support contracts, valued in total not to exceed $40 million. All the letter contracts were finalized within 150 days, for a final, total value of less than $240 million.

Our construction projects are fixed-price incentive (firm target) or award-fee multiple incentive arrangements. We share in overruns and underruns, but we don't allow the contractor to include any target profit. Rather, we establish a generous award-fee pool and stipulate in the contract that the contractor can't claim his portion of any underrun, unless, over the life of the contract, he maintains at least an 85 percent average score on his award fees. This keeps the contractor's focus on the award fee--where we motivate quality, customer satisfaction, and safety, and where the bulk of the profit potential is--but still maintains the incentive to find efficiencies and exercise ingenuity through the opportunity for underrun savings. All our new projects are performance-based requirements with a design-build methodology, which are a kind of hybrid of performance-based and prescriptive requirements.

(RMO) Did the PenRen Office partner with other government agencies to get the job done?

(DH) As mentioned previously, PenRen was supporting FEMA, Arlington County Fire and Rescue, the FBI, and other rescue, recovery, and investigative agencies in the days immediately following the attack. Another key player was the Pentagon's real estate and facilities division, the building's maintenance organization that also worked closely with the rescue and recovery agencies. Once actual reconstruction began, we continued to work closely with the real estate and facilities division, as we always do, to ensure the spaces are designed and constructed with a view towards operations and maintenance from a lifecycle cost perspective. We also work very closely with the military services and defense agencies that constitute the tenants of the affected spaces, to ensure we're building their spaces to satisfy their needs. Again, this is our normal practice. What's a little abnormal about this project is the speed and urgency of the coordination and execution to put these displaced tenants back into the Pentagon and ensure that the recovered spaces are reconstructed properly.

(RMO) How does the Pentagon restoration project differ from the Pentagon renovation project?

(DH) As discussed above, the recovery effort is not a true performance-based design-build approach. This deviation from our preferred approach was necessary to take advantage of the fastest means available to put tenants back into the building. The most significant differences, however, are the intangible ones--the true sense of purpose and urgency on the work site. The construction workers worked 24-7 until Christmas. They continue to work 20 hours a day, six days a week in two 10-hour shifts and have put the fast-tracked project several months ahead of an already aggressive schedule.

These workers aren't really responding to contract incentives. They're responding to a much more profound sense of purpose--and they're performing magnificently. This doesn't in any way detract from the performance we see on our other projects, including renovation work, which is excellent. But this project is different, and the workers themselves are determined to send a message and establish a visible symbol of the country's ability to recover.

(RMO) How does the Pentagon restoration affect the Pentagon renovation? Any lessons learned?

(DH) At the time of the attack, the program was poised to award its revolutionary renovation contract for Wedges 2-5 and begin a new era. The attack occurred literally days before the expected contract award date. Instead of beginning the new era firmly focused on the renovation, the early days of the Wedges 2-5 contract were chaotic, as the contractor scrambled to perform unexpected recovery work on the internal Wedge 2 spaces to put tenants back into the building as quickly as possible. Work on the renovation was secondary.

That's in the past now, but the effects of the attack are now being felt in other ways. Congress has appropriated over $300 million in FY02, with the promise of additional out-year funding to kick-start acceleration of the renovation by four years. The Wedges 2-5 team is now re-phasing the previously estimated 14-year period of performance to ensure completion by 2010. In addition, there is some uncertainty now about where organizations that perform critical military missions will be housed within the Pentagon, which complicates planning and ongoing design work. Additional funding has been identified to increase our force protection measures within the building. All these new requirements and uncertainties must be ironed out quickly, so the project can move forward smartly to meet the new accelerated schedule. It's a demanding, challenging environment where flexibility and innovation are absolutely critical.

(RMO) What is life like now? Does the PenRen staff work more hours?

(DH) It's all "relative," so to speak. This wasn't an 8-to-S organization before the attack. The program, under the leadership of Lee Evey and Mike Sullivan, worked hard to restore its previously unfavorable reputation and build credibility over the last four years. We were successful because of the dedication and incredibly hard work of the people on the staff. The program gained a reputation for delivery on its promises, no matter how challenging.

Certainly, in the days immediately following the attack, people in the program worked very long days, some around-the-clock. More than one individual brought a sleeping bag to sleep on the floor of his or her office. Now, people work long days and sometimes weekends, but not to such extremes. As I mentioned earlier, the construction workers on the crash site (known as the "Phoenix Project") work 10-hour shifts (two a day) six days a week. Now, some sense of normalcy has returned. But workdays are still full-there's no such thing as just a routine, hum-drum day in PenRen. Every day is a new adventure in solving problems no one has seen coming or dealing with situations no one could have imagined several months ago, or even yesterday!

(RMO) Sounds like a success story.

(DH) Yes, from a construction perspective, the renovation of Wedge 1 was the most important kind of success-many of the improvements, such as modem sprinkler systems and structural reinforcements, helped save lives on 9/11. And now, the Phoenix Project is an overwhelming success, well ahead of schedule.

From a business perspective, our strategy for organizing integrated project teams keeps everyone, including the functional representatives, focused on mission success. In our contracting organization, everyone knows that his/her job is to help the project manager get his or her job-the project itself-done. It also helps contracting specialists and officers identify very closely with their projects. They are considered a critical part of the project team. We locate contracting professionals onsite in the construction trailers for our larger projects, such as the Phoenix and Wedges 2-5 projects. They are the project manager's business advisors. Also, from an organizational point-of-view, all our contracting specialists are contractors. The only federal employees in my organization are the contracting officers. This provides tremendous flexibility as the workload expands, and eventually, contracts. This helped me deal with the urgent need to rapidly and dramatically expand my workforce to deal with the increased workload resulting from 9/11 and non-renovation construction agent projects. It will also help me when it's time to contract my workforce.

The contract arrangement we've employed in both the Wedges 2-5 and Phoenix contracts has been proven in previous cases to be an overwhelming success. As discussed above it focuses attention on performance success, but also provides an economic incentive that further motivates innovative ways of realizing savings.

Finally, all the techniques the program has implemented in the last four years have made it the organization it is today. Not every government activity could deal with what has come our way since 9/11. Which is not to say we haven't made mistakes-we have. Our senior management on the program continuously stresses it is not so much whether or not we make mistakes (because we will, given our environment), but how well we recover. We deal with the unexpected, solve the problems, and move on. That's what we did before 9/11, and that's what we've been doing ever since.

This concludes the interview. Accolades are due to the staff of the PenRen Office for their selfless dedication and perseverance. The government and these contractors are moving with lightning speed to restore the damaged wedge by 9/11102, the first anniversary of the attack. CM

About the Author

ROSA M. ORTIZ, isa contracting officer with the Transportation Security Administration and is president of the Washington, D.C., Chapter.

DIANA HOAG is a contracting officer and the acquisition and contracting group leader for the Pentagon Renovation Office. Send comments on this article to
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Author:Ortiz, Rosa M.; Hoag, Diana
Publication:Contract Management
Article Type:Interview
Geographic Code:1USA
Date:Sep 1, 2002
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