Target Hospitality announces details of $3.3B contract award

Target Hospitality announced certain contract terms associated with the November 6 humanitarian contract award for the Influx Care Facility, or ICF, located at Target’s Pecos Children’s Center, or PCC, community. The $75B Indefinite Delivery, Indefinite Quantity, or IDIQ, contract adheres to the customary funding process noted in contracts of a similar nature and has a five-year period of performance with the ability to extend for an additional five years. The ICF Contract, funded through the IDIQ, has a standard one-year base period of performance, with four one-year option periods, and allows for up to $3.3B of potential funding through 2028, with the opportunity of additional funding access through 2033, if the IDIQ 5-year option is exercised. Starting in 2021, PCC remains one of the only active ICF sites in the U.S. and the IDIQ award establishes the foundation for 13 years of continuous humanitarian solutions at PCC. In conjunction with the ICF Contract, Target and its non-profit partner have entered into a new PCC contract which continues to leverage the unique strengths of both organizations. Under the New PCC Contract, PCC will maintain similar facility size and operational scope compared to the previous contract, commenced in May 2022. In addition, the New PCC Contract will operate similarly to the previous contract, which centered around annual minimum lease revenue commitments with additional occupancy-based variable revenue based on active community census. Annual funding commitments are expected to be completed through normal course annual governmental appropriations as provided within the IDIQ. The New PCC Contract has an effective date of November 16 and is expected to provide for approximately $178M of minimum annual lease revenue commitments with expected five-year cumulative minimum lease revenue commitments of approximately $892 million through 2028, assuming the U.S. government exercises all option periods. Inclusive of all potential occupancy-based variable revenue, total potential value of the New PCC Contract could exceed $1.7B of cumulative revenue through 2028, assuming the U.S. government exercises all option periods.