The construction industry is facing challenging economic times. As of July 2009, the construction industry continues to have the highest unemployment rate at 17.4 percent, up more than 50 percent from last year's rate, reports Ken Simonson, chief economist of the Associated General Contractors of America (AGC). In June 2009, construction job losses totaled 79,000 and totaled close to one million over the past twelve months. Architectural and engineering services employment also continues to decline, which doesn't bode well for future construction forecasts. As such, the construction industry is increasing its reliance on federal construction work.
Federal Stimulus Monies to the Rescue?
In February 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA). The ARRA invests a total of $787.2 billion in spending and tax cuts to stimulate the economy, including approximately $308 billion in appropriated spending, $269 billion in direct spending and $211 billion in tax cuts. Of that amount, approximately $140 billion is slated for federal construction projects. The ARRA requires that federal projects administered directly by federal agencies be governed by the Federal Acquisition Regulation (FAR), but the FAR does not apply to federal-aid projects (e.g., highway and bridge construction and clean water projects). The FAR is published as 48 C.F.R. and is available online at www.arnet.gov/far.
In March 2009, the FAR Council issued new interim final rules for contractors and procurement officials disbursing stimulus funds that apply to all directly-funded recovery projects. Even though the rules may change in the future (public comment period ended on June 1, 2009), at least for now, the interim rules are effective. Some of the requirements include:
- Reporting (FAR Case 2009-009)- Prime contractors must file detailed public reports to the government regarding the nature of their work, job creation/retention data and certain salary information.
- Buying American for Construction Material (FAR Case 2009-008)- Unless an exception applies, construction, repair and maintenance projects must use iron, steel and manufactured goods produced in the United States.
- Whistleblower Protections (FAR Case 2009-012)- Prohibits nonfederal employers from discriminating against, demoting or firing persons who alert the government to questionable uses of stimulus funds.
- Publicizing Contract Actions (FAR Case 2009-010) - Acquisition officials must issue public notices on contract actions valued at $25,000 or more.
- Government Accountability Office (GAO)/Inspectors General Access (IGs) (FAR Case 2009-011)- GAO has authority to audit contracts and subcontracts, and IGs may interview contractor and subcontractor employees.
New Standard Contract Provides Assistance with Federal Projects
One group, ConsensusDOCS, a coalition of construction industry associations, has made it easier for construction companies to work on federal government construction projects. In June 2009, ConsensusDOCS published the first and only standard agreement written specifically to address the complexities of federal subcontracting-the ConsensusDOCS 752-Subcontract for Federal Government Construction Projects.
"At a time when the stimulus and other federal construction programs are rapidly expanding, general and specialty contractors will benefit from using this standard subcontract to address the new and complex rules for federal government projects," according to Brian Perlberg, executive director of ConsensusDOCS.
The ConsensusDOCS 752 addresses the numerous, and often complex, terms and conditions required for contractors and subcontractors to comply with the FAR. The agreement addresses new legal requirements regarding the legal status of employees (employment eligibility and verification regulations), compliance with business and ethics rules, federal Prompt Pay Act requirements and more. The federal government contract administration is also governed by some unique provisions such as:
- FAR 52.232-5-Payments Pursuant to fixed price construction contracts
- FAR 52.232-15-Stop work orders
- FAR 52.242-14-Suspension of work
- FAR 52.243-4-Changes
Adhering to federal contractual requirements can be complicated, and any subcontract or purchase order must follow the FAR requirements. To assist in that effort, ConsensusDOCS has created a free guidance document to its newly published 752 Standard Subcontract for Federal Construction Projects, which can be downloaded at: www.ConsensusDOCS.org/downloads/752percent20Guidebook percent2006112009.pdf.
While modified in accordance with the FAR's requirements and practices, the new subcontract document is still based upon the fair risk allocation philosophy found in the current ConsensusDOCS 750 Standard Subcontract Agreement.
Americans Remain Hopeful and Federal Construction Projects Play an Integral Role
As Thomas J. Kelleher, Esq., of Smith Currie & Hancock LLP, recently said, "With America looking to the construction community to rebuild our economy and restore our hope, the last thing we want is contractors being excessively burdened by complex rules and regulations. These [ConsensusDOCS] contract documents will keep needed construction projects from getting unnecessarily tangled up in red tape. There is no need to reinvent the wheel every time someone wants to engage a subcontractor or work as a subcontractor on a federal government construction project. This new agreement, as well as every document in the ConsensusDOCS family, was crafted by a unique coalition of associations and industry stakeholders representing every part of the construction process, including designers, owners, contractors, subcontractors and surety professionals. All project stakeholders affected, directly or indirectly, by subcontracting practices would benefit in using the new ConsensusDOCS 752 Standard Federal Subcontract."
ConsensusDOCS contracts are the first and only industry standard contracts written and endorsed by a team of professionals representing twenty-two leading construction associations. Offering a catalog of more than ninety contract documents covering all methods of project delivery, ConsensusDOCS contracts incorporate best practices and fair risk allocation to further the project's best interests. For more information or to download excerpted samples, visit www.ConsensusDOCS.org.
Every contractor and subcontractor should be aware of the varied and often complex rules when working on federal construction projects. Additional resources can be found at:
Construction Business Owner, September 2009