No one reading this article needs reminding that the construction industry is one of the industries hardest hit by the recent recession. But, it is also seen as one of the only industries having the intrinsic capability to lead our country's economic recovery by creating immediate, non-exportable job opportunities for thousands of Americans. For that reason, the construction industry is one of the single largest beneficiaries of the American Recovery and Reinvestment Act of 2009, commonly referred to as the Stimulus or Recovery Act. Passed shortly after the presidential inauguration, the Stimulus Act has as one of its central goals the appropriation of billions of federal dollars to be used to fund thousands of public construction projects around the country.
For many, the flow of federal dollars under the Stimulus Act into the hands of working Americans has been far slower than anyone had hoped. In fact, as reported by the Recovery Accountability and Transparency Board, since the Stimulus Act's passage on February 17, 2009 through March 31, 2010, $203 billion worth of federal government contracts, grants and loans have been made available to state, local and individual recipients. Of that amount, however, only $62 billion-or roughly 30 percent-reportedly has been paid out and actually received.
While the flow of Stimulus Act funding to public construction projects has been slower than anticipated to date, the number of federally-funded project and contract opportunities is on the rise and will continue to dominate over commercial construction opportunities, possibly for years to come. Construction companies must seriously consider public contracting opportunities to make up for lost commercial opportunities. Here's how to get started in federal government construction contracting and maximize your competitive chances of winning and successfully performing a federal government construction contract.
1. Get your federal registrations and certifications in order.
As a general rule, every federal contractor must register in the Central Contractor Registration (CCR) database and complete an Online Representations and Certifications Application (ORCA) before becoming eligible to receive a federal contract, grant, loan or other form of federal financial assistance. The CCR is an online repository of basic company information. Registration in the CCR has been mandatory generally for all federal contractors since October 1, 2003. This information is electronically stored and available to all federal agency procurement officials, who rely upon this information during the solicitation and award of federal government construction contracts (and other forms of federal financial assistance).
Registering in the CCR is as simple as completing a one-time, online application, which collects a variety of basic information about a contractor's business and the goods and services provided. While federal contractors need only complete the registration application once, federal procurement laws require contractors to review and update their CCR profile at least once per year. However, because contractors are responsible for the accuracy and completeness of the information contained in their CCR record, they are well advised to routinely review and update their CCR profile whenever a material change in that information occurs. Contractors should appoint an executive-level employee (or some other person that will have knowledge of material changes in corporate information) to be responsible for maintaining and updating their CCR records.
In addition to the CCR, federal contractors also are required to complete the ORCA. ORCA is an Internet-based system that centralizes the storage and collection of various required representations and certifications that previously were included in every government solicitation. ORCA was created in part to streamline the procurement process by eliminating the repeated need for contractors to submit paper copies of the government's standard representations and certifications with each competitive bid or proposal.
The scope of the representations and certifications contained in a contractor's ORCA is vast. Like its paper predecessor, these include, for example, certifications related to business ownership and size, compliance with applicable labor standards and labor laws, compliance with domestic trade restrictions (e.g., Buy America Act and Trade Agreements Act), and compliance with procurement integrity laws, among others. Like CCR registration, contractors must update their ORCA profiles on at least an annual basis and are responsible for ensuring the truth and accuracy of that information.
While errors in a contractor's ORCA (and CCR) record is not unusual, contractors should be especially mindful of the automated certification responses generated by the online system. For example, unlike many of the certifications that require manual selection (e.g., clicking the appropriate box), several certification options are populated by default based upon other information inputted by the user. This often results in the unintentional but affirmative misrepresentation of business size, for example, where a large business is represented as a small business. This glitch in the system underscores the need for contractors to implement a routine system to update and verify the information reflected in these online repositories, to say nothing of the liability that a contractor could face for making a false representation to the federal government.
2. Become familiar with the special programs administered by the Small Business Administration (SBA)
As the world's largest consumer of goods and services (including construction services), the federal government has the ability to dictate unique, non-commercial terms and conditions, including those that serve to foster social and political interests. Among these include the special contracting incentives and programs available for small businesses.
The federal government's small business contracting programs are administered by the U.S. Small Business Administration (SBA). The SBA has established a series of size standards for businesses that vary by and within each industry and represent the largest a business-including subsidiaries and affiliates-can be and still qualify as a "small business concern." For construction contractors (and specialty trade contractors), the size standards generally are based upon average annual receipts and range between $14 million to $35.5 million depending on market sector.
Being a small business is beneficial in government construction contracting for a number of reasons. First, numerous government construction contracts are "set aside" for small business, meaning competition (if there is any) is restricted solely to qualified small businesses. The advantages of restricted competition is colossal, especially in today's overly-competitive construction environment. Additionally, low-interest loans and other forms of federal financial assistance are available for small businesses that may not otherwise be eligible for similar funding from commercial financial institutions. Finally, special programs like the mentor-protégé program enable small businesses to enter into special relationships with large businesses (e.g., subcontracts, joint ventures, etc.) to more successfully compete for and perform federal government contracts, all-the-while still benefitting from restricted competition, (which also benefits large businesses if structured properly).
While the opportunities for and benefits of being a small business are significant, so are the penalties for violation of the strict rules for determining size, affiliation, etc. For that reason, small businesses (and large businesses relying on business's status as a "small-business") must take special care to ensure strict compliance to SBA's rules and regulations.
3. Pay very close attention to the terms and conditions in the government's solicitation.
As mentioned above, the federal government dictates terms and conditions that ordinary commercial construction owners cannot. Whether it's payment of prevailing wages under Davis-Bacon; adhering to the Buy American Act or Trade Agreements Act (or other domestic preference rules); or ensuring that the accounting system meets the government's requirements for tracking costs and determining allowability and allocability (even for fixed-price contracts, in some cases)-all of these unique provisions are set forth in various contract clauses incorporated either in full text or by reference in the government's solicitation.
Most of these clauses are derived from Part 52 of the Federal Acquisition Regulations (FAR). Determining which clauses apply to any given federal contract is largely based on such factors as type of contract awarded (lump sum vs. cost reimbursement), contract value and type of work or services to be performed by the successful contractor. Becoming familiar with the various FAR clauses that apply to government construction contracting when these conditions vary is a must for successful federal contractors.
In addition, while public contractors have always been subject to heightened levels of scrutiny to ensure the integrity of the public contracting process, contractors performing Stimulus Act-funded projects are subject to unprecedented levels of government and public scrutiny. With public reporting obligations on such things as amount of Stimulus Act funds received, jobs created or preserved, and even disclosure of executive compensation, in some cases, the Stimulus Act contains provisions that government auditors and regulators are examining in order to weed out (and punish) unscrupulous public contractors. It goes without saying that the government will judge a contractor's performance by reference to the contractor's ability to adhere to the contract's terms and conditions. Contractors that blindly submit bids or proposals without paying close attention to these rules face substantial risk of default, termination or worse, suspension, debarment, or civil or criminal prosecution.
The commercial construction industry has experienced unprecedented difficulty in the last few years; conversely, there are more public construction opportunities out there now than there have been since development of the federal interstate system in the 1950s. Companies with little or no federal construction experience are looking to federal construction contracting and the added opportunities made available under the Stimulus Act. While these opportunities are intended to help us all weather a very difficult storm, any contractor that engages in this work with a "business-as-usual" mindset runs a very substantial risk. Understanding the rules, regulations and programs applicable to federal government contractors is the only way to minimize risk and maximize reward.
Construction Business Owner, July 2010