The pandemic disrupted the economy and changed how many businesses operated. For the construction industry, this has meant a slow down with many projects on hold. As things start to open back up, and with the possibility of a large infrastructure stimulus package on the horizon, things are starting to look up for the industry as a whole. This has many construction companies looking to make up for down time, which may include expanding into government contracting.
For construction companies prepared to handle the extra administrative work that comes with government contracting, it can be a great way to grow. The following tips can help you understand the steps necessary, as well as the additional responsibilities that go along with taking on government contracts.
What is government contracting?
Government contracting simply refers to working on publicly funded contracts. These types of contracts can cover everything from professional services, like accounting or software development, to construction. Public works is another phrase you will see in reference to infrastructure work done for the benefit of communities, such as building or repairing roads and bridges.
The government offers contracts for a number of reasons, largely governed by laws in that state that government contracts must be awarded through competitive bidding processes. The goal is to find competitive pricing, to make it possible for small business to compete for government contracts and to better leverage the buying power of the government.
What laws govern government contracting?
These types of contracts are subject to special laws, most notably:
Davis-Bacon and Related Acts (DBRA)
This law applies to federally funded, or assisted contracts in excess of $2,000 for the construction, alternation, or repair of public buildings or public works. DBRA includes prevailing wage rates, reporting and other requirements.
Service Contract Act (SCA)
This law governs federal service contracts, and it includes prevailing wage rates and reporting requirements. SCA applies to contracts for services provided through a government contract, such as the work of accountants or janitors.
There are also many states and even municipalities with prevailing wage regulations as well. These tend to govern state funded, or assisted projects. Every contractor is responsible for knowing and understanding the regulations that apply to their contract.
Additionally, the government is also bound by regulations overseeing contracting programs for small businesses. (Title 13 Part 125 of the Code of Federal Regulations (CFR) The government’s purchasing process is also closely governed by the Federal Acquisition Regulation (FAR). There are some agencies that have additional rules regarding regulations in FAR.
Basic requirements to bid on federal contracts
Government contracts can be a good source of income for growing construction companies, but they do come with increased requirements. This increases the administrative burden on your back office, especially payroll processing. To make a successful transition, you’ll first want to be well versed in all applicable laws and regulations.
Once you’re comfortable with the laws and enhanced regulations, you can take the following steps to get prepared to move forward:
- Register your company with the Federal Contractor Registry. You have to do this in order to be qualify for federal contracts.
- Find the North American Industry Classification System (NAICS) code for your industry. This six-digit code is mandatory to bid on federal contracts, so keep it handy.
- Register to receive a Data Universal Numbering System (DUNS) code. This nine-digit code is mandatory to bid on federal contracts.
Your company may have to register with the state as well if your state has prevailing wage laws and you want to bid on state contracts or federally assisted contracts. These are contracts that are funded with a combination of federal and state dollars. Most of the time, this is done through your state’s Department of Labor, but it could another state agency such as a workforce commission or industrial and labor relations department. You can check first with the U.S. Department of Labor to get information on individual state boards of labor. This is a good starting place to determine what you need to do in your state.
It’s important to mention that these steps are for established construction companies looking to expand into government contracting. If you’re starting a business from scratch, you’ll need to take additional steps to get established. The Small Business Administration has a wealth of information available to provide guidance.
Finding government contracts
As you can imagine, there can be a lot of competition when it comes to government contracts. This can deter smaller organizations from entering the arena, but don’t let it keep you from bidding. There are some measures in place to help even the playing field a bit, including small business set-aside contracts.
Smaller organizations, including women-owned and service-disabled veteran-owned businesses, may qualify for these set-aside contracts. These contracts are “set aside” for this segment and have limited competition. This allows smaller companies to have a greater chance at winning the bid. Some of these types of contracts are open to any small business, but others are restricted to only small businesses that participate in Small Business Association (SBA) contracting assistance programs.
There are two types of set-aside contracts: Competitive and sole-source.
Competitive set-aside contracts: If at least two small businesses can perform the type of work needed for the contract, it is typically considered a competitive set-aside. This is automatically the case for most government contracts under $150,000, with few exceptions.
Sole-source set-aside contracts: These are contracts offered without any competitive bidding, and it is reserved for situations where only a single business can fulfill a contract’s requirements. This is less common, but if you are interested in these you must participate in one of the federal contracting assistance programs, which include women owned, service disabled, disadvantaged business among others. Learn more about these programs here.
Searching for government contracts
Finding government contracts can be a real challenge when you’re starting out. While there are a few places you can start your search, the following two databases are official and popular platforms:
SAM.gov The System for Award Management, more commonly known as SAM, is a federal website where all contracts over $25,000 must be advertised. Since posting contracts here is required, it is an especially good starting point.
SubNet is a database ran by the SBA and it lists subcontracting opportunities. This is most helpful for those that want to subcontract for an established prime government contractor.
You can amplify your search efforts by creating a strong profile on databases that government agencies utilize when they are looking for contractors. For example, all profile information on the SAM system is shared on the Dynamic Small Business Search (DSBS) database. This can actually help you gain exposure to government agencies that are actively on the market to hire contractors. Just be sure that all information about you on SAM is complete and accurate.
Construction companies looking to make up lost ground due to the 2020 pandemic can use government contracting as a fresh source of new revenue. And since the new administration is working to pass a large stimulus infrastructure package, it is an especially good time to jump into the arena. Just remember, government contracts come with extra hoops to jump through. To be successful you’ll need to learn all the rules, prepare for the administrative work and carefully select bidding opportunities.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.