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05/27/2020
5 factors construction companies should consider before pursuing federal contracts
COVID-19’s impacts on commercial construction and new opportunities due to increase in government spending on construction contracts are causing some previously commercial-only construction companies to consider pursuing government construction contracting opportunities. Before seeking federal contracting opportunities, consider these five key factors.
1. Regulatory requirements for federal contracting: The level of the regulatory requirement depends on the type of opportunity being pursued. Some opportunities are awarded under Federal Acquisition Regulation (FAR) Part 12 (Acquisition of Commercial Items) or FAR Part 14 (Sealed Bidding). There are much fewer requirements that would be new to a commercial contractor under these types of awards. If the award is to be made under FAR Part 15 (Contracting by Negotiation), then there many additional requirements, including:
- Truth in Negotiations Act (TINA) risk: There are risks associated with submitting certified cost or pricing data.
- False Claims Act risk: Those found to intentionally have submitted inaccurate information during award of a government contract face consequences.
- FAR compliance: FAR Part 31 compliance (allowability of cost) presents challenges to commercial contractors that may not have systems to segregate unallowable costs or allocate costs in FAR-compliant ways.
- Cost Accounting Standards (CAS) compliance: In some cases, awards may be subject to the additional cost accounting requirements of CAS.
2. System requirements: One of the most challenging areas of compliance involves companies’ timekeeping, accounting, estimating, and purchasing systems. Accounting can be problematic in particular. The government expects systems to be capable of complying with FAR and potentially CAS requirements that commercial construction may not have experience with. This does present a significant barrier to entry, but one that can be overcome by developing policies, procedures, and systems that meet government expectations. Many companies have gone down this path and established approved systems that provide a competitive advantage in winning government work.
3. Strategy to pursue opportunities: After deciding to pursue federal government opportunities, a necessary step is developing a strategy to identify and pursue opportunities. For those seeking General Services Administration (GSA) schedule opportunities, once listed on the GSA schedule, go to SAM.gov (which recently replaced FedBizOps) to find possibilities. If you are pursuing items that are not commercially available, FedBizOpps also provides information about RFPs or RFQs to which you can respond. One approach is to determine the government’s required specifications. Then, make sure your product or service meets these specifications, and if it does not, consider changing it to meet them. When the government is ready to buy the product or service, you will have an advantage, since your product or service will have a commercial sales history that will facilitate the government’s purchase of the product through the GSA schedule.
4. Ways to obtain a competitive advantage: Many federal contracting opportunities involve set-asides for veteran-owned, women-owned, and other types of businesses, including small business set-asides. Consider enabling your company to participate in these set-asides. Many businesses that do not consider themselves to be small businesses do qualify. Identify your North American Industry Classification System (NAICS) code and go to the Small Business Administration’s website to look up your revenue limit to qualify as a small business. If you are under the limit, register your company on the System for Award Management website. Consider other opportunities to participate in set-asides, including expanding ownership to those who will assist the firm in participating in minority, women-owned, veteran-owned, or other set-asides.
5. Performance of the contract: Once you have won government work, it is important to successfully perform your contract. This will determine whether you can win future work. The government can be unforgiving if it perceives you did not meet quality or timing requirements. Make sure to communicate frequently with your U.S. government contracting officer and their representatives so that you can be rated highly for the work you have delivered and quickly address any government concerns.
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Jack Callahan
CPA, Partner - Construction Industry Leader
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This has been prepared for information purposes and general guidance only and does not constitute legal or professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its partners, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.