You have heard all about the American Recovery and Reinvestment Act (ARRA)—more popularly known as the Stimulus Bill that passed in February 2009—and all the money that will soon start flowing out of Washington. Whether you believe this will really kick-start the economy or not, there is some construction money coming for infrastructure work. But do concrete contractors, especially smaller companies, really have any hope of getting in on these projects? Definitely, maybe.
First you should know that despite the $787 billion size of the package, the amount that will go into construction is much less—about $131 billion. That's a big chunk of change, and although a portion is allocated to energy efficiency retrofits, most (about $72 billion) is for infrastructure-related projects that will include a lot of concrete work.
Transportation (including pavement, bridges, and rail) is well funded, but buildings—especially new buildings—are not a priority with the heavy emphasis on shovel-ready projects. Building Design & Construction editor Rob Cassidy emphasized that in his March editorial, entitled “Congress to AEC Industry: Drop Dead.” “Seven hundred eight-seven billion smackers and just scraps for the U.S. nonresidential design and construction industry,” he wrote.
But with the dearth of private construction, especially the rigor mortis in residential, government spending on infrastructure may help to keep your company afloat until things turn around. But if you have done mostly private work in the past, you've got some things to learn and should prepare now to be ready for the opportunities.
One thing that is essential today in working with the government is the ability to navigate the Web. Practically everything the government does is accessed on various Web pages (see What You Need to Know to Do Business With the Government). There are government Web sites for the entire executive branch and all the individual agencies have their own sites—and their own requirements and quirks.
Maybe the most important thing to understand is that the government has many regulations, and the bureaucrats who oversee the work will insist that every regulation and every form be filled out completely and properly. This means that there will be lots of extra paperwork and oversight. From prevailing wage requirements to bonding issues to quality control and safety, most government owners want lots of documentation—and the amount increases as you move up the ladder from local to state to federal.
“With things like prevailing wage and the like, it really adds up,” says Skip Foster, president of Covenant Estimating, Conyers, Ga. “One of my clients is a roofer and he told me he had an $80,000 roof repair and there are 1500 pages of documents that he's responsible for.”
But look at it from their side and realize that public engineers and project managers are being pressured to spend ARRA money as quickly as possible. Under this system there is a limited time for review, but plenty of time for second guessing, so help them out where you can and it might pay off.
Whether it's federal, state, or local funding, the process of purchasing goods and services, including construction, is called procurement. All states have a procurement office. For federal projects, procurement is a melange of across-the-board information resources and regulations to very specific departmental requirements—although all federal procurement falls under the Federal Acquisition Regulation (FAR).
Even being allowed to bid government work requires some preparation. Registration as a contractor, prequalification of some sort, and the ability to acquire a performance bond usually are all necessary. For example, to bid on Government Services Administration (GSA) work or Department of Defense work (including the Corps of Engineers) or any federal work, you must first register as a contractor on the Central Contractor Registry (CCR, www.ccr.gov) and submit past performance evaluations through a commercial service called Open Ratings, which will conduct independent audits of customer referrals to come up with a past performance rating.
State work also often requires prequalification. “Illinois has a state form everyone has to fill out for any state or federal projects,” says Pam Broviak, public works director in LaSalle, Ill. “If it's just local funds then that's not always necessary since we often would be using local contractors that we know.”
“With a government bid, the contractor has to provide a bid bond,” says Shawn McMahon, president of McMahon Contracting, Grand Prairie, Texas. “Some municipalities and cities require you to be prequalified to bid one of their projects. For instance, the Texas DOT has us turn in a certified audit every year, and they tell us how much work we can bid on depending on our working capital. We go through the renewal process every year. As long as your cash flow is positive and your working capital is up, it's not a big hassle. It does have to be a certified audit, and a lot of contractors don't want to go through that expense. Municipalities have a lot of prequalification questions they ask including: equipment lists and who you have worked for in the past. They do call and verify that your past performance has been good.”
Prequalification requirements can sometimes become onerous in terms of paperwork and can disqualify good potential bidders. “If you haven't done work for the New Jersey DOT in the recent past, you're not likely to,” says Harald Greve, owner of Applied Engineering & Technology, Skillman, N.J. “They look at your five-year history and every year you don't work for them you lose 20% of your possible score. You're competing against firms that have 95% scores so you can't ever get qualified. They don't really want to have to re-evaluate companies and teach them how to work with the DOT.”