Generating accurate estimates is essential for any contractor. The only way to remain profitable is to have firm control of costs. Usually, when you run into cost overruns or delays, you can renegotiate your contract, but that’s not typically the case with a federal construction contract.
The rules differ when bidding on federal construction contracts, and you need to understand those rules before you bid. There are prerequisites to bidding. You need to have subcontractors and suppliers lined up, and there are safety and security requirements that must be met.
As with most government procedures, the bidding process is complex, but it can also be extremely rewarding. That’s why it pays to take steps to ensure you provide an accurate and compliant construction bid.
The Benefits of Government Work
There are many reasons to pursue federal construction contracts. First, you will have fewer competitors. The bidding process is more complex, and many contractors don’t want to try to understand the rules and regulations. Fewer competitors mean a greater chance of winning the contract.
Second, the more government contracts you bid on, the easier the process becomes as you understand the bidding protocols. Eventually, you could become a preferred vendor, giving you access to more government contracts with fewer competitors.
Third, government agencies pay within 15 days and the “check clears”, most commercial contracts are net 30 days and checks can bounce. Once the bid is approved, you can be sure the money is available, and you will be paid according to the contract terms.
Finally, federal construction contracts can pay more if you know how to select the right contracts. The Federal Government is the largest purchaser of goods and services in the world, and once you crack the code on estimating and bidding for government construction contracts, you can create an ongoing pipeline of federal business.
The Unique Aspects of Bidding Federal Contracts
The Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS) give you most of what you need to know. If you are a small business, you must also comply with the government contracting requirements set by the Small Business Administration (SBA).
FAR/DFARS requirements cover a range of issues, including safety and quality control, inspections, sourcing, performance, and more. There are new security rules, and FAR 52.204-21 outlines the requirements for contractors’ information systems, including transactions with government systems. Because more approvals and transactions are being handled electronically, complying with these security standards has become increasingly important.
You also must meet the regulations for subcontracting work, including calculating and validating the percentage of work given to your subcontractors. If you are negotiating sole-source projects then you must have at least three qualified subcontractors for each trade when bidding to determine fair and reasonable cost provisions according to the FAR and DFAR... Each one of those subcontractors must meet the same federal guidelines.
As the primary contractor, you must sign the certificate of current cost or pricing data stating that you have met all the requirements. That includes your subcontractors. If one of your subcontractors proves non-compliant, you are responsible and it could jeopardize your contract.
Important Facts About Federal Contracts
Contractors who have never bid on a federal project often have misconceptions about the process. Here are just a few of the harsh truths to anticipate:
- The government usually can’t and many times won’t help you. When preparing a federal construction contract, you will get no assistance, including help clarifying the request for proposal (RFP). You must work with what you are given.
- You can’t renegotiate the final contract. Even if material costs or other variables change, it is virtually impossible to modify a firm fixed-price government contract once it is signed. That’s why it pays to be meticulous during the bidding process.
- RFPs are not standardized. Each government agency and department has its own nuanced requirements and processes. Approach every government bid without preconceptions and read the requirements carefully.
- Permitting is not required on federally Owned property. Construction projects on federally-owned properties are subject to federal regulations. That means local building permits aren’t needed so a local construction license is not required. The Federal Government is its own inspection authority however on federally leased facilities Building permits are required.
Bidding on a Federal Project
We can’t cover all the considerations that go into bidding on a federal construction project here. However, there are some basic rules to follow:
Understanding the correct project for your company is essential for success. Never be afraid to turn down a project if it does not fit within your company's capabilities.
Scrutinize the RFP.
When bidding on any federal construction project, it’s essential to study the RFP. Be sure you understand the details of the project. Some RFPs are less detailed than others, so be sure to include exceptions and fill in the gaps as part of the bid to minimize risk. Build in contingencies and an extra margin of profit to cover the unexpected.
Know your subcontractors.
You need to consider at least three subcontractors for each trade as part of your bid, including an outline of each subcontractor’s work scope and associated costs. You also need to have accurate specifications and costs from suppliers because material costs are locked when the contract is signed. Always get a time commitment from Subs and suppliers ensuring their prices are good at the time of the award. On projects more than a year in duration, always request an inflation factor as part of the contract.
Review your safety standards.
Safety protocols are required for every RFP, but they will vary with each government agency. A less-than-average safety record will exclude you from working at certain facilities.
Have a strong team of estimators.
Your best strategy for winning a profitable government contract is to start with accurate estimates. Consider yourself ahead of the game if you have an experienced team of estimators with specific expertise covering the general areas of the project scope.
Your bid submission should be absolutely accurate. If your bid is accepted, then you may be ready to negotiate some of the terms in the contract, but it’s best to spell out everything you can in the bid to simplify negotiations and protect yourself.
Get Expert Guidance
Preparing a bid on any federal construction contract can be daunting, but you don’t have to go it alone. Companies like Bold Concepts can walk you through the process and show you how to prepare and present a winning federal bid.
Bold Concepts has been helping contractors with federal bids for more than 30 years. We can show you how to interpret a government RFP, estimate costs, and comply with regulations. We also can help draft the scope letter, outlining the terms of the contract and serving as a safety net for the protection of your profits.
Federal construction projects can be rewarding and open the door to ongoing work. To become a successful bidder, you must know how to identify markets that best suit your capabilities, and execute by understanding the intricacies of the government bidding process. Bold Concepts can show you how it’s done and educate you on handling federal construction bids. And Bold Concepts is always there to provide support when you need it.