Federal government construction project contracts are a great way for commercial construction firms to make money. The total construction spending from all government levels totaled $476 billion in 2023. That’s almost a 25% increase from $383 billion in 2022.
Government contracts are the main source of income for many construction firms. Other firms bid on a mix of public and private jobs. However, there are rules when it comes to public construction contracting. These rules differ between agencies. It is important to know the rules for public construction contracts.
How Government Construction Contracts Work
Winning a public contract is determined by cost. There are different delivery methods for contracts. The most common is called “Design-Bid-Build.” This happens after the architect and plans have been selected. Then, the project is advertised and general contractors can submit bids and proposals.
For public projects, the “lump sum” contract is used most. General contractors receive bids from trade contractors and submit the full project bid for a set price. Bids and proposals must be sealed and submitted by the bid date. Then, all submitted bids are opened and read aloud.
The winner of a government construction project for bid is the lowest responsive bidder. A responsive bidder has met all the legal conditions and specifications. They have the skills, ability, and finances to complete the project.
The “Design-Bid-Build” method is number one for government building contracts. However, there are other ways to win public building jobs. These include procurement, contracting, and project delivery.
How to get Government Construction Contracts: Prequalification
Public agencies sometimes want general contractors to be prequalified for a job. Prequalified means a person must qualify in advance to take part in something. This rule is followed on a project-by-project basis. These rules differ between public entities and states. It is important to know and follow the rules.
- Getting security approvals for your workers.
- Register with the System for Award Management (SAM) before bidding
You will also need to know or have the following:
- North American Classification System (NAICS) code.
- Your Employer Identification Number (EIN).
- Registered Data Universal Numbering System (DUNS) code
Pre-Bid Meetings
The owner will hold a pre-bid meeting or site visit for federal government construction projects. This allows contractors and subcontractors to understand the job requirements. These are great opportunities to ask questions about the bid or site conditions. It also lets you network with interested contractors.
Occasionally, these pre-bid meetings are mandatory. You cannot bid on the project if you do not attend a mandatory meeting. Agencies often use the list of people who attended the meeting to send out important bidding documents. It is always good to attend pre-bid meetings, whether mandatory or not. That way, you can submit a better bid.
Government Building Contracts Programs
It is a goal to make sure all businesses have equal opportunity to compete for government projects. Agencies have created programs to grant a certain number of contracts to women, minority, and small businesses.
The U.S. Department of Transportation (DOT) has the Disadvantaged Business Enterprise (DBE) program at the federal level. This program covers federal, state, and local transportation projects. They oversee the financial aid to qualified businesses.
There are also programs out there that help these types of businesses:
- Small Business Enterprises (SBE)
- Women Business Enterprises (WBE)
- Small Disadvantage Businesses (SDB)
- Women-Owned Small Businesses (WOSB)
- Veteran-Owned Small Businesses (VOSB)
- Service-Disabled Veteran-Owned Small Businesses (SDVOSB)
- Historically Underutilized Businesses (HUB)
Check with your state to see if your business is in one of these categories. If it is, you can get certified and registered to take advantage of these programs and projects.
Prevailing Wages
The Davis-Bacon Act of 1931 is a federal law requiring contractors and subcontractors to be paid locally prevailing wages. These wages are for federally funded or assisted construction projects and include fringe benefits. Prevailing wages are determined based on different factors.
Washington, D.C., and 26 states also have their own prevailing wage laws. While some people call these laws “Little Davis-Bacon Acts,” they are known by different names in those states. The dollar limits are also different. It is important to look up any prevailing wage laws in your state. That way you can include them in your bids.
Construction Bonds
Government agencies often require construction bonds from prime contractors, too. This ensures that bids, construction work, and payments to subcontractors and suppliers follow the terms of the bid and contracts. The three most common bonds are bid bonds, performance bonds, and payment bonds.
Bid Bonds
A bid bond guarantees that a bid is accurate and true. It says the contractor plans to perform the work if they win the bid and are awarded a contract. If a contractor submits a bid without a required bid bond, the bid will not be opened.
Performance Bonds
Performance bonds are used to ensure the contractor performs the work in the contract. If they fail to do so, the performance bond is used to protect the owner if they must hire another contractor. Performance bonds are typically 100% of the bid.
Payment Bonds
Payment bonds make sure general contractors pay all their subcontractors and suppliers for their work and materials. If a contractor defaults or files for bankruptcy, the project owner can make a claim and use the money to pay any dues. Payment bonds are typically for the full cost of the bid.
Any federal project will require both performance and payment bonds. This is a result of a federal law called the Miller Act. It is important to look and see if your state requires any performance or payment bonds.
Contractor license bonds, supply bonds, and maintenance bonds are other bonds that may be required on a project. Contractors can ask the surety agent to review your company’s financials, skills, resources, and capability to perform the work.
Most surety companies give you two bonding capacity amounts: one for single projects and an aggregate for all open projects. Once you complete a project, you should inform your surety agent.
Want to learn about federal, state, and local public construction opportunities in your area? ConstructConnect has the most up-to-date project details with plans and specs included all on a single platform.
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