This post explains what government construction contracts are, what types of GSA construction projects bidding are available, and how to bid on government construction jobs successfully.
What are government construction projects?
The name says it all: GSA construction contracts are government contracts aiming to hire private construction firms to design and/or build various facilities such as office buildings, educational buildings, sports facilities, medical buildings, transport infrastructure like roads or bridges etc.
While the government is a very exacting client, bidding on federal construction projects can be extremely profitable. In fact, many building companies prosper on fulfilling solely government construction work.
How to place federal construction bids?
Like with any other type of GSA contracts, the very first things to do are:
- Register your business with SAM, which involves getting NAICS and DUNS number among everything.
- Finish the obligatory GSA training programs.
- Make sure to meet other GSA contract requirements.
- Get on a schedule.
Among other requirements typical for any federal contract, bidding on federal construction projects has a number of additional prerequisites. They include bid bonds of several types and some other requirements.
Bid bonds protect the government against a situation when the winning bidder refuses to undertake the contract or fulfill its requirements completely or partially. For every government contract above $100,000 bid bonds are obligatory. The value of bond is usually the same or greater than the contract price.
There are two types of bonds:
- Performance bonds. If the contractor fails to deliver what the gov project requires, the bond should cover obligations of the contractor. Consequentially, another contractor will be hired to finish the project.
- Payment bonds. The goal of this bond is to ensure that the contractor pays for materials, works and possible subcontracting costs. If it fails to do this, the bond steps in.
Prevailing wage laws. Employees involved in government construction contracts should receive wages average across the industry. This is to prevent using low-quality low-paid workers. To make sure the contractor really pays what it should, there is a mechanism of Certified Payrolls.
Prompt payment requirement. The Federal Prompt Payment Act aims to prevent slowing down of federal construction projects due to lack of payment to contractors and subcontractors. You must include these provisions to every contract with your subs and suppliers.
Who wins GSA construction bids?
Federal construction projects are awarded to the bidder who qualifies to requirements and specifications of the project, possesses skills and resources to fulfill it, and offers the lowest bid among all other bidders. However, a lot depends on what type of bidding the government will use for each specific project.
Construction bidding types
Depending on a situation and a specific project, government buyers may use different approaches to government projects bidding. Specifically, project delivery and procurement methods. Understanding them is important for a construction firm to remain competitive under different circumstances.
Project delivery methods
There are several ways the government performs construction of federal projects. Each approach has its pros and cons, while all of them target faster project completion and lower budgets.
The approach is a widely popular way the government agencies use to fulfill projects. In this method, the government first selects and hires a designer who develops plans and specifications for the project. Then, a bid for construction project is published as IFB or RFP solicitations, and the contractor who won the bid builds the project.
- More control over the project for a federal buyer
- Government gets better protection against unfair construction bids
- Easy to estimate project costs thanks to preliminarily developed specifications
- With known specifications, the only major factor to consider is bid price
- Potential risk of unplanned expenses in case of design discrepancies
- The agency shares responsibility for execution of the project with the contractor
- Increased risks of compromised quality due to “cheaper is better” paradigm.
Unlike DBB, the Design-Build contract covers both the design and the construction at the same time. This does not necessarily means than a single business entity must fulfill both jobs. Instead of doing everything itself, the contractor often outsources some parts of the project to subcontractors. In fact, typically, general contractors cooperate with architect firms to bid on the solicitation together.
- Streamlined overall process allows the government commissioning new facilities faster
- Lower costs compared to DBB
- A single contractor is responsible for every stage of the GSA project, so no conflicts can arise
- Since the architect is not hired by the government, it works in contractor’s best interests, not in the best interests of the government
- More complex evaluation of the project cost
- Less control over the project in its entirety means potential quality problems if the contractor’s temptation to cut costs affects its responsibility.
Construction Manager at Risk (CMR)
Here, the government hires a consultant (construction manager) who is responsible for the design and the construction of the project at a Guaranteed Maximum Price (GMP). Staying in the middle between DBB and DB approached, the CMAR method combines features of both. On one hand, different firms are responsible for design and construction, like in Design-Bid-Build. But like in Design-Build, one single party controls both stages.
- More control over costs and risks
- Faster project completion due to synchronized design and construction
- Higher quality, especially on large scale projects
- Construction manager takes responsibility for the project and acts in the best interests of the government
- Doesn’t fit smaller projects
- Price competition is limited, which may result in higher than fair price
- The government is liable for any problems with the project at any stage
Here are approaches the government uses to award bidders on federal construction projects.
This principle is often uses in cooperation with the Design-Bid-Build delivery method. Since specifications of the project are well-defined, the only deciding factor is price, so the contractor who bids the lowest usually wins.
Best value source selection
Here, the agency evaluates other factors than price too. The idea is to achieve the best value for the price, so complex consideration of multiple factors is performed. The key metric here is Past Performance Evaluation.
Qualification based selection (QBS)
This is where price does not matter at all. The initial selection of the contractor is done based solely on its professional qualification (this corresponds to the Request for Qualification solicitation type). Then, the government creates a “short list” of several potential contractors and selects the best one (usually with the lowest bid) through a Request for Proposal solicitation. Prices can be negotiated in the process.
Negotiated procurement is a non-public procurement type where government directly negotiates prices and terms of fulfilling the construction contract with a qualifying firm. This type of procurement is only allowable in certain circumstances, for instance when there’s risk for people’s life or property, or when two consecutive public bids have failed.
Sole-source procurement method is used when there is only one contractor that meets the prerequisites of the construction projects. This type is applicable for complex or unique projects or in case of emergencies.