March 18, 2020
Be Ready for the Government Contract
By Brett W. Johnson
As of the last report, the United States Treasury Department is proposing a $1 trillion stimulus package to spur economic stability during the COVID-19 crisis. This is on top of what state and local governments are proposing or have already instituted. As such, there are many opportunities for government contracts. Many companies that would have never considered bidding a federal, state or local government contract a few years ago should consider seeking out these opportunities.
There is a roadmap as to what companies can expect regarding potential stimulus packages. There will be significant opportunities with every governmental agency. In addition to direct state contract opportunities, states will also likely be provided federal funding to support state programs, such as in transportation, economic support, communication, healthcare and economic incentive grant programs.
A major problem many companies will face is being prepared for when the opportunity arises—whether it is as a prime or sub-contractor. Companies that are prepared for the opportunity will be in the best position to concentrate on the actual bid process rather than being bogged down with preliminary administrative hurdles that must be accomplished before ever being allowed to bid. As is well known, timing is everything in government contract opportunities.
The first step is that the company must perform a self-evaluation. Since it is required anyway, the best place to start this evaluation process is to register with the System for Award Management (SAM.gov). As part of the registration process, the company will need to determine its North American Industry Classification System (NAICS) Code and have a DUNs number provided by Dun & Bradsheet. It is important to note that a company may have multiple NAICS Codes and should not get relegated to only one. The company will also need to complete several certification representations and provide accounting data, which is a requirement of the SAM process. The company will also be required to reference intermediary and ultimate parent company control. All of the companies will need Commercial and Government Entity (CAGE) Codes, which may be a little more time consuming to obtain if the parent company is a foreign entity.
As part of the self-evaluation, the company must have an understanding of whether it qualifies for any preferences or set-asides. These are usually tied to socio-economic programs for small businesses and qualifying size determinations are aligned with the company’s NAICS Code. For those companies that meet the threshold for being considered a small business concern, they may also qualify for socio-economic status based on who owns the company (51 percent ownership by a woman, minority or veteran) and where the company is located (HUBZone). The U.S. Small Business Administration (SBA) is a great resource about such socio-economic programs. Further, each state has its own agency dedicated to assisting small businesses, so this is another resource to find opportunities.
It is expected that a great majority of the stimulus package will be directed at small businesses. Therefore, if a company does not meet one of these requirements, it might think about teaming up with a small business concern that does meet the criteria to bid on a contract opportunity. The relationship between the two companies can be formalized in various legal forms – joint venture agreements, teaming agreements or strategic partnership arrangements. This is a strictly regulated area, and a full understanding of the applicable laws is necessary if a construction company decides to enter into a legal relationship with a small business concern as part of its business plan.
Once a company completes the SAM process, it must make sure that it is able to handle the multitude of requirements that the federal government places on a business that is awarded a government contract. These requirements include, but are not limited to, labor standards, reporting requirements, sub-contracting plans, accounting issues and business ethics. These requirements, which are not usually required on private commercial contracts, include many that construction companies have previously wanted to avoid. Now, because of the pandemic crisis, many companies will have no choice to ensure competitive stability in their industry. Companies must understand that these requirements are part of the federal government contract and cannot be ignored.
During this self-evaluation process and possible small business selection process, a company should be regularly searching for federal contracting opportunities. Unless an exception applies, almost all opportunities for federal contracting must be posted on the Federal Business Opportunities new website at “Contract Opportunities” (beta.sam.gov). Each agency also usually regularly posts solicitations for opportunities on its own website and sometimes before the solicitation makes it to the central website.
In addition, a construction company’s services may meet the criteria to be placed on the U.S. General Services Administration (GSA) “schedule” to expedite and receive notice of opportunities that a construction company might not otherwise consider. In the previous American Recovery and Reinvestment Act of 2009, which is likely to be the template for the stimulus, the government created a special website to show how funds had been allocated and to further transparency. When this occurs, it will be a great source of opportunities, specifically in regard to subcontract opportunities, and should not be ignored. Finally, each state and municipality usually has their own web portal that showcases opportunities and track procurement solicitations. These separately require registration. Thus, it is important to pre-register to ensure an understanding of all potential opportunities.
It is important that companies take the bidding process seriously. A “cookie cutter” response that does not address the solicitation requirement will not be well received, especially in today’s environment where the competition is strong (but not impossible to overcome). The bid process is an art form and companies would be wise to seek out assistance in their preparation.
If a company responds to a solicitation with a bid and loses the award, the process is not necessarily over. The solicitation, bid and award process is extremely strict and heavily regulated. If a company believes that the governmental entity should have awarded it the contract, then a bid protest may be warranted through several different forums – the agency that made the award, the Government Accountability Office (GAO) or the various federal judicial courts, depending on the circumstances. The state and municipal governments have similar forums for relief.
A point of caution: there are significant laws that dictate how a company can negotiate with the government. First, there is the Truth in Negotiation Act that requires truthful and candid negotiations with governmental entities. There is also the Procurement Integrity Act and specific ethical regulations related to contact with solicitation officers and access to source selection information. Finally, there are conflict of interest requirements that should be addressed. The failure to adhere to these laws can have significant liabilities pursuant to the False Claims Act or other laws. Marketing and business development departments should be provided training about these requirements and avoid unnecessary pitfalls.
A company that decides to do business with the government will be presented with many opportunities. It is up to the company to prepare in advance and constantly seek out the solicitation offers. However, it is important that any company that decides to do business with the government understands that it is subject to multiple requirements that it would not normally be subject to under a commercial contract. These requirements cannot be ignored. Rather, these regulations must be understood and followed. Over the next several months, there will be significant government contract opportunities and companies should prepare now.
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