Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
Government Contracting
Government construction contracting can be rewarding. Many of the largest construction companies regard it as a mainstay of their business. Public works projects are available at all levels of government, from towns, cities, and counties, to state agencies, to the federal government. But when you’re first starting out, even if you have significant experience in private construction contracting, moving into this new territory can seem a little daunting. And to be honest, it can take a little effort to get your head wrapped around the ins and outs of bidding on government construction projects.
Government contracting can be a complicated matter due to its highly regulated nature, particularly at the federal level, and some states have a comparably complex procurement process. The high degree of regulation, however, helps ensure the fairness of the bidding process and minimizes the risks to the taxpayer dollars that fund public works projects. It also requires contractors new to the government construction marketplace to gain a good understanding of how to qualify as a bidder, find and evaluate government projects, prepare cost estimates and proposals, and so on.
The First Steps
If you’ve been in business for a while, you probably have laid the necessary foundation by forming a legal business entity and registering it with the IRS to obtain an Employer Identification Code (EIC) or Tax Identification Number (TIN). At the state level, you should be properly licensed and/or registered, which may involve furnishing a contractor license surety bond. Additionally, some local governments also require contractors to be licensed and bonded to operate in those jurisdictions. They also may require contractors to provide their DUNS number, which gives them access to information about the business through the Data Universal Numbering System.
Another thing to consider is whether you might benefit from getting your business certified in one of the categories that would qualify you to bid on certain set-aside projects. These are projects that are intended to increase government contracting opportunities for smaller construction firms and those owned by women, minorities, or members of a special interest group such as veterans. You can seek certification through the Small Business Administration.
To bid on federally funded projects, you’ll need to register with the System for Award Management (SAM) and submit a capabilities statement. Your capabilities statement is your opportunity to let federal project owners know what your business can do for them, so highlight your biggest contracting accomplishments. And include your North American Industry Classification System (NAICS) codes, which identifies your business’s specific services.
How Are Government Contracting Opportunities Advertised?
Federal construction contracting opportunities are posted on SAM, as an Invitation for Bid (IFB), Request for Quotation (RFQ), or Request for Proposal (RFP). E-bidding is not exclusive to federal contracting. It has become the norm for many state and local agencies. Project opportunities are posted online, bids are submitted electronically, and contract awards are announced online as well.
How Do Government and Private Contracting Differ?
The biggest difference for contractors entering the government construction marketplace is the reliance on construction surety bonds to indemnify project owners against risk. While some private project owners may require bonding, it’s much less common than in government contracting.
The federal Miller Act requires contractors bidding on federally funded projects with a value over $100,000 to provide a bid bond and demonstrate their ability to purchase performance and payment bonds if chosen as the winning bidder. Most states have their own version of this legislation, collectively referred to as “Little Miller Acts.”
A bid bond guarantees that if you are awarded the job, you will accept it at the price you quoted. This protects the project owner against the risk of having to go through the bid advertising and evaluation process again if you should decide that your bid was too low for you to make a profit on the project or turn it down for some other reason.
A performance bond is a contractor’s guarantee to complete the project in accordance with applicable laws and the terms of the construction contract. The project owner is protected against financial loss resulting from the contractor’s failure to do so. A payment bond guarantees that the contractor will pay subcontractors, suppliers, and workers in compliance with contractual terms and indemnifies the project owner against legal responsibility for the contractor’s debts.
Bonding Capacity
One of the most important things a contractor can do to become a successful bidder in the government construction world is to establish sufficient bonding capacity and continue to build it as the business grows.
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