Contractor’s Corner: How to cash in on a government spending boom - Feb 2021
By Dave Stafford
Are you looking for another opportunity for sales this year? Government dollars will flow from recently passed congressional bills to local economies. With the size of the federal budget, millions will be spent in refurbishing offices, replacing flooring in a variety of buildings or erecting new facilities. Each representative and senator has their own local wishlist for spending to help them at election time. Start now with research in your geographic area for profitable opportunities. The trickle-down effect may be slow, but it will happen.
START MAKING CONNECTIONS
Who do you know that is either connected with a government agency or already does business with them? Perhaps you know a congressional staffer or an actual congressperson. Explain that you specialize in interiors projects and ask about ones that are planned and funded for your area. You may get lucky and find one in transition that is going out for bid.
Maybe you’ve already done business with a wily general contractor who lands his share of local municipal contracts. Does he have anything coming up with that large Army or Air Force base in your area? Highlight your credentials and ask for a spot on his subcontractor’s list.
A local university or school system might have just received a large-dollar grant to build an exhibit or modernize a new area. Talk to the facilities people for the school systems about their local budget for the coming year. Even though virtual learning is prevalent, maintenance must be done.
For years, the same company was selected to do all carpet replacement work in the House and Senate chambers as well as member and staff offices. Look for those diverse opportunities that come from retail; a small two-bedroom apartment carpet job turned out to be for a well-connected senator. He was so pleased that we ended up doing all the flooring at his country estate.
I was approached by a top-tier mill rep with the question, “Would you be interested in a long-term, labor-only project with us? I’m sure there might be a spiff on the carpet for you.” A designer had selected his product for a large office complex occupied by a quasi-government agency; they wanted to buy the 40,000+ yards of carpet direct from the mill since they had funds available rather than pay the property management company. Therefore, to get the carpet sale, the mill rep had to arrange with a local dealer to provide the receiving, storage, delivery and project installation services. While a logistical nightmare, we ended up making nice profit with a piece of a large job we would have never otherwise seen.
The toughest part of all may be finding your own niche within the expertise your company possesses. Perhaps it is service work and prompt, expert installation or repairs; carpet cleaning; or resilient, ceramic or terrazzo rejuvenation. Start small and get your foot in the door.
UNDERSTAND THE REQUIREMENTS
Government money and contracts come in all forms and may not be strictly awarded by government personnel. When money is budgeted and then allocated, there might be certain government purchase requirements. It will depend on the agency. Some follow the FAR (Federal Acquisition Regulations) and competitively bid every job over a specific dollar amount, perhaps $5,000; certain agencies seem to find a way to let a contract without a competitive bid for $100,000 or more “in satisfying a critical agency need.” That is typically one of time constraints.
The lower the expected dollar amount of the government purchase, the more latitude a contracting officer has to exercise his discretion. A request for quotation (RFQ) or request for proposal (RFP) means a lower dollar amount is expected, and the buyer may take your suggestions and award to other than a low bidder. Whenever you see an invitation for bid (IFB), though, the government buyer has done his research, has an idea of what the purchase will cost and expects you to bid on exactly what was specified. Unless a compelling reason exists, he will award to the lowest bidder. I once lost a nice bid because I offered an alternative product solution, “We told you what we wanted, and even though we ‘might have been wrong,’ you had to provide pricing on that product and application.” Had I been more experienced, I would have bid lower on the specified items, received an award, then shown them their error and given them a chance to make a change.
Let’s say a government agency has just received the money to replace flooring in a multi-story building. Rather than do an agency purchase, they go to their property manager with a benign request for new flooring and a check in hand. The facilities people will get bids but are not overly burdened with the FAR and manage the entire process; yes, they will get several prices and document their files, but that is it. Or this will become a single job for a general contractor or construction manager. This was another case where you had to know somebody to even provide a bid, and there was no requirement that it had to be an advertised bid.
In a truly terrible lapse of judgment, the government decided to do a purchase and award themselves. They split the product purchase from the installation. It was fiscal year end, and they had to spend the money and were getting pressure to satisfy their small business award (SBA) set-aside requirements. The product could only be sourced from a large business, so I got that order; they then went to a small, local installation contractor to satisfy their SBA requirement. He bid the job too cheap, and to save money, used the wrong adhesives, which caused flooring deterioration when it was installed. A total loss and a physical mess to clean up, the local contractor went bankrupt, and the government suffered a seven-figure loss. I am told that many heads rolled in that debacle, and I had to deal with the fallout for over a year.
KNOW YOUR BIDS AND CONTRACTS
Firm, fixed price (FFP) and indefinite delivery indefinite quantity (IDIQ) contracts are two types of government bids and contracts with which you should become familiar.
An FFP is for an actual project where funds have been set aside for the purchase. Most of these are larger dollar amounts and are usually IFB types; some will require payment and performance bonding, so be sure you can get a bonding from an insurance company in the event you win the bid. Bid bonds may sometimes be required (to ensure you do not withdraw your bid after submission). The ability to secure bonding and bonding costs will vary. Applications for bonding can take time, so plan ahead; you may even have to show evidence that you can secure a bond up to the amount of your bid, too.
Frequently, this type of bid is where you will be the subcontractor to a general contractor or operate under a construction manager. It is usually complex with many pages of legalese and gotchas; pay particular attention to the scope of work and the required time for completion. A deadly addition is the liquidated damages provision. If you do not meet the delivery/installation time specified, you can be charged a penalty for each day you are late (until the government formally accepts the project). A favorite amount is $500 a day. I looked with awe at some 40 pages of rules, regulations and contract clauses for a relatively simple job, and asked the contracting officer, “Is all of this really necessary?” He responded with a wry smile, “No, not unless or until you don’t perform the job; then I’ll bury you.” And he was serious.
With an IDIQ contract, the concept is that the government knows they will need a certain amount of flooring and installation, just not specifically. They may have a budget but not the funding. This type of contract is their version of planning ahead to not delay a quick purchase because of FAR rules. In one case, I happened to see a bid about to be posted for an item I already had under a GSA IDIQ contract. I asked, “What if I had a way for you avoid delays on this purchase?” The contracting officer jumped at the chance to place an order under “an already advertised, competed and multiple-awarded contract” since he was freed from the requirement of the whole bidding process. Even better, he told his friends, and I received several more orders and generated lots of goodwill within that agency. The number one reason that any agency uses this type of contract is for expediency: simplified rules for comparing prices rather than formal competitive bidding, 15 minutes on the phone getting prices versus 30 days for advertising an RFQ or longer for an IFB, and no threat of bid protests from unsuccessful bidders.
The downside to this type of contract is that no purchases are guaranteed. If you go after one of these, make sure there will be a need. Always ask about prior purchase amounts, budgets, project plans and which ones are already funded. You will also have to do your own marketing, since most will be multiple-award. At least three or more companies offering similar products and services may be awarded a contract to give the buyer a choice of secondary supply.
Since I had the next lowest price for a such a bid, I was also awarded a contract at my price in case the lowest bidder did not perform. He was a disaster in delivery times and overall performance; rather than go through a formal process of canceling his contract for cause, the agency just placed most orders with me and allowed his contract to lapse after one year. Such a contract is like having a union card, you can get the work if there is work so long as you make the client happy.
TIPS FOR ALWAYS GETTING PAID
Cashing in means getting paid for a government job in a reasonable time after you have delivered and/or completed installation. I have always been paid by federal, state and local governments for properly authorized jobs. No exception. Being paid “on time” is another issue entirely. Unlike most other purchasers we deal with, the government cannot legally issue a purchase order or obligate itself to purchase without first having funds available for the purchase. A contracting officer always hopes his customer will add at least 10% to the amount he expects to spend so that awards may be made promptly. When over-allocation of funds happens, extra items may be added as change orders up to the limit of funds.
We received an order to demolish existing flooring, and to prepare, furnish and install carpet and accessories for the first floor of a building. This was under a RFQ, and our price was about $16,000. Imagine my surprise when I was told to “take a look at the second-floor corridor and give us a price.” I asked the government site manager what was going on; he winked at me and said, “I expect they’ve found some extra money somewhere.” Long story short: I ended up doing three more areas in that one building under contract amendments for more than $40,000.
The difference between prompt payment and waiting a year for the check may be your attention to detail. Always make sure the written purchase order is signed and correctly states the type, amount, quantity of service and scope of work to be performed. Once you start, you have accepted the job. When delivering materials or installation, always get a signed receipt and retain it for inclusion with billing.
To make it easy to evaluate your billing and to process payment, the invoice should state the purchase order or job number, listing of quantities of materials, unit prices and price extension exactly as listed on the government purchase order.
Include with your invoice as much of the following as feasible: copy of the purchase order, any amendments, delivery receipts or receiving report, and project signoffs.
Send the invoice and attachments to the address specified in the purchase order. The government’s position is that their N30 time for payment starts when they receive the invoice at the specified location. Period.
Follow up by phone if no payment is received within 40 to 45 days; have them look up the payment status by purchase order number. Nothing beats civility and having your paperwork at hand. Screaming and threats usually hinder rather than help, and they might “lose” your invoice again.
When there is a problem, start with the person that issued the purchase order; if they do not know the answer, they can find out and cut through bureaucratic layers.
Tax dollars will be spent, and you can get a piece of it if you do your research. While it requires some sales skills, patience and dogged determination are paramount. And it is not for everyone. If you have decided to pursue some form of government business, good luck.
Copyright 2021 Floor Focus
Related Topics:The International Surface Event (TISE)