Bidding Wars: Can Your Firm Afford to Offer a Proposal on a Federal Design and Build Contract?

by Jeff Yoders
- Jul 29 2014 - 3 min read
design_and_build_contract
Micke Tong

Federal contracting laws have never favored small firms. Connected firms have long enjoyed insider advantages from simple familiarity with officials and processes when it comes to a federal design and build contract.

Still, design competitions for everything from federal courthouses to garages and outbuildings on National Park Service land promise, at the very least, that the little guy gets a crack at the billions in taxpayer dollars spent every year on design services. Right?

The current process threatens to shut small firms out before they even consider entering a competition simply due to the time and expense necessary to submit an entry that may not win or even crack the top nine in a federal design-build competition.

“When teams are shortlisted in two-step design-build, an architecture firm spends a median of $260,000 to compete for a design-build project, by making plans, models, and other materials,” says AIA First Vice President Helene Combs Dreiling, FAIA, while recently testifying before the House of Representatives Small Business Committee. “When approximately 76 percent of firms make less than $1 million annually, this creates a ‘Hobson’s Choice’ on spending limited capital for the chance to win a federal contract.”

If it costs a median of $260,000 for a small firm to compete in a federal design-build competition, according to Jessica Salmoiraghi, AIA Director, Federal Relations & Counsel, it is hard to ask its principals to spend more than 25 percent of their annual gross income on a competition where they have a 1-in-10 chance of winning, if there are 10 finalists. Even if there are fewer finalists, it’s still a competition the small proprietor may not win. The bill Combs Dreiling was testifying in favor of would enable firms to determine their risk tolerance within the industry standard of three to five finalists. But the bill is still in committee.

design-build contracts

Under the Small Business Act, the federal government is required to set aside 23 percent of prime contracts for small businesses, and a recent change in its language increased the participation of lower-tier subcontracts to be counted toward small-business participation. Given that many architecture firms are subcontractors in design-build, it would be to the benefit of the prime contractor to work with smaller firms to help the government agency meet their small-business participation goals.

Stipends given to firms who take the time to compete in federal design-build competitions have also been brought up as an answer, but there is little stomach for any mechanism that will cost the taxpayers more money in the current congress.

“At this time, congress is looking for ways to reduce expenditures, and stipends are an easy answer,” Salmoiraghi says. “Additionally, since many construction projects have been shelved due to the lack of funding, there is no money for these projects, much less stipends. A recent change to the Small Business Act increased the credit that prime contractors can receive from lower-tier subcontractors. This greatly benefits smaller firms.”

Acting as a subcontractor on federal design-build projects would give a small firm a much better chance to participate, without incurring the costs of essentially going it alone in a federal design-build competition.

“There are opportunities for architects and the profession to take advantage of the changing federal market,” Salmoiraghi says. “With more than 97 percent of AIA member’s firms qualifying as small businesses and the recent changes to the SBA’s set-asides, the federal market is getting larger for small businesses, rather than smaller. As the House Transportation and Infrastructure committee continues to look at methodologies to utilize Public-Private Partnerships in government buildings, and as the federal building stock continues to deteriorate, there are opportunities for small businesses to take advantage of this market condition.”

design-build contracts

In addition to generating federal business, check out these tips on getting new leads and clients for your firm: 3 Things to Do for 5 Minutes a Day to Build a Pipeline of Work and Clients for Life: 6 Tips to Generate Leads and Build New Business.

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