The Infrastructure Investment and Jobs Act was signed into law “way back” in late 2021. As expected, it’s taken a while for many of the resulting jobs to come online. Nevertheless, confidence remains high that they’re indeed coming. If your construction business is interested in this work, here’s a look at two of the most common bidding methods for federally funded projects.

Submitting a sealed bid

The predominant method for most federal construction work is “sealed bidding.” It begins when the government releases an invitation for bid (IFB). The IFB provides the project specifications or statement of work, proposal instructions, and a draft contract. Bids are then opened publicly.

Sealed bidding is used when the specifications are clear, and the determining factor is price. The qualified construction company with the lowest price will win the bid — which will be a firm, fixed-price contract.

Generally, contractors who win sealed bids won’t have to submit cost and pricing data. The cost principles contained in the Cost Accounting Standards (CAS), a set of standards and rules that the federal government uses to determine costs during negotiated procurement, typically don’t apply. However, the Federal Acquisition Regulations (FAR) do apply to sealed bids and, indeed, to all government procurements.

Because CAS doesn’t apply, a substantial portion of the cost-accounting regulations applicable to government contracts won’t come into play for most construction businesses. Nonetheless, contractors bidding these types of contracts shouldn’t completely ignore the regulations because they may come into consideration if change orders are requested, the contractor submits claims for additional compensation or the government terminates the contract for its convenience.

The applicability of cost principles to fixed-price contracts is specifically addressed in FAR 31.102, “Fixed-Price Contracts.” It states, in part, “The applicable subparts of part 31 shall be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (a) cost analysis is performed, or (b) a fixed-price contract clause requires the determination or negotiation of costs.”

Negotiating a contract

Although sealed bidding is the most popular procurement method, the federal government sometimes uses “contracting by negotiation” for multiyear construction management contracts, facilities management work and overseas contracts.

This approach typically comes into play when the construction services involved are complex, difficult to describe and include factors other than price. Unlike the sealed bidding method, which awards only fixed-price contracts, contracting by negotiation can take many forms — including cost reimbursement contracts.

The process begins when the federal government publishes a request for proposal (RFP). Like an IFB, an RFP contains the statement of work or specifications, proposal instructions, and a draft contract. Unlike proposals under sealed bidding, however, the contract proposals aren’t opened publicly. Rather, the federal government evaluates the proposals against an established list of evaluation criteria addressing technical, management, past performance and cost items.

After the initial evaluation, the government selects the best proposals for inclusion in the competitive range. Then it negotiates with the offerors in the competitive range by seeking clarifications; pointing out weaknesses; suggesting improvements; and discussing terms and conditions, schedules, and other items. After completing negotiations, offerors submit a Final Proposal Revision.

Finally, the federal government awards the contract to the construction company that offers the best value, all factors considered — not necessarily the lowest bidder.

Recognizing the differences

Several factors are present in negotiated contracts that aren’t found in fixed-price contracts awarded under sealed bidding. Negotiated contracts valued above a specified dollar threshold require the contractor to submit cost and pricing data before the award is granted.

Also, with a negotiated contract, the award may be subject to an audit to determine the contractor’s compliance with cost principles and the accuracy of underlying cost data used in the construction company’s estimates.

Getting ready

Working on a public project is a different experience from undertaking a job in the private sector. Should you win a bid to be part of a federally funded infrastructure project, be sure your leadership team and employees are ready.

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