Bidding on federal construction contracts allows you to find projects that best suit your strengths. The pool of active federal contracts waiting for bidders is incredibly deep, so there’s almost always work available for those willing to seek it out.
In part one of this two-part series, our Nashville contractor lawyers explored the bidding process and how the government awards design contracts. In part two, we will examine how the government awards construction contracts, the role of performance and payment bonds in federal contracts, and the penalties for violating these bonds.
Construction Acquisition on FedBizOpps
Construction projects ranked below the prospectus level are assigned using sealed bidding procedures, competitive proposals, or competitive orders against existing IDIQ construction contracts with multiple awards. On the other hand, major construction contracts are awarded using the Federal Acquisition Regulation (FAR) “Source Selection Method.”
This method requires a technical proposal or management proposal, and a price proposal. This proposal is then evaluated for quality and cost effectiveness. The “best value” is selected and the government and the firm enter negotiations where any necessary changes to the technical or price proposal can be implemented.
In this system, technical proposals are evaluated in a two-step system before the firm is informed whether or not their technical proposal is viable for the project. On average, bids are awarded within 60 days of receipt of offers.
Performance and Payment Bonds
FAR 28.102 establishes that construction projects with budgets over $100,000 require performance and payment bonds in accordance with the Miller Act. A performance bond acts as a promise of surety to the government that the contractor will perform all obligations as outlined in the contract that has been awarded. Conversely, payment bonds represent a promise of surety of payment to anyone who supplies labor or materials in contractually binding work. These bonds help protect all parties and ensure that projects are completed and payments are awarded in a timely fashion.
Penalties for Breaching Bonds
If you breach a performance bond, you will incur a penalty of 100 percent of the original contract price and any price increases. This amount can vary if the contracting officer determines that 100 percent of the original contract price is excessive, and a smaller amount will protect the government.
Breaching a payment bond is similar to breaching a performance bond. You will incur a penalty of 100 percent of the original contract and any price increases. Once again, the contracting officer can influence this price. When dealing with a payment bond, the contracting officer can make a written determination that a payment bond is impractical or superfluous. It’s important to remember that the payment bond must be worth at least as much as the performance bond.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.