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costs | Georgia Tech Procurement Assistance Center

Georgia Tech Procurement Assistance Center

Where construction contractors are most likely to exceed the budget

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Budget structures vary by the type of construction a contractor performs.  For example, subcontractors typically have a significant amount of their costs allocated to direct labor and materials while general contractors’ budgets are likely to have more subcontracted work on their books.

However, despite the differences in where the budget is weighted, every contractor, no matter its specialty, is vulnerable to cost overruns.

Weather delays

When serious rain, snow or other weather events keep contractors from making progress on their jobs, it’s not uncommon that both subs and GCs have those lost days tacked onto their schedules.  But what about the extra costs?

“If we get a rain day, it’s not like we can send the superintendent home and not pay him,” said Chuck Taylor, director of operations for Englewood Construction in Illinois.  “If we have a construction trailer, it’s not like we can tell the rental company, ‘Hey, it rained today, so we’re not going to pay for the rental on the trailer.’ It doesn’t work that way.”

Additional costs, which also include items like water remediation, wrapping an exposed building in protective material or bringing in expensive heaters, are often compounded by having to spend even more money on extra labor to make up lost time.  That could mean paying for additional crews or paying workers overtime.

This is an area of contract or subcontract negotiations that deserves attention, and it never hurts to ask the owner or GC for reimbursement beyond just adding time to the schedule.

Joe McLaughlin, chief financial officer of Austin Industries in Dallas, said contractors need to take into consideration where they’re building and factor in potential weather issues.  But, he said, it all goes back to what’s in the contract, so it benefits contractors to try to make the terms as flexible as possible.

Continue reading at:  Construction Dive

Federal contractors may be able to recover costs caused by the government shutdown

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The current government shutdown is now the longest in U.S. history, and many federal contractors are incurring costs as a result of shutdown-related work stoppages and delays. Luckily, many federal contracts contain clauses that provide a potential avenue for recovery of such costs. Further, there are practical steps that contractors can take to increase their chances of recovering shutdown-related costs from the government.

What contract clauses might apply?

Several Federal Acquisition Regulation (FAR) clauses, including the following ones, could provide contractors with an avenue to recover costs incurred as a result of shutdown-related delays or work stoppages:

  • FAR 52.242-14 (Suspension of Work)
  • FAR 52.242-15 (Stop Work Order)
  • FAR 52.242-17 (Government Delay of Work)
  • FAR 52.243-2 (Changes – Cost-Reimbursement)
  • FAR 52.243-3 (Changes – Time-and-Materials or Labor-Hours)

It is very important to note that these clauses generally impose very short timeframes in which a contractor must provide the government with notice and/or assert its right to an adjustment.

Keep reading this article at: https://www.jdsupra.com/legalnews/federal-contractors-may-be-able-to-53396/

GSA issues RFP for office supplies contract

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The General Services Administration issued a request for proposals Jan. 31 for the third generation of its office supplies strategic sourcing contract.

The ability for agencies to purchase everyday supplies such as pens, paper and printing items from a single contract will save more than $155 million annually on reduced administrative costs and lower prices, according to GSA.

Proposals are due March 17.

Keep reading this article at: http://www.federaltimes.com/article/20140131/ACQ01/301310010/GSA-issues-RFP-office-supplies-contract 

How to reduce the growing number of bid protests

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With bid protests increasing by almost 50 percent since 2008, many industry observers and policymakers may be tempted to place the blame for procurement slowdown — particularly in the defense industry — squarely on the contractors. Yet to do so to the exclusion of the other key player in this equation — the Defense Department — ignores that bid protests have proliferated largely as a result of the way government does business.

It may be the case that some government contractors file frivolous protests in order to hang onto a contract they once held but subsequently lost, or in an effort to extract concessions from the government, such as the opportunity to start or continue work while the protest is resolved. However, bid protests are a game of high-stakes poker for most contractors. Protests are expensive, and protestors are prohibited from billing their protest costs against their contracts.

Even if the Government Accountability Office (GAO) sustains a protest (and awards the successful protestor its protest costs), a contractor may still need to go through the bidding process all over again, and there is no guarantee that it will win the second time around. In addition, the GAO retains the power to summarily dismiss a protest it deems frivolous, ultimately rendering any effort put into filing a protest a waste of resources. In other words, bid protests do not just slow down the government; they also slow down business for contractors.

Keep reading this article at: http://www.defenseone.com/management/2013/08/how-reduce-growing-number-bid-protests/68582/ 

Insourcing savings difficult to predict

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Insourcing saved the Homeland Security Department $2.3 million since mid-2010, a DHS official said, even while counterparts at the Defense Department said their initial estimates of cost savings to be had from converting contractor positions into full-time civil service jobs were overestimated.

During a March 29 hearing of the Senate Homeland Security and Governmental Affairs subcommittee on contracting oversight, Debra Tomchek, executive director of the DHS balanced workforce program management office, said efforts underway at DHS since mid-2010 to rely less on contractors and to hire more civil servants have produced about $2.3 million in savings as of January 2012.

According to Tomchek’s written testimony, DHS calculates the cost of a contractor to a civil servant using a “DHS Modular Cost Model” that includes “one-time and recurring costs associated with establishing new positions.”

During the hearing, Chuck Grimes, Office of Personnel Management chief operating officer, emphasized that savings shouldn’t be calculated by just comparing labor costs.

When the Defense Department began an insourcing initiative in 2009, then-Defense Secretary Robert Gates estimated the Army could produce $400 million worth of savings and that conversion of contractor positions would save 40 percent on employment costs.

“We had two instances over different periods of time where we achieved anywhere from about 16 to 30 percent savings. And really the percentage savings are really dependent upon the function that’s being in-sourced and the location where that’s occurring,” said Jay Aronowitz, Army deputy assistant secretary for force management, manpower and resources.

Lack of a good cost model to compare the true costs of retaining civil servants versus hiring contractors has long been an obstacle to cost transparency and decision-making. The Center for Strategic and International Studies proposed in May 2011 a cost estimation taxonomy that would permit a comparison based not on labor costs, but the costs that federal agency would incur if it tried to meet its needs by internally running the equivalent of a private sector consulting firm.

— by David Perera, Fierce Government IT, Apr. 3, 2012 at http://www.fiercegovernment.com/story/insourcing-savings-difficult-predict/2012-04-03.

Women, minorities pay a high price for procurement gains

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In the wake of reduced federal contract spending, a new study found that the price tag of doing business is higher for minority and women contractors as compared to other small firms.

An American Express survey, “Women and Minority Small Business Contractors: Divergent Paths to Equal Success,” measured 740 active small-business contractors and looked at how the women and minority contractor experiences compares with other small firms in terms of overall contracting activity and success.

It found, particularly for minorities, that the annual investment made to seek federal contracts was 35 percent higher than for the average small firm with the same credentials. While small firms invested an average of $103,827 to secure a federal contract in 2010, the investment made by minority business owners averaged $139,709. Women business owners invested a less-than-average $86,643, but still up 23 percent from their 2009 investment of $70,512.

“It took minority business owners longer to achieve their very first victory in procurement,” the study said.

As bidding activity and success rates dipped for small business contractors from 2008-2010 as compared to three years before, the survey found women contractors were part of the same trend, but minorities weren’t. While minority contractors had a steeper decline in bidding activity than other small businesses, minority firms’ success rates jumped 10 percent in garnering prime contracts between the periods of 2007-2009 and 2008-2010. Meanwhile, overall prime-contracting rates plunged 8 percent during the same period.

Another positive finding showed women and minority contractors were more likely than their non-contracting colleagues to exceed $1 million in revenue and more likely to own larger firms versus their non-contracting peers.

Furthermore, the survey examined “turning points” toward procurement success in these two groups.  It found that 55 percent of most small businesses couldn’t point to a single action that defined their success. However, fellow business owners were found to be “more helpful than average” to minorities in sharing tips and experiences. Outside consultants (procurement advisors, accountants, or attorneys) and agency purchasing officials ranked “higher than average” at helping women.

These groups were more likely to have a specific certification or procurement designation. For women, getting on the GSA schedule was shown to buoy their business and 41 percent said that the designation has been “very or extremely helpful.” On the other hand, certification as a women-owned business was “very or extremely useful” to only 17 percent of the group. For minorities, 8(a) and disabled-veteran status has proved to be the most helpful certification.

The findings are part of the second annual government contracting survey from the American Express OPEN’s Victory in Procurement small business program.

All the businesses in the study are contained in the Federal Procurement Data System and are registered on the Central Contractor database.

About the Author: Alysha Sideman is the online content producer for Washington Technology.  This article appeared Mar. 6, 2012 at http://washingtontechnology.com/articles/2012/03/06/women-minority-contracting-study.aspx?s=wtdaily_070312.

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