By Christopher Horton, partner, Smith, Currie & Hancock LLP
The federal government is the largest energy purchaser in the United States, with an annual electricity bill for the fiscal year 2019 of almost $4 billion. As a result, President Biden’s administration is aggressively pursuing 100% clean energy and net-zero emissions by 2050. In fiscal year 2020, federal agencies invested over $842 million in energy efficiency and renewable energy improvements. It is expected that this number will continue to grow as federal agencies seek to improve energy systems and infrastructures for federal buildings. The increased focus on construction and improvements related to renewable energy provides solar contractors with a great opportunity to grow their business through federal contracting. Doing business with the federal government, however, is very different from contracting in the commercial and residential sectors.
An overview of government construction contracting
The federal government procures construction services and materials through multiple agencies. All procurement notices for federal contracts over $25,000 are posted on the newly-launched System for Award Management (SAM) website. Contractors can use this new website to register for business with the federal government, search for contracting opportunities and manage and monitor the procurement process. The type of information contained within the site includes pre-solicitation notices, solicitation notices, award notices and sole source notices. To be eligible to compete for government contracts, it is necessary for the solar contractor to obtain a data universal numbering system (DUNS) and then register with SAM.
Solar vendors who want to sell to the government should be familiar with the General Services Administration (GSA), which is a self-supporting federal body that assists the government in obtaining products and services. The GSA also oversees its schedules, which are itemized lists of vendors who provide commercial goods and services. GSA will only work with companies that have been in business for at least two years and have a balance sheet of sales greater than $75,000 each of the last two years.
Solar contractors can also pursue federal government work through subcontracting opportunities. Most government construction contracts, including subcontracts, reflect policies contained in statutes and in the Federal Acquisition Regulation (FAR). Besides containing standard contract clauses, the FAR also sets forth extensive guidance to federal agencies and contractors on procurement, contracting methods, contracting requirements and contract management.
Small business and minority business opportunities
Congress has enacted statutory goals for procurement that includes awarding not less than 23% of prime contracts to small businesses. Additionally, Congress authorized each agency to establish annual goals relating to procurement goals for small businesses and minority businesses. For individual agencies, these goals apply to both prime contracts and a general contractor’s buyout of subcontracts. The Small Business Administration (SBA) administers and supervises various small business programs, including “Small Disadvantaged Business,” “Women-Owned Small Business Federal Contracting Program,” and “8(a) Business Development Program” (minority owned business). To pursue small business opportunities, solar contractors must be certified through the SBA. As an example, to certify as a “Small Disadvantaged Business,” the contractor must be owned and controlled by one or more disadvantaged persons and the contractor must be “small,” which is based upon a calculation by the SBA.
Solicitation and procurement of federal contracts
The procurement process begins when a federal agency identifies a need for construction services, such as solar energy. A contracting officer is then assigned to manage the solicitation and procurement process. The contracting officer will identify the kind of procurement method used. Once the procurement method is chosen, a request for proposals is drafted and publicly issued at the SAM website. The request for proposals instructs solar contractors on how to submit proposals, explains what criteria will be used to evaluate proposals and establishes a time frame for receiving proposals and selecting contracting awardees. The request for proposal will also identify the project delivery method, which can include design-bid-build contracts, design-build contracts and construction management contracts. Solar contractors should also be aware that federal contracts can be further categorized by the type of delivery — indefinite delivery contracts, definite quantity contracts, requirement contracts and single-task order contracts — and type of price — fixed-price contracts, cost-reimbursement contracts and incentive-type contracts.
When submitting a proposal, a solar contractor must make certain certifications to the federal government, including certifications that the contractor is responsible, registered with SAM and not debarred, suspended or proposed for debarment. The government expects of its contractors the highest integrity and ethics. Any false statements in proposals, or at various other times during the contracting process, can lead to criminal prosecution.
During the evaluation period, the government may review qualifications, experience, methodology, the timeline for providing services and the anticipated cost. This evaluation process can take months and it is not uncommon for contractors to have to submit multiple revised proposals until one is finally accepted and negotiated. Upon an award, the solar contractor is bound to execute the contract and begin performance.
If another contractor that supplied a proposal thinks that it had the best value proposal, the contractor can question the government’s evaluation process. The upset contractor could file a bid protest with the Government Accountability Office (GAO) or with the U.S. Court of Federal Claims. This process can significantly delay the performance date. If a bid is rejected, it is essential to contact the contracting officer and ask questions about why the proposal was rejected.
Contract performance and management
Performance and payment bonds are required before any contract of more than $100,000 is awarded, pursuant to what is known as the Miller Act. These bonds represent a promise by the solar contractor that the surety will pay or perform on the part of the solar contractor if the solar contractor fails to do so. Since liens cannot be placed on federal projects, solar contractors and/or their suppliers and materialmen must look to a Miller Act payment bond for relief. The Miller Act has strict notice requirements with which federal contractors must comply. Failure to provide bonds can lead to termination for default by the federal government.
During performance, solar contractors must be familiar with their contractual obligations and rights. Most of these obligations and rights arise from FAR, including the handling of payments, differing site conditions, contract changes, delays, suspensions and acceleration. For example, FAR includes a standard construction contract changes clause that permits a contracting officer to authorize changes within the general scope of the contract. If any change issued by the contracting officer causes an increase or decrease in the contractor’s cost of or time required for performance, the contractor must assert its right to an adjustment within 30 days. This is done by notifying the contracting officer of the change and describing the general nature and amount of the adjustment.
Solar contractors must also be familiar with the Contract Disputes Act (CDA). The CDA provides a framework for asserting and handling post-award claims by either the government or a contractor, including breach of contract claims, claims for time or interpretation issues regarding a specification and claims arising out of an implied-in-fact contract between the federal government and a contractor. All disputes under the CDA must be submitted to either the U.S Court of Federal Claims or to an administrative board of contract appeals.
Kristina Thoren, a law clerk with Smith, Currie & Hancock, LLP, contributed to this article.
Christopher Horton is a partner in Smith Currie’s Fort Lauderdale office. Chris represents owners, contractors, and design professionals in litigation, arbitration and mediation in state and federal courts, as well as other venues throughout Florida and the Southeast. He is also experienced in the preparation and negotiation of design and construction contracts, public and private procurement, federal contracting claims, construction licensing, and alternative project delivery. Chris acts as corporate counsel for a solar contractor and has counseled both owners and solar contractors on numerous solar projects. Learn more: smithcurrie.com