As far back as the late 1600s, red tape (or ribbons) were used to bind official documents. The “red tape” phrase has since taken on a different meaning—one that conjures up unnecessary hoops and onerous bureaucracy. The proverbial red tape in government contracting represents a necessary checks and balance system to ensure fairness and equity in way contracts are solicited, reviewed and awarded. With nearly one in five employees, or approximately 22 million in our nation employed by a government agency or office (federal, state or local), securing a contract that serves this workforce represents a significant business opportunity. And while securing the work can be extremely challenging and require significant work, the potential upside can be tremendous.
Securing and effectively executing cleaning contracts at government buildings requires extensive knowledge and specific skills. Service who are versed at navigating the ins and outs legal requirements, required registrations, vendor qualifications, contract types, bid types and processes, proposal evaluation criteria, employee requirements, scope of work, service level agreements, reporting requirements are well positioned for success. Those that don’t—well, all they see is the proverbial red tape. The trusted, qualified cleaning contractor will possess not only the ability to deliver quality service in often challenging environments, but also the acumen to align with complex business and contracting requirements.
Government contracting falls into three broad categories: Federal, State, and Local. Federal contracting is generally the most defined in terms of requirements and processes.
Federal Contracting
Federal contracting is governed by legislation including the Armed Services Procurement Act (APSA), the Federal Property and Administrative Services Act (FPASA), and the Competition in Contracting Act (CICA). Contract types include: Fixed-price, Cost-Reimbursement, Incentive, Indefinite-Delivery, Time and Materials, Labor – Hour, Sealed Bidding, Negotiation, Reverse Auctions. Not only are there process and pricing requirements associated with each, there are also underlying legal requirements. A qualified contractor will understand and comply with all related concerns.
Federal RFPs are issued and executed under very specific guidelines and requirements included in the Federal Acquisition Regulation (FAR). Contractors must understand the policies and procedures under FAR—prohibitions on the Contracting Officer (CO) such as supplier favoritism, sharing technical solutions, revealing pricing, sharing past performance references are just the start. In-depth knowledge of FAR procedures is critical as contractors are legally liable for compliance.
The contractor is also for a full and clear understanding of the terms and conditions within the contract, as well as key factors and sub-factors in the RFP. The successful vendor will know how to generate proposals that meet key selection criteria of cost, past performance, and technical approach. This expertise often resides in a carefully trained sales/estimator staff.
To bid on federal government contracts, contractors must obtain a Dun & Bradstreet (DUNS) number, a unique nine-digit number issued for each physical location of the contractor’s business. In addition, contractors must provide their North American Industry Classification System (NAICS) code. NAICS codes classify businesses based on the particular product or service they supply. Businesses will generally have a primary NAICS code but can also have multiple NAICS codes if they sell multiple products and services. Contractors must also register in the government’s System for Award Management (SAM).
Fair Play—For All Sizes
Congress created the Small Business Administration SBA in 1958 to help small businesses compete with larger companies in various industries. At that time, Congress mandated a small business contracting goal of no less than 23% of the total values of all prime contract awards. This is commonly referred to as “set-aside” work. Current annual spend on private sector contracts is over $500 billion, providing tremendous opportunity for companies registered in one of the appropriate designated categories:
- 8a Business Development (SBA 8a). Business must be owned by an economically disadvantaged individual, been operating for two-plus years, and have a net worth of under $250,000.
- Women-Owned Small Business (WOSB). Designed to address historical inequity in contracting to women-owned companies: 51%+ female ownership is required.
- Economically Disadvantaged Women-Owned Small Business (EDWOSB). Must meet additional criteria based on owner’s income level.
- Historically Underutilized Business Zones (HUBZone) Program. Targets small businesses in underrepresented business zones such as rural or urban areas.
Service Disabled Veteran Owned Program (SDVO). Helps veterans build businesses after their active military service. In order to qualify the business must be at least 51% owned by a veteran who was disabled in service. Other “self-certifying” businesses may preferentially compete for government contracts including:
- Women-owned
- Veteran-owned
- Small Disadvantaged Business
- Native American
In addition, the U.S. Department of Transportation (DOT) established the Disadvantaged Business Enterprise (DBE) Program in 1982 to assist small businesses in securing government contracts awarded by states using federal-aid highway funds.
Again, all bids are evaluated in terms of cost, past-performance, and technical approach. Past performance evaluation is facilitated via establishment of a Marketing Partner Identification Number (MPIN) in the System for Award management (SAM).
Generally, the small business that wins the contract must directly perform at least 51% of the revenue value of the contract; subcontracting up to 49% of the contract is typically permitted. This approach can help the small business take on contracts where they may lack the total expertise or resources to execute on their own.
One of the challenges of building a small business enterprise is establishing the past performance or track record needed as part of bid evaluation. As part of the Past Performance input under FAR Part 8 concerning Federal Supply Schedule (FSS) contracts, past performance, for example, must be directly connected to the prime contractor and may not include past performance of any subcontractors on the prime’s team.
State and Local Contracting
States average $66 billion in spending, with roughly 50/50 split between state and local agencies. States vary in terms of contracting set-aside requirements. These set-aside dollars are preferentially awarded to women and minority owned businesses as well as disabled veteran owned businesses that register with the state.
State and local governments do not operate under a consistent set of contracting rules analogous to the Federal Government under FAR. These entities enjoy greater latitude in contracting practices which vary significantly in quality. Various State and Local governments have collaborated to develop a set of best practices that can be used to establish better consistency and quality in contracting. Key areas include:
- Guidelines around late proposals
- Informational Bid Websites
- Public posting of bid questions
- Open proposal review
- Defined bid selection criteria
- Weighted bid evaluation criteria
- Content provided in RFP
- Streamlined contract format
- Consistent terminology
- Guidance on proposal format
- Provide pricing evaluation criteria
- Avoidance of local preferences
- Definition of acceptable billable costs
- Clarity around terms and conditions in RFP
Contracting with state and local governments carries the same types of concerns as federal contracting with the added complexity of variability from entity to entity. This requires contractors to understand the requirements of each entity to prepare and execute correctly.
Executing the Contract
The successful bidder has won the contract based on a winning combination of cost, past performance, and innovation. The contractor must now implement its program under the commitments of the bid and the appropriate requirements of the entity served. Of course, the contract must be executed in compliance with all applicable OSHA requirements; these compliance efforts are often administered by carefully trained safety personnel. Per the osha.gov website, “Every contractor and subcontractor shall comply with the safety and health standards published in 41 CFR Part 50-204.” The CFR is organized as follows:
- Subpart A – Scope and Application (§§ 50-204.1 – 50-204.1a)
- Subpart B – General Safety and Health Standards (§§ 50-204.2 – 50-204.10)
- Subpart C – Radiation Standards (§§ 50-204.20 – 50-204.36)
- Subpart D – Gases, Vapors, Fumes, Dusts, and Mists (§§ 50-204.50 – 50-204.72)
- Subpart E – Transportation Safety (§ 50-204.75)
Under Subpart B – General Health and Safety Standards we see the following key topics:
- § 50-204.2 General safety and health standards.
- § 50-204.3 Material handling and storage.
- § 50-204.4 Tools and equipment.
- § 50-204.5 Machine guarding.
- § 50-204.6 Medical services and first aid.
- § 50-204.7 Personal protective equipment.
- § 50-204.8 Use of compressed air.
- § 50-204.10 Occupational noise exposure.
Each section goes into specific details and requirements that are sometimes tailored to specific industries under the code. Based on this quick review, it becomes clear that the contractor must possess a broad knowledge of OSHA regulations under the various codes to ensure compliance. Failure to comply can result in significant penalties, per the table below taken from the osha.gov website.
OSHA Penalties
Below are the penalty amounts adjusted or inflation as of Jan 2, 2018.
Type of Violation Penalty
Serious $12,934 per violation
Other-Than-Serious
Posting Requirements
Failure to Abate $12,934 per day beyond the abatement date
Willful or Repeated $129,336 per violation
It’s noteworthy that responsible individuals can face criminal prosecution if a worker is killed as the results of willful violation of safety provisions. The penalty comes with up to six-months prison time and $250,000 fines for individuals plus fines up to $500,000 to the company.
Employees must undergo the background checks and drug screening per the requirements of the particular contract. Requirements may include:
- National Criminal Background Check
- Certificate & License Check
- Social Security Number Verification
- Employment Verification
- Education Verification
- Reference Verification
- Drug Test
These requirements point to the importance of including the correct background check expenses in the proposal—and to a broader business management practice of offering the right wages to attract and retain employees who can pass that level of scrutiny. Since completion of these background checks can take considerable time to complete, they speak to the importance of maintaining appropriate contingency staffing to cover for turnover and absenteeism without service lapse. This work is often overseen by carefully trained human resources staff.
Government contracts will be governed by a contracted Scope of Work (SOW) and may include Service Level Agreements (SLA) that call for specific performance requirements. It is highly likely that service hours will be measured and managed, even under Fixed-price contracts. Thus, the contractor must be careful to incorporate the right resources into the bid to execute the work, including specific performance requirements, and accommodate for unexpected expenses such as overtime and repairs, as well as a background check budget that anticipates an accurate level of turnover. Operations must be trained to execute to requirements and maintain appropriate required records.
Government contracts may specify wage and benefits requirements for employees working on the project. These must be accurately incorporated into the bid. The contractor is legally liable to meet these requirements, and failure to comply can result in payment of back wages and benefits as well as associated penalties. Formal debarment can result from non-compliance, causing the contractor to be disallowed from participation in future government RFPs. Compliance is sometimes monitored via formal payroll reporting; thus, the contractor must consider the associated administrative burden into pricing. Accounting personnel must be trained to ensure a compliant payroll process.
As noted, government contractors can act as a Prime Contractor, or as a Subcontractor to the Prime Contractor. Contractors with certain qualifications enjoy access to a large percentage of government contracts “set aside” for competition limited to contractors with these qualifications. Such contractors frequently subcontract to other contractors, who may not possess the same special qualifications, as a means of bringing additional resources and expertise to the partnership. Subcontractors are also fully responsible for compliance.
As noted, the successful cleaning contractor will typically have professional resources, e.g., sales/estimators, human resources, accounting, safety, and operations, that are trained in the specific required competencies and are active in the design and execution of the service program. A knowledgeable and well-prepared team, as noted, will enable the contractor to operate successfully in the government contracting space.
Government contracting—both the process of completing bids and obtaining the work and then, of course, completing the work—requires a deep skill set and commitment. It’s a rigorous process, even for those who know the terrain, with potential rewards to match.
Steve Larson, Executive Vice President