AGC Presses for Direct-Federal Construction Procurement Reform in 2014

Prohibiting Reverse Auctions, Reforming Design-Build and Implementing Lower Tier Small Business Subcontractor Counting AGC will press for action on a host of direct-federal construction procurement initiatives in 2014, including: (1) prohibiting reverse auctions for construction services; (2) reasonably limiting single-step design-build procurements; (3) reasonably limiting second-step design-build finalists to three to five teams; and (4) reasonably implementing the allowance of prime contractors to count lower tier small business subcontractors towards their small business subcontracting goals. The first three initiatives are legislative and well-under way in Congress as a result of AGC advocacy efforts in 2013. The last initiative is regulatory and faces implementation through the U.S. Small Business Administration, after AGC successfully pressed for the small business reform before Congress in 2013. Turning to the legislative initiatives, two AGC-supported direct-federal construction procurement reform bills were introduced in 2013: (1) H.R. 2751, the Commonsense Construction Contracting Act of 2013, by Rep. Richard Hanna (R-N.Y.); and (2) H.R. 2750, the Design-Build Efficiency and Jobs Act of 2013, by Rep. Sam Graves (R-Mo.). H.R. 2751 would prohibit federal agencies from procuring construction services that small businesses could perform through online reverse auctions. H.R. 2750 would prohibit single-step design-build procurements for projects above $750,000 and limit second-step design-build finalists to three to five teams. Prior to their introduction, AGC testified in May 2013 before the House Small Business Committee urging members of Congress to advance these general initiatives.  Shortly thereafter in July, Reps. Graves and Hanna introduced the aforementioned legislation. In December, AGC testified before a joint hearing of the House Committees on Veterans Affairs and Small Business on H.R. 2751 and the prohibition of reverse auctions for construction services. That same month, AGC also testified before the House Oversight and Government Reform on H.R. 2750 and design-build procurement reform. At that hearing, AGC testified that the association generally supports H.R. 2751, but notes that the $750,000 single-step design-build procurement threshold may be too low in certain situations, and some degree of flexibility was needed. The U.S. Army Corps of Engineers (USACE) agreed with AGC and offered a solution whereby all design-build procurements will be two-steps, unless the contracting officer receives approval for single-step design-build procurement through USACE Headquarters. On the regulatory issues, in December Congress passed and the president signed into law the AGC-supported reform that will allow prime contractors to count lower-tier small business contractors towards the prime contractor’s small business subcontracting goals. The simple change in this AGC-supported reform will encourage prime contractors to make sure small businesses have opportunities to compete for subcontracts at every tier, thereby allowing more opportunities for small business growth. In addition, it will help prevent first-tier small business “pass-through” situations and help provide transparency to the small business program.   However, the reform itself will not be effective for at least 18 months after an SBA rulemaking process occurs.  As with any rule making process impacting your construction contracting business, AGC will proactively work with regulators to help ensure that contractors are not overburdened by the implementation process. For more information, please contact Jimmy Christianson at (703) 837-5325 or christiansonj@agc.org.