The U.S. government’s increased investment through initiatives such as the Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act has opened a wealth of opportunities for construction companies. These programs target areas of national interest, including transportation, semiconductor manufacturing, and renewable energy components.

As a result, many construction firms, previously focused solely on commercial projects, are now looking to federal contracts, grants, and tax incentives. However, before venturing into this arena, construction companies must carefully weigh several key factors.

The U.S. government, being the world's largest customer, offers new opportunities through these spending programs, but organizations must understand the regulatory requirements and conduct due diligence before pursuing government contracts.

Understanding Regulatory Requirements

Federal contracts come with specific regulatory obligations, which can vary by contract type. For example, contracts under Federal Acquisition Regulation (FAR) Part 12 or FAR Part 14 impose fewer requirements than those under FAR Part 15. FAR Part 15 contracts include stricter rules such as:

Truth in Negotiations Act (TINA)‍

Requires certified cost or pricing data to be submitted. Contractors face risks if the provided data is inaccurate.

False Claims Act‍

Contractors who submit false information may face severe penalties.

FAR Compliance‍

Contractors must ensure cost allocation aligns with FAR Part 31 guidelines.

Cost Accounting Standards (CAS)‍

Some contracts may require adherence to CAS, adding complexity.

Federal grants and tax incentives, such as those under the Inflation Reduction Act for renewable energy, come with similar compliance obligations, especially in critical sectors like semiconductor technology.

Meeting System Requirements

To comply with federal contract standards, companies must ensure that their accounting, timekeeping, estimating, and purchasing systems meet government expectations. These systems need to be in alignment with FAR, 2 CFR 200, and possibly CAS. Though challenging, companies can develop internal policies and systems to ensure compliance, which gives them a competitive advantage when seeking federal contracts.

Developing a Strategic Approach

A solid strategy is crucial for identifying and pursuing federal opportunities. Construction firms aiming for General Services Administration (GSA) schedule opportunities should list on the GSA schedule and use SAM.gov to locate potential contracts. For non-commercial items, responding to Requests for Proposals (RFPs) and Requests for Quotations (RFQs) on FedBizOpps is necessary. Ensuring that products and services meet government specifications can help a company stand out when the government is ready to make a purchase.

Leveraging Competitive Advantages

Federal contracts often include set-asides for small, veteran-owned, and women-owned businesses. By identifying the North American Industry Classification System (NAICS) code and checking the Small Business Administration’s revenue limits, construction companies can determine if they qualify as a small business. Registering on SAM.gov and considering ownership changes for set-aside eligibility can boost the company’s chances of success.

Ensuring Successful Performance

Securing a federal contract is just the first step. Successful performance is essential for future contracts. Meeting quality, timelines, and reporting standards is crucial, as the government holds contractors to high expectations. Frequent communication with government officials is essential for maintaining strong performance ratings and quickly addressing concerns.

Successfully navigating federal contracts requires a deep understanding of regulatory compliance, robust systems, strategic planning, leveraging competitive advantages, and ensuring strong performance. Compliance with regulations is critical, and working with accountants, legal counsel, and tax professionals can ensure good-faith adherence. By carefully considering these factors, construction companies can access the lucrative opportunities offered by federal contracts, grants, and tax incentives.

For questions on federal contract compliance, contact Scott.Damiecki@CohnReznick.com or Rich.Meene@CohnReznick.com.

CohnReznick, a top advisory, assurance, and tax firm, helps organizations optimize performance and manage risks across various industries, including construction, government contracting, hospitality, and renewable energy. For more details, visit CohnReznick’s website.