Ahh, the government. Our favorite nail yet infrequent hammer. Love to criticize, but we reach for it whenever things get out of hand. When it comes to government contracts, there are enormous rewards as well as pitfalls. The steady work can keep crews busy during these tight times so long as everyone knows what’s in the fine print. Some contractors specialize in serving the people, while others find the effort not worth the hassle. Still others want to participate but can’t cut through the graft in a system that’s seen as blind to malfeasance.
Big TimeBy one estimate, the U.S. Government spends about $250 billion a year on goods and services, making it the largest contractor by far. Contracts are heavily regulated to combat fraud, contain dense legalese, and go through a more complex procurement schedule than the private sector. Laws and regulations are to be strictly followed, enforced by threats of fines and debarment from bidding on future contracts.
Some roofing contractors specialize in government contracts, going through extensive procedures to work on sensitive projects. Homeland Security isn’t just a cabinet post but a mindset for all levels of government. McGraw Hill is publishing a new directory for firms specializing in homeland security.
The Barrett Co., Wilmington, Del., has done its share of government projects during its 75-year history. Recent projects include the Jefferson and Lincoln Memorials, the Department of Labor and the Post Office’s largest building. While his company doesn’t necessarily focus on government contracts, its high-performance BURs are geared toward clients who are seeking long-term weatherproofing for institutional buildings.
“It basically aligned itself because of the life-cycle cost vs. installed cost,” says Tim Barrett, president, about his products and government bids. “For the most part, they expect to be in the building over 100 years.”
Even with the changes in construction delivery processes, Barrett sees many government agencies savvy to current trends in products and services all while committed to getting the lowest price. He sees the Government Services Administration as a tight ship overseeing procurements and auditing many businesses and agencies. Some may argue that examples of government waste or incompetence are signs of a successful watchdog doing its job, while others love to bludgeon the faceless bureaucrats who merely push paper and waste tax dollars. “By and large, I think the construction people have broken out of that mold, which is a good thing,” says Barrett. “GSA management is really forward thinking.”
That forward thinking leads to significant contributions to society, and not just things like Tang or the Internet. Energy Star is a home run in many industries, including roofing. The program is voluntary, saves energy and attracts consumers. In another area, Barrett Roofing is working with the Department of Interior on using green roofs — roofing systems that incorporate a layer of top soil and vegetation — to mitigate storm water runoff for large roofs.
Some studies have shown that up to 50 percent of the precipitation can be retained by such roofs while offering significant savings since valuable land won’t be needed for water retention. Garden terraces are created out of nothing, energy is saved, and long-term roofing is in place. The process is expensive, but so are phenomena like the Heat Island effect, which raises the temperatures of entire cities. In order for something like green roofs to collectively address problems like that, government initiatives are the only way to ensure large-scale compliance. So, while the government is fixing its roof leaks, it also looks at long-term solutions. “There’s some different wrinkles but you’re still dealing with a client who wants quality,” says Barrett. “And unlike the private sector, you’re just about guaranteed that you’re getting paid in the end.”
Bad TasteMike McClure, owner of Membrane System Inc., Atlanta, has performed his fair share of government work, including the Georgia Dome in 1993. He is in the middle of a two-phase project for MARTA, the light-rail system. Although his last job for MARTA in 1995 was a hassle, he bid the project after being encouraged by a general contractor. “It was a mistake,” says McClure, who dealt with the agency’s in-house experts. “The submittal process was an absolute nightmare. What they do is aggravate you for a simple job. It’s just not worth it.”
He was hoping that the $145,000 contract would be simple but is at the point where he just wants to survive the second phase. Other problems with government agencies include a recent school board contract that had 74 pages of articles that had nothing to do with the specifics of the project. Another time he won the bid for an emergency repair of a water treatment plant but refused to sign the contract, which called for a concrete engineer when there was no concrete work being done. Public officials are rebidding for the third time now and McClure says that MARTA is having a hard time finding contractors. “What you’re doing is running off the good contractors who look at the risks and rewards,” he says. “They basically make it impossible for the good contractors to win the bid or even bid the project.”
McClure considers his careful perusal of contracts a rarity. There is a tendency for public agencies to overwrite contracts that indemnify parties and address every liability issue to come up in the last 20 years. McClure doesn’t think the average contractor realizes his exposure as he tries to negotiate the contracts to basically a neutral position or at least use the AIA model contract, which many in the industry consider the most balanced. “It’s a good sign to me of the types of people you’re going to work with,” explains McClure about general contractors willing to sign an AIA contract. “We take it very seriously. Even when the economy is not bad it’s tough.”
BlatantThe complexity of government contracts has its legacy in past offenses and shenanigans. Other wording encourages behavior that elected officials want to promote. Federal Acquisition Regulations (FAR) cover everything from workplace safety to minority hiring practices to speed limits. The government uses its spending clout to reward model companies while weeding out potentially bad ones. Unfortunately, the waste continues and the weeding is sparse and then often only the small ones.
The Project on Government Oversight (POGO) made headlines last year when its study of government contracts since 1990 revealed not only lax oversight but also criminal behavior and chronic violations with no real threat to the loss of government access. Even after new concerns with security, there are embarrassing events like 18 workers repairing the Pentagon who had the same Social Security number.
POGO’s report says that fines, penalties, restitutions, settlements and Superfund cleanup costs for the federal government’s top 43 contractors totaled $3.4 billion. Even though 16 of the contractors have been convicted of 28 criminal violations (US News and World Report says its 30 companies), the only suspension was against General Electric: It lasted five days.
“I’m repeatedly amazed at the things I hear,” says Stan Kolbe, director of government affairs for the Sheet Metal and Air Conditioning Contractors National Association Inc. “The government needs to have a high standard and know who its doing business with. I think that should matter now more than it did before.”
SMACNA formed the Mechanical Electrical Sheet Metal Alliance with two other trade groups to lobby the FAR Council to improve the federal government’s business practices. Representing 12,000 construction businesses, the alliance urged the government to adopt practices that reward low bidders and punish violators. Two years ago, a mechanical contractor urged the Council to reinstate the contractor responsibility rule adopted by the Clinton Administration.
“[I]t is no secret among federal constructing corps or our industry that many top quality firms don’t offer services in the federal market — because of the quality of the competition there,” said Lonnie Coleman of Cleveland, Ohio. “The rules we are discussing are one way to make a major improvement in federal purchasing programs. This also is in line with public and private purchasing trends nationwide too.”
The rule was a process that began under the first Bush Administration and a “contractor responsibility” law was passed after years of declining vigilance in punishing violators during the 1990s. It was one of the last acts by the Clinton Administration, one that was suspended by the Bush Administration the next day after there was an outcry from some in the business sector. It was permanently repealed later that year.
“There are a number of business groups opposing it,” says Kolbe. “There are a number of companies with a long list of violations and the government is still doing business with them.” In a society that demands accountability from its citizens, the conduct of some businesses is hard to justify. Companies often arrange for a settlement with the government and avoid the shame of admission, but even those that have pled guilty (such as Archer Daniels Midland for price fixing in 1996 and Lockheed Martin for bribery in 1995) have little fear in losing future government contracts. Companies promise to be more vigilant and implement a corporate ethics program, yet the violations continue. In the early 1990s, the Department of Defense even set up a special unit just to handle violations from GE, recovering $221.7 million in three years.
The problem is not just waste and corruption but matters of life, death and national security. Soldiers have been killed and sensitive buildings are at risk due to negligence in the system. POGO states that with available technology it should be relatively easy to track corporate offenses and that procurement officers be given the mandate to suspend or debar non-complying companies, since there seem to be many ethical contractors just waiting for a level playing field. Kolbe points out that many states have “three strikes” rules where felons get long sentences after their third conviction and that a three-year suspension is rather mild.
“I’ve got children and time out is not considered a serious penalty,” he says. “I think corporate responsibility should be a mainstream issue...I went all over the country and spoke on this at conventions and meetings. I have people clapping, saying ‘This is the right thing to do.’ Almost everyone talks about the image of construction and how we can improve it. This is one way.”
There is some movement. In New York, the state is going after theft and fraud the same way it tackled so-called petty crimes in New York City. The idea is that people with a criminal mindset aren’t terribly concerned about the laws they break, so those who cheat the state or school board probably also cheat on taxes, insurance and payroll. New York keeps a file of companies as well as personal names that are tracked through federal tax ID numbers.
The Environmental Protection Agency is asking for comment on its proposed background checks on future contractors. And the new Homeland Security Department has the vision to make its current procurements through the 22 existing agencies it oversees. It too is seeking comment from the public on building a purchasing network from scratch. Even though corporate scandals have taken a back burner to other issues, there is an opportunity for roofing contractors to make their thoughts known on how to create an environment where the government has the integrity, memory and efficiency of a well run firm.