The $787-billion stimulus package provides for about $130 billion in federal, state and local government construction spending. The entire construction industry has been anxiously awaiting the pipeline of projects now hitting the streets. With the economic crisis having all but shut down commercial and residential construction, many in the construction industry, including contractors who have no prior experience in government construction, are now actively competing for a share of the stimulus pie. This change in market focus has immediate ramifications for the newcomers. Most important, transitioning contractors must quickly learn that success in the public sector requires education and adjustments in four areas.

LIFSCHITZ

First, the rules of the game are fundamentally different. Unlike private contracting, which is governed by common law, local statutes, state mechanic’s lien laws, the Uniform Commercial Code and standard form agreements, government contracting is regulated by special procurement statutes and regulations and conducted under government-drafted “boilerplate” contracts. The statutory and regulatory framework includes unique laws on contract formation, bidding, negotiations, accounting, labor relations and many other issues not typically addressed in commercial construction contracts.

Second, government accounting rules and requirements are different. Normal financial accounting systems do not satisfy mandated accounting requirements, so the importance of assuring compliance before proceeding with the first government contract is important. Unless a compliant accounting system is in place prior to obtaining the first contract, numerous and costly problems will result.

Third, government procurement is used to implement economic change and accomplish social goals such as a drug-free workplace and enhanced opportunities for women, minorities and small businesses. Government contractors are thus required to take steps to fulfill these policies by establishing “plans,” satisfying goals through subcontractor and supplier procurement and inserting “flow down” provisions in subcontracts.

Fourth, the atmosphere and culture in government construction is fundamentally different. Meticulous attention to detail and proper compliance with notice and submission requirements often means the difference between a successful project and a nightmare. Government construction is far less forgiving than commercial construction when it comes to a failed attempt to preserve one’s rights.

Differences will be further heightened in stimulus procurements because of concerns over accountability and transparency. Stimulus-funded projects will be subjected to a heightened level of scrutiny by officials, the media and general public, all of whom will hold contractors to a very high standard.

Judah Lifschitz is co-president of Shapiro, Lifschitz & Schram P.C., Washington, D.C. He can be reached at lifschitz@slslaw.com or (202) 689-1900.