Construction Contracting Training FAQ

Learn more about construction and infrastructure training on this Frequently Asked Questions (FAQ) page.

Federal Construction Contracting and Infrastructure Contracting FAQ

What are infrastructure and construction contracts?

Infrastructure contracts are agreements between the government and a contractor for construction, alteration, or repair work on public buildings or public works. They are subject to specific regulations, including the Miller Act, the Davis-Bacon Act and the Buy American Act.

How are infrastructure contracts different from standard government contracts?

Fixed-Price Contracts: Infrastructure contracts frequently use fixed-price contracts due to the predictability of costs for materials and labor.  While fixed-price contracts offer cost predictability for the government and a lower administrative burden for contractors, they can expose contractors to cost risks due to unforeseen circumstances like inflation or supply chain issues.

Domestic Preference Requirements: Infrastructure contracts, especially those funded by federal financial assistance programs, are subject to stricter “Buy American” provisions, like those in the Build America, Buy America Act (BABA).  These provisions mandate using American-made iron, steel, manufactured products, and construction materials unless specific waivers are granted.  Standard government contracts may have less restrictive domestic preference requirements, like those under the Trade Agreements Act (TAA), which allows materials from designated countries.

Subcontracting: Infrastructure contracts often involve a complex network of subcontractors.  Prime contractors must carefully manage flow-down clauses in subcontracts, ensuring compliance with regulations like Buy American provisions.  They should also consider incorporating provisions related to indemnification, payment terms, termination rights, and dispute resolution that reflect the unique nature of infrastructure projects and protect their interests.

Changes and Differing Site Conditions: Infrastructure projects are particularly susceptible to changes and differing site conditions due to the nature of the work and the potential for unforeseen circumstances during construction.  Contractors need to understand the nuances of the Changes Clause and the Differing Site Conditions Clause in the FAR, and know when to submit requests for equitable adjustments for additional time or costs due to changes ordered by the Contracting Officer or differing site conditions encountered.  They must also comply with notice and documentation requirements to preserve their rights to recover additional compensation

What should a contractor do if the contracting officer directs additional work that isn't covered by the contract?

A contractor cannot refuse to perform work directed by the contracting officer, even if it’s outside the original contract scope. The contractor should proceed with the work but document all costs and time impacts associated with the additional work and submit a request for equitable adjustment (REA) to seek compensation for the changes. Refusal to perform can lead to disputes and potential termination for default.

What is the Davis-Bacon Act?

The Davis-Bacon Act is a federal law that requires contractors and subcontractors performing on federally funded or assisted construction projects to pay their laborers and mechanics prevailing wages as determined by the Secretary of Labor.

How does the Davis-Bacon Act work?

Applicability: The Davis-Bacon Act (DBA) applies to contracts in excess of $2,000 for construction, alteration, or repair of public buildings or public works. This means that many federal infrastructure contracts would likely be subject to the DBA.

Prevailing Wages: The DBA requires contractors to pay their laborers and mechanics the locally prevailing wages and fringe benefits as determined by the Secretary of Labor. This is intended to protect local wage standards and prevent contractors from undercutting local labor costs.

Wage Determinations: The Department of Labor (DOL) issues wage determinations that specify the prevailing wage rates for different types of construction work in specific geographic areas. These wage determinations should be incorporated into the contract documents.

Certified Payroll: Contractors must submit weekly certified payroll reports to the government, detailing the hours worked, wages paid, and deductions made for each employee. This ensures compliance with the DBA and allows the government to monitor prevailing wage payments.

Enforcement: The (DOL) is responsible for enforcing the DBA. They can conduct investigations, audit payroll records, and impose penalties for violations.

Subcontractor Compliance: Prime contractors are responsible for ensuring that their subcontractors also comply with DBA requirements. This includes flowing down the relevant clauses in subcontracts and monitoring subcontractor payroll practices.

Contractors must be diligent in their compliance efforts, including understanding their obligations under the DBA, incorporating the correct wage determinations, paying prevailing wages, submitting accurate certified payroll reports, and ensuring subcontractor compliance.

It is recommended to consult additional resources or legal counsel specializing in government contracts to get comprehensive information about the Davis-Bacon Act and its specific application to your project.

What are "patent" and "latent" defects in specifications, and how do they impact claims?

Patent defects are obvious errors or inconsistencies in the specifications that a reasonable contractor should have identified before bidding. Claims based on patent defects are usually unsuccessful because the contractor is expected to have recognized and addressed them during the bidding process.

Latent defects are hidden or not readily apparent errors in the specifications that a contractor could not have reasonably discovered until performance began. Claims based on latent defects are more likely to succeed as the contractor could not have anticipated the issue.

To recover for defective specifications, a contractor must demonstrate that they were actually misled by the defect, and their reliance on the defective specification was reasonable.

What is the Miller Act?

The Miller Act is a federal statute that requires prime contractors on federal construction contracts to furnish payment and performance bonds.  The Miller Act applies to all contracts over $150,000 for the construction, alteration, or repair of any public building or public work of the Federal Government.  It does not apply to construction contracts entered into by state and local government entities.  However, many states have variations of the Miller Act, known as “Little Miller Acts.”

The Miller Act was created because subcontractors and suppliers cannot place liens on federal property.  The payment bond protects subcontractors and suppliers by providing a payment enforcement mechanism if the prime contractor fails to pay.  If a prime contractor fails to pay, subcontractors and suppliers can go to the surety with a claim for payment. 

There are different requirements depending on the value of the construction contract:

  • If a contract is over $150,000, payment and performance bonds are required.
  • If a contract is between $35,000 and $150,000, the contractor must provide at least two payment protections: a payment bond, an irrevocable letter of credit, a tripartite escrow agreement, certificates of deposit, or individual sureties. 

The performance bond protects the government by requiring the surety to take over the project or pay the excess completion costs if the prime contractor defaults.  The government is the primary beneficiary of the performance bond, and subcontractors and suppliers are not generally able to recover under a performance bond.

Who is protected by the Miller Act payment bond?

The Miller Act payment bond protects:

  • First-tier subcontractors who contract directly with the prime contractor.
  • First-tier material suppliers who contract directly with the prime contractor.
  • Second-tier subcontractors who contract directly with a first-tier subcontractor.
  • Second-tier material suppliers who contract directly with a first-tier subcontractor.

It does not protect lower-tier subcontractors or suppliers who contract with parties other than the prime or first-tier subcontractors.

Can a prime contractor stay a Miller Act claim filed by a subcontractor if the prime has a pending claim against the government?

It depends. Courts have ruled in various ways on this issue. While the Miller Act prohibits waivers, a subcontract clause requiring a subcontractor to stay an action until a prime contractor’s dispute with the government is resolved may be enforceable. The outcome is highly dependent on the specific jurisdiction and the language of the subcontract.

What is the difference between the Buy American Act (BAA) and the Trade Agreements Act (TAA)?

The BAA and TAA are domestic preference laws that give preference to American-made products and materials in government procurements. However, they differ in scope and application:

  • BAA: Applies to most federal procurements and generally requires the use of domestic end products unless exceptions, such as unreasonable cost or non-availability, apply.
  • TAA: Applies to procurements above certain thresholds and extends preferences to designated countries with which the U.S. has trade agreements. Products from these countries are treated similarly to U.S.-made products.
What is the statute of limitations for filing a Miller Act claim?

The statute of limitations for filing a Miller Act claim is one year from the date on which the last labor was performed or material was supplied for the project. This deadline is crucial, and missing it can bar a subcontractor or supplier from recovering payment.

Where can I find more information about infrastructure and construction contracts?

The Federal Acquisition Regulation (FAR) and agency-specific supplements like the Defense Federal Acquisition Regulation Supplement (DFARS) are primary resources for regulations governing federal contracts, including infrastructure contracts.

It’s important to consult legal counsel with expertise in government contracts, especially infrastructure contracts, to understand the specific requirements and best practices for your project.

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