Thomas J. DePace, COO and Senior Engineering Manager with Advance Sound Company, a Farmingdale, N.Y.-based member of the National Electrical Contractors Association (NECA), testified on behalf of the association to the House Small Business Committee Subcommittee on Contracting and Infrastructure on several pressing concerns facing contractors and presented solutions for moving forward.
Chaired by Rep. Jared Golden (D-ME), the hearing, titled “Helping Small Businesses Compete: Challenges and Opportunities in the Federal Procurement Marketplace,” is part of the subcommittee’s ongoing effort to improve the competitive viability of small businesses and examine the issues affecting them.
“Within the federal construction industry, there are three key areas ripe for reform, most notably, the prompt payment of change orders, the lowering of federal retainage rates, and the requiring of bonding on Public-Private Partnerships,” DePace said “Each of these three areas holds a unique challenge to the federal marketplace.”
DePace went on to highlight the critical need to pay contractors promptly for change orders. His comments strongly resonated with Rep. Pete Stauber (R-MN) [pictured right], the subcommittee’s ranking member.
“Delayed payments [on change orders] have real-world consequences for small businesses,” Stauber said. The Congressman, along with Rep. Mark Veasey (D-TX), are sponsoring the NECA-supported Small Business Payment for Performance Act (H.R. 2344), which has broad support from a wide variety of construction industry organizations.
DePace also discussed the need to lower federal retainage rates, the government’s ability to hold up a percent of a contract price until satisfactory completion of the work.
“One immediate way to mitigate the degree of financial exposure from federal retainage is for the federal government to follow suit with state and local governments and lower the overall rate of retainage that federal contracting officers may charge,” he said. “This would put more liquidated funds in the pockets of America’s small businesses, and likely decrease the overall cost of federal construction projects.”
NECA Chief Executive Officer David Long said the House Small Business Committee showed leadership and great understanding of the effects of slow payments to contractors.
“The fact that Congress understands that contractors should receive partial payment for unilaterally requested change orders is a major step forward,” he said. “Legislation addressing this concern would alleviate the unnecessary risks many small construction contractors assume as the cost of doing business.”
Finally, DePace said the need to reform the 1934 Miller Act to definitively apply to Public-Private Partnerships in the federal marketplace is clear, as they are increasing in use.
“I am extremely encouraged by this subcommittee’s efforts to better understand the challenges of the federal marketplace,” DePace said.