How to Take Advantage of the Economic Stimulus Program by Procuring Government Contracts

President Obama proposed an economic stimulus package that is expected to make over $800 billion dollars in federal funds available in order to lift our country out of the recession. One primary purpose of the recovery plan is to create jobs. The theory is that if jobs are created, people will have money to spend on goods and services and this increased spending will put our economy on track.

This theory is based upon a British economist named John Maynard Keynes and referred to as Keynesian economics. According to Keynesian economics the government should stimulate economic growth and improve stability in the private sector.

Keynes argued that the solution to depression was to stimulate the economy ("inducement to invest") through some combination of two approaches. One was to a reduction in interest rates and the second was by Government investment in infrastructure. According to Keynes the injection of income results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.

The Obama administration appears committed to the government investment in the infrastructure of our country including the retrofitting bridges, building roads and interstate highways, and upgrading public buildings. What this means is there will be a lot of money available to construction companies in the form of government contracts.

Here is how it works. When a public agency is using government funds on a construction project they must comply with a series of laws designed to prevent corruption, increase competition, broaden industry participation, and assist small businesses in obtaining contracts and subcontracts.

First, engineering and architectural plans must be completed and approved. Next, the government agency, or awarding body, must advertise in local newspapers for bids. The awarding body makes the plans and specifications available to responsible contractors who desire to bid on the public project. Sealed bids are submitted and the awarding body is required to award the contract to the lowest responsible bidder. Once the contract is awarded the successful bidder is then required to perform the contract.

When federal funds are involved, the contractor must comply with the Davis-Bacon Act which includes assuring the proper prevailing labor wage is paid to the workers.

In addition to public works construction contracts, most government agencies seek to broaden their supplier base through the federal contracting program, and have various outreach programs in which commercial vendors may participate.

The award of a federal contract involves regulatory issues in the government contracting process. The Federal Acquisition Regulation specifies uniform contract formats for the different types of procurements. Although these formats differ somewhat, they generally follow the same structure. Because taxpayer money is involved in government procurements, the process is highly regulated. The regulations are extensive and have evolved over many years.

In order to be successful in procuring government contracts, the vendor must be prepared to submit technical as well as cost proposals and the proposal process can be extremely involved. People wanting to engage in procuring government contracts are advised to hire employees or retain consultants who are experienced in preparing competitive proposals.

There will be business opportunities to construction companies and suppliers, however in order to position yourself to procure those government contracts one must understand the government procurement process.

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