Caveats
While the red tape traditionally associated with public projects has waned, Shiner warns that there are still important nuances to keep in mind when working within the public sector.
In addition to accounting for longer payment terms and a web of vested parties, dealers under contract to a prime or subcontractor (and certainly when fulfilling an installed sales contract) will likely have to adhere to prevailing wage requirements for any labor provided to the project. “Almost every agency sets a prevailing wage for labor” to help eliminate low-balled bids, says Shiner. “Each agency sets a different wage [for each type of task, similar to worker’s compensation ratings], and may lock in that wage for the length of the project.”
While potentially affecting a dealer’s profitability on the labor portion of an installed sales arrangement, prevailing wage requirements also call for a considerable amount of administrative time. “Improper or incomplete reporting can hold up an entire payment,” even if every other sub and supplier is in compliance, says Shiner.
Similarly, an agency might delay a payment to consider and investigate a change order or an overhead cost submitted on an invoice. “It’s essential for any contractor or supplier to cover as many bases as possible on their bids,” she says, to avoid such delays and their ripple effect on everyone’s profitability. “The key is knowing what agency is ultimately funding the project and its paperwork requirements so you’re not the one holding up the check.” –Rich Binsacca is a contributing editor for ProSales.
Public Project Tips
Dealers seeking to bid directly or piggyback on a public project proposal with a contractor customer should consider these tips for making the process as smooth as possible:
- Identify the government agency responsible for approving invoices and related paperwork and releasing funds.
- Fully understand and account for prevailing wage and other requirements, and the paperwork involved to comply, in bidding public projects.
- Consider logistical issues and potential hazards, limitations, and related costs for delivering materials to government buildings or projects (and especially military installations) given heightened security measures.
- Investigate military base closings and/or public-private ventures in your area that may attract the interest of builder and contractor customers and therefore include a bid from an LBM supplier.
- Scan public notices and other public announcements (often through trade associations) listing state and local public projects; find out which contractors are requesting bid packages and offer to supply the materials portion.
- Expect and account for longer payment terms; consider negotiating extended terms with upstream suppliers, if necessary.
- Don’t be afraid of supplying materials to a tax-funded project, as the bulk of red tape and other potential hazards to profitability are likely to have been reduced or removed to encourage private-sector players.
–Rich Binsacca
