President Obama's Economic Stimulus Package: Are Your Ducks in a Row?

The inaugural concerts, speeches and parties are over. It is now time for President Obama and Congress to focus on the much anticipated $800 billion economic stimulus package that promises to infuse federal funds into the country's infrastructure. While the details and timing of the economic stimulus bill are still being decided, there is little doubt that a significant amount of federal dollars will become available to the construction industry. The most likely recipients of the funds are those who have invested time and resources to ensure that all of their ducks are in a row.

Bidder prequalification, minority or disadvantaged business certification, registration to do business in a foreign state, updated drug testing policies and proper insurance coverages are some areas where those in the construction industry can diligently prepare in order to maximize their chances of benefiting from the anticipated injection of federal money. Contractors and industry professionals must understand the nuances of the public bidding statutes for each state they intend to perform work. And because federal funds are involved, those who want to participate in projects sponsored by the economic stimulus package need a solid understanding of applicable federal laws and regulations.

Several states impose requirements for prequalification of bidders. For example, Indiana requires contractors desiring to perform professional services on certain public works projects with an estimated cost of $150,000 or more to apply for qualification prior to submitting a bid. See Indiana Code § 4-13.6-4-2. The Indiana Department of Transportation also requires contractors to file a verified statement that includes a complete report of financial ability, adequacy of plant and equipment, organization and experience of the applicant. See 105 Indiana Admin. Code §11-2-1. Similarly, Kentucky generally requires contractors and subcontractors for highway projects to prequalify by securing a certificate of eligibility prior to submitting bids on certain projects. See Kentucky Revised Statutes § 176.130. Ohio also has prequalification requirements for bidders on state highway projects. See Ohio Revised Code § 5525.03. Each of these states has their own unique requirements, forms and intricacies for the prequalification of bidders. Now is the time to make sure you are properly qualified for public work.

Almost all states require out-of-state companies to obtain a certificate of authority before conducting business within its borders. Ohio, Kentucky and Indiana all require some form of registration by foreign corporations. See Ohio Revised Code § 1703.03; Kentucky Revised Statutes § 271B.15-010; Indiana Code § 23-1-49-2(a). Some states even require such registration before an out-of-state contractor can submit a bid on a public works project.

It is clear from the early versions of the legislation that the Small Business Administration ("SBA") will play a significant role in how the federal dollars are allocated. Millions of dollars will likely be aimed at increasing SBA loans to small businesses, both in loan guarantees and direct lending. The Small Business Act, 15 U.S.C. § 631, establishes preferences for qualified small businesses. The eligibility requirements for SBA's Business Development program can be found at 13 CFR 121.01 et seq.

These are just a few examples of the regulatory maze created by the various state and federal public bidding statutes. Contractors and other industry professionals who invest the time and resources to confirm that they are properly prequalified, registered, and compliant with state and federal regulations will secure pole position in the race for the federally funded construction promised by President Obama. With 11 offices in 5 states, the Construction Law Group of Frost Brown Todd LLC is equipped to ensure that its construction clients are strategically positioned and prepared to take advantage of the predicted $800 billion infusion into the economy.

Posted by: Daniel P. King

Categories: Construction Contracts, Current Developments / Legislation, Federal and State Procurement / Bid Disputes