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Federal government construction projects will be plentiful, but full of potential pitfalls

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With the economic downturn and the enactment of the American Recovery and Reinvestment Act of 2009, many contractors are looking to the federal government for work.

Military construction contracts have increased more than four-fold since 2007, while spending on private construction has declined to half of what it was three years ago. Expenditures on military construction in the San Diego area are expected to reach $1.4 billion in 2010 and $1.6 billion in 2011.

So, you think your construction company is ready to get into the government contracting game? Good idea, but there is a lot to learn about doing business with the federal government. As McKenna Long & Aldridge attorney Mark Budwig, a 20-year veteran of construction law, explains, "It is a heavily regulated industry with many stringent rules that can land you in hot water if violated."

A few of these rules are worth highlighting. First, as a result of increased competition for federal work, the number of bid protests are increasing. The rules governing bid protests relating to federal work are vastly different from those relating to California state projects.

Second, the False Claims Act protects the government against false claims for payment by offering substantial financial incentives to "whistle blowers" who notify the government. Importantly, no proof of the contractor’s specific intent to defraud is required, and a violation can result in stiff penalties, treble damages and debarment.

Third, contractors must comply with special wage requirements. MLA Attorney Jim McNeill, who counsels contractors on employment issues, says "These rules require that minimum wages for a contractor’s laborers be based on the prevailing wages in the locale where the work is to be performed, which can require a contractor doing work in various locations to compensate its workers at different rates."

Finally, bidding federal work is very different from bidding on private or California public works projects. According to Doug Farry, a managing director in Government Relations at MLA, "Politics within the government can impact decisions on the ground in ways that may seem counterintuitive to the uninitiated. And since Congress ultimately writes the check, legislative oversight committees can, and often do, intervene in the process as well. Given the amount of federal funding being poured into Southern California, savvy contractors and subcontractors are well advised to seek assistance from experienced government relations and government contracts professionals to help them create a strategy for successfully navigating through the maze that is the federal government.

About McKenna Long & Aldridge LLP

McKenna Long & Aldridge LLP (MLA) maintains its focus on all facets of federal and state public works projects and provides services for commercial and private works construction projects. MLA attorneys have experience in subway and surface transportation, power generation, dams, pipelines, sewerage treatment, airports, military facilities, commercial buildings, industrial plants and housing projects. Notable examples are the San Diego Convention Center, the Los Angeles Hyperion Wastewater Treatment Plant, and the Twin Oaks Valley Water Treatment Plant.

Written by Laurence R. Phillips, Esq., a partner in the law firm of McKenna Long & Aldridge LLP.

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