Contractors may be left waiting for payment for public construction projects delayed by lack of government funding
Congress looks set to approve short-term government funding this week to avoid a government shutdown – but the lack of long-term funding immediately had a major impact on public sector construction.
“We cannot start new programs. You cannot build new ships. We’re going to have to delay maybe 100 military construction projects,” Pentagon spokesman John Kirby noted. “And when you do that, it’s not just military installations that are affected. These are local communities and local businesses.
If you listen to U.S. lawmakers, now would be a good time to tread carefully on public projects.
“A lot of times the defense programming, the ship repairs change from year to year,” said Sen. Mark Warner. “And if you have to use last year’s budget, it will cost us jobs and, frankly, cost taxpayers millions of dollars.”
Senator Tim Kaine agreed, adding that “using a continuing resolution, simply extending last year’s budget without considering today’s needs and tomorrow’s needs is not the right way.” to fund the federal government.
Situations like these are unfortunate indicators of how difficult it is to work on public construction projects.
“Project cancellations are almost as common on public projects as they are on private projects,” notes Levelset’s Tom Scalisi. “With taxpayer-controlled budgets and funding, money for projects can fluctuate from year to year. Additionally, when political offices change hands, as we saw last year, projects that were once fast-tracked may stop working.
It is important to approach public projects with as much attention to detail as private projects, and this includes the prequalification process. Not all public projects are guaranteed to move forward smoothly, as are those affected by the absence of a government spending bill. There are many ways for a company to prequalify a public project and ensure the project is protected, including tracking bond information and negotiating a project’s termination clause.
Contractor’s Tip: Obtain a copy of the payment bond if you participate in a public project
“Before bidding on a public project, contractors should be aware of the circumstances surrounding the project, including how it will be financed and whether there is any risk of potential disruption to the project,” says construction attorney Scott Grier.
13 years of experience
Bruce Inosencio, Jr., a construction attorney based in Michigan and Florida, agreed with this sentiment, noting that “When negotiating the terms and conditions of a contract, it is important to consider – and plan – the possibility that the project will be immediately stopped at no fault of any of the parties.
26 years of experience
“If, for example, a project is owned by the federal government and the project ends abruptly, that would have a substantial financial impact on your business,” Inosencio continued. “How could the impact be calculated, and who is going to pay for it?”
Even though lawmakers hope to pass a long-term bill soon, it may be important to keep abreast of the situation and prepare a contingency plan.
“Budget wisely,” adds construction attorney E. Aaron Cartwright III. “Every business owner knows feast or famine. When you have a good time, be sure to put funds aside for the future. Make sure you have other projects in the works or that you have the ability to start if a project is cancelled.
E. Aaron Cartwright III
5 years of experience
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