2023 outlook for US government construction contracts

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Current trends and opportunities

According to the latest data from the US Census Bureau, the value of federal construction spending in 2022 was $33.8 billion, a slight increase from $33.4 billion in 2021. The largest categories of federal construction spending were highway and street ($9.7 billion), conservation and development ($5.6 billion), office ($4.8 billion) and military ($4.4 billion).

One of the main drivers of federal construction spending in 2022 was the $1.2 trillion bipartisan infrastructure bill that was signed into law by President Joe Biden in November 2021. The bill allocated $550 billion in new spending over five years for various infrastructure projects, such as roads, bridges, transit, broadband, water, power and environmental remediation. According to the White House, the bill will create millions of jobs, improve competitiveness and resilience, and address climate change.

Another driver of federal construction spending in 2022 was the $768 billion National Defense Authorization Act (NDAA) for fiscal year 2022, which authorized funding for the Department of Defense (DoD) and other national security programs. The NDAA included $26.6 billion for military construction and family housing, $10.4 billion for energy resilience and conservation projects, and $2.5 billion for overseas contingency operations. To bid on any military construction projects all contractors and staff must take USACE EM385 1-1 Training. There are several different types of EM385 training so be sure to research which length of training course each of your employees needs.

Looking ahead in 2023, federal construction contractors can expect more opportunities from the continued implementation of the infrastructure bill and the NDAA, as well as from other potential legislation and initiatives that may emerge from the Biden administration and Congress. Some of the areas that may see increased federal construction spending in 2023 are:

  • Clean energy and climate change: The infrastructure bill allocated $73 billion for clean energy transmission and grid modernization, $21 billion for environmental remediation, $15 billion for electric vehicle infrastructure, and $7.5 billion for clean buses and ferries. Additionally, the Biden administration has pledged to achieve net-zero emissions by 2050 and has proposed a $2 trillion clean energy plan that would invest in renewable energy, energy efficiency, electric vehicles, public transit, green buildings and innovation.
  • Cybersecurity and digital transformation: The infrastructure bill allocated $65 billion for broadband expansion and affordability, $1 billion for cybersecurity grants for state and local governments, and $100 million for digital equity programs. Moreover, the Biden administration has issued several executive orders and directives to enhance cybersecurity and modernize federal IT systems, such as creating a national cyber director position, establishing a cyber incident review board, launching a zero-trust security initiative, and increasing cloud adoption.
  • Health care and social services: The infrastructure bill allocated $25 billion for upgrading health care facilities, especially in rural areas, and $12 billion for community health centers. Furthermore, the Biden administration has proposed a $1.8 trillion American Families Plan that would invest in universal pre-K, free community college, child care subsidies, paid family leave, nutrition assistance and health care expansion.

Space exploration and innovation: The NDAA allocated $25.4 billion for space-related programs within the DoD, such as the Space Force, the Space Development Agency, the Missile Defense Agency and the National Reconnaissance Office. Additionally, the Biden administration has expressed support for NASA’s Artemis program that aims to land humans on the moon by 2024 and prepare for a future mission to Mars.

Challenges and best practices

While federal construction contracts offer lucrative opportunities for contractors, they also pose significant challenges that require careful planning,

Some of the best practices for winning federal construction contracts are:

  • Research the market and the customer: Before bidding on a federal construction contract, contractors should conduct a thorough market research to identify the needs, priorities, preferences and expectations of the government agency that is soliciting the contract. Contractors should also review the agency’s past and current projects, budgets, performance standards, evaluation criteria and feedback to understand what the agency is looking for and how to tailor their proposal accordingly.
  • Register and network: Contractors should register their business on SAM.gov, the official website for doing business with the federal government, and obtain a DUNS number, a CAGE code and a NAICS code. Contractors should also network with government officials, contracting officers, prime contractors, subcontractors and industry associations to build relationships, gain insights, find opportunities and form partnerships.
  • Prepare a compliant and compelling proposal: Contractors should carefully read and follow the instructions in the solicitation document, such as the Request for Proposal (RFP), the Invitation for Bid (IFB) or the Request for Quotation (RFQ). Contractors should also submit a compliant and compelling proposal that addresses all the requirements, demonstrates their qualifications and experience, provides a realistic and competitive cost estimate, and highlights their unique value proposition and differentiators.
  • Seek assistance and feedback: Contractors should seek assistance and feedback from various sources, such as the Procurement Technical Assistance Centers (PTACs), the Small Business Administration (SBA), the Office of Small Business Utilization (OSBU), the Government Accountability Office (GAO) and other mentors or consultants. These sources can help contractors with various aspects of bidding on federal construction contracts, such as finding opportunities, understanding regulations, preparing proposals, negotiating contracts and resolving disputes.
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