Change Orders Bill Introduced to Offer More Transparency to Federal Construction Jobs

A new proposed national law would provide greater transparency to subcontractors and suppliers with respect to change orders on federal construction jobs.

Dubbed the “Small Business Know-Before-You-Bid Construction Transparency Act of 2017” or H.R. 2350 and introduced by Rep. Don Bacon of Nebraska, the bill would provide more insight as to how long a particular federal agency takes to review, approve and pay for change orders; the validity of payment assurances, such as payment bonds; and the timeliness of monthly payments.

These steps would help smaller construction companies better prepare bids to such jobs by more accurately assessing the effects of delayed payment through change orders, according to a review of the legislation by the American Subcontractors Association (ASA), which supports the bill.

Currently, some federal agencies routinely delay review and approval of change orders until the end of the project, leaving subcontractors and others to pay their own bills, including to suppliers, while waiting for delayed payment from the government, said E. Colette Nelson, chief advocacy officer with ASA. “This bill would provide prospective federal construction contractors and subcontractors the information they need to factor into their bids and offers to the federal government to assess the risk and resulting cost of delayed payment for change orders,” she said.

The bill would require federal agencies to post to a website each payment made to a prime construction contractor, including the date and amount of payment. Any amounts withheld from the amount requested by the prime contractor and a general explanation of why such an amount was withheld must also be specified, Nelson said. “This information will allow a subcontractor or supplier to determine when its payment is due (i.e., under the Prompt Payment Act, seven days after the government pays the prime contractor), without resorting to contacting directly the already-harried contracting officer or the prime contractor,” she said.

The legislation would allow suppliers and subs to more easily check the validity of payment bonds or modifications to these bonds, as well as any notices that may be required to perfect the bonds, on a federal construction project by having government agencies post a copy of the bonds, the ASA said. The federal Miller Act requires a prime construction contractor with a federal contract of more than $150,000 to provide a payment bond to assure payment of its subs and suppliers.

The House Small Business Committee is expected to hold a hearing on H.R. 2350 in the near future, Nelson said.