Generating consistent revenues in the construction business can be a tough for a small or medium sized company. Some companies find themselves with steady contracts and enjoying long-term stability, while others may be unlucky and have trouble finding and retaining enough work to get them through the year. Construction is an industry where unknowable and uncontrollable factors have a major influence on the success of a company.
Depending on the type of work they do, or the time of the year, some companies will experience a lull in the number of projects they are hired for. Businesses in parts of the country where it snows or rains consistently sometimes find that contracts are put on hold for an entire season, leading to lost revenue. In situations like these, through no fault of their own, companies can end up scrambling to figure out how they can cover their losses for the year. One reliable strategy to compensate for the unpredictability of construction work is to bid on contracts with municipal, county, state or federal government agencies. Government construction contracts can provide a stable revenue stream for companies, even during what is typically considered the off season.
The Right Price
For companies that win contracts with government agencies, it’s not uncommon to make enough money from a single contract to cover a whole season. While some government projects are small and may only last a few days, others can take years to complete. The level of competition varies from contract to contract, but eligible businesses can improve their chances of winning work by getting certified as small, women or minority-owned businesses.
Public agency contracts typically offer two different billing structures: one follows a fixed price structure for the entire contract, while the other follows the proposed price that you submitted and that the agency agreed upon. Either option is good for your business, but offer slightly different advantages. Prices for materials and labor can increase over time during long term projects, which can impact a contracting business’ profit margin; but government contracts tend to pay well so companies can expect to be satisfied even with a fixed price contract. Regardless of whether a job is fixed price or proposed price, the buying agency will usually pick up the tab for any extra expenses that are incurred in order to complete the work.
Over the course of some construction projects you may have the option to subcontract parts of the job to other companies, therefore taking some of the burden off of yourself. The responsibilities and risks associated with the job as a whole are still all yours, but you can benefit from reduced pressure by outsourcing certain tasks that you may not be equipped to handle. Even if you do choose to subcontract, by carefully allocating the aspects of the job that you want to keep in your court, you can still make a sizeable profit in the end.
Government Contracts Can Contribute to Your Success
Many construction companies find that government contracts provide a stable source of revenue that creates job security during uncertain economic times. Contracting with the government can pay more than companies are used to making for local projects, and having a government department as a satisfied customer can boost your reputation in the industry. By endeavoring to take on both small and large projects, businesses can establish themselves as a reliable contractor; after building a relationship with the agency companies may be asked to take on jobs that do not require a formal bid.
As with any contract you plan on pursuing, when it comes to government contracts make sure to do your research and evaluate your resources to confirm that you’re equipped to handle the job. It may also be a good idea to contact other companies that have worked for the government in the past and get advice from them on how to go about submitting a proposal and winning the bid.
Danielle Calamaras | BidNet.com