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Chapters:

3.8 Procurement under Awards of Federal Assistance

Construction Requirements

Jump to Section:
Qualifications
Special Fiscal Conditions for Construction Projects
Payment of Money Guaranteed by the Federal Government
Executive Requirements 13202

Qualifications

If you are a recipient or subrecipient considering the use of agency funds for construction, be aware of the following qualifications:

  • Costs incurred as an incidental and necessary part of a program for renovation, remodeling, maintenance, and repair costs that do not constitute capital expenditures ARE generally allowable, subject to provisions of program-authorizing legislation.
  • The total cost of a construction project includes the cost of site preparation and demolition of existing structures. You must apply to the project any proceeds (program income) realized for site preparation activities (e.g., salvage value of structures demolished or proceeds from the sale of timber). Use these proceeds to reduce the total cost of the construction project.
  • You must pay relocation costs in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policy Act of 1970, 42 United States Code §4601, et seq.
  • OJP will not obligate funds for construction until you have contacted and assisted us in satisfactorily completing any applicable OJP procedures by complying with the National Historic Preservation Act, the National Environmental Policy Act, and other related Federal environmental impact analysis requirements.

information iconFinancial Management Tip

All income generated as a direct result of an agency-funded project is considered program income (see Chapter 3.4).

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Special Fiscal Conditions for Construction Projects

The awarding agency (e.g., State) may accept the bonding policy and requirements of subrecipients if they adequately protect agency funding (and, by extension, Federal dollars). If the awarding agency determines that the recipients do not have adequate policies that protect Federal dollars, the awarding agency must require all of the following:

  • A bid guarantee equivalent to 5 percent of the bid price
  • The bid guarantee must consist of a firm commitment—such as bid bond, certified check, or negotiable instrument accompanying a bid—as assurance that the bidder will, upon bid acceptance, execute such contractual documents as may be required within the time specified after the forms are presented.
  • A performance bond on the part of the contractor for 100 percent of the contract price
  • A performance bond is a bond executed in connection with a contract to secure fulfillment of all the contractor’s obligations under such a contract.
  • A payment bond on the part of the contractor for 100 percent of the contract price
  • A payment bond is a bond executed in connection with a contract to ensure payment as required by law of all persons supplying labor and material in the execution of the work provided for in the contract.

information iconFinancial Management Tip

The customary fixed fee or profit allowance in cost-type contracts may not exceed 10 percent of the total estimated costs. This rule applies to contracts executed under grants.

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Payment of Money Guaranteed by the Federal Government

The Federal Government guarantees the payment of money borrowed by a recipient or subrecipient.

  • The State may, at its discretion, require bonding and insurance to protect the interest of the Federal Government.
  • If a project is considering construction of facility improvements for less than $100,000 and the subrecipient does not have any requirements for bid guarantees, performance bonds, and payments bonds, the subrecipient must meet the requirements of the State.

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Executive Requirements 13202

Preservation of Open Competition and Government Contractors’ Labor Relations on Federal and Federally Funded Construction Contracts
These requirements apply to recipients and subrecipients of awards and cooperative agreements and to any manager of a construction project acting on their behalf. If you are one of these people or an employee of one of these organizations, then you must ensure that the bid specifications, project agreements, and other controlling documents do not:

  • Require or prohibit bidders, offerors, contractors, or subcontractors to enter into or adhere to agreements with one or more labor organizations, on the same or other related construction project(s); or
  • Otherwise discriminate against bidders, offerors, contractors, or subcontractors for becoming or refusing to become or remain signatories, or otherwise to adhere to agreements with one or more labor organizations, on the same or other related construction project(s).
  • Contractors or subcontractors are not prohibited from voluntarily entering into agreements with one or more labor organizations.

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