July 2010

NSPE TODAY: POLICY PERSPECTIVES
NSPE's Work in Washington Means Big Savings for Small Firms

BY CHRISTOPHER M. STONE, P.E., F.NSPE

Every membership-based organization has to be able to answer two basic questions: Why should I join your organization and why should I renew my membership? For NSPE members and those considering joining, I have one big reason—actually, it's 355 million reasons.

Back in March, thanks to the efforts of the Council on Federal Procurement of Architectural and Engineering Services, a federal rule was issued that is expected to save small architectural and engineering firms $355 million annually. Perhaps you haven't heard of COFPAES, and maybe you weren't familiar with this issue, but NSPE has been part of this group for many years, representing your interests in Washington, D.C.

To address and monitor the effect of federal regulations on the practice of engineering and architecture, COFPAES was organized in the late 1960s. Made up of several professional associations—NSPE, the American Institute of Architects, the American Society of Civil Engineers, and the Management Association of Private Photogrammetric Surveyors, among others—COFPAES's first accomplishment was contributing to the enactment of the Brooks Act in 1972. This law codified the use of qualifications-based selection of engineering design services at the federal level. Since that time, COFPAES has consistently promoted sound federal A/E procurement practices and works behind the scenes to promote and protect QBS.

Most recently, COFPAES was instrumental in supporting the Small Business Administration's Office of Advocacy as it successfully pushed to rewrite the rules on retainage that are part of the Federal Acquisition Regulation (FAR). The recent rule change gives contracting officers more flexibility in carrying out their jobs and will remove a huge financial burden for small A/E firms.

The practice of retainage can be traced back to England's construction industry in the 1840s. It allows a buyer of construction services to withhold money from a contractor until the work is complete. Retainage makes money available to finish a project if the contractor does not, and it also creates an incentive to complete the work.

According to the Small Business Administration, an absolute 10% withholding has been in place for a number of years. And in some cases the money has not been returned to the firm until 15 months beyond the close of the contract. COFPAES called retainage "one of the most onerous federal rules impacting small business."

The FAR revision and clarification states that a contracting officer can withhold up to 10% of the payment due in any billing period when deemed necessary to protect the government's interest and ensure satisfactory completion of the contract. No withholding is required, however, if the contractor's performance has been satisfactory. FAR states, "The changes make clear that retainage is optional and any amounts retained should not be held over beyond the satisfactory completion of the instant contract."

COFPAES Chair Patrick Olson, P.E., called the retainage rule "an unbearable burden for the A&E community." In some cases, member firms of COFPAES had millions of dollars in retainage held for several years on contracts where the firm received the highest possible performance ratings. It meant that A/E firms acted as bankers to the government, he added, providing interest-free loans that often exceeded a company's profit margin for a contract.

The change in the retainage rule is a tangible example of how NSPE benefits the practicing engineer. NSPE and other groups, through COFPAES, speak with a united voice on federal A/E procurement law, leading to quality design of the infrastructure needs of our nation, and to protect the health, safety, and welfare of the public. NSPE members are encouraged to contact NSPE (governmentrelations@nspe.org) regarding threats to QBS, and to work alongside NSPE, COFPAES, and their representatives in a coordinated manner.

Visit www.cofpaes.org for more information about how NSPE and COFPAES work together.

Christopher M. Stone, P.E., F.NSPE, is NSPE's representative on the Council on Federal Procurement of Architectural and Engineering Services. He will serve as NSPE president in 2011–12.