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With the 118th Congress in full swing, FCA International has been meeting with members of Congress and their staff to address three contracting reforms important to the construction industry. These reforms include worker misclassification, change orders, bonding requirements for public-private partnership (P3) projects.

Since 2011, FCA International has consistently worked to address worker misclassification. FCA International has advocated for reforming Section 530 of the 1978 Revenue Act, which is overly permissive in providing a safe harbor for misclassification of workers as independent contractors instead of employees.  FCA International has supported and will continue to support legislation that would address misclassification only in the construction industry. Without interfering with the use of legitimate independent contractors or increasing penalties, this legislation would give the Treasury Department more authority under Section 530 to increase efforts to identify and reduce misclassification, to address tax evasion and increase tax compliance.

Misclassification is rampant in the construction industry and costs the government and taxpayers, at all levels, substantial uncollected revenues.  Given the magnitude of underreporting to the IRS, increasing taxpayer compliance would generate substantial revenue to the federal government to reduce the tap gap. The federal government loses Social Security and Medicare taxes, income taxes and unemployment insurance.

FCA International maintains a system of apprenticeship training, health and welfare, pension benefits, and career advancement training that ensures an adequate supply of highly-skilled trade persons, who are compensated and classified correctly as employees.  Allowing the misclassification of workers threatens to degrade the quality of high workforce standards in a vitally important industry and one that maintains high wage and benefit standards.  Finally, workers who should be classified as employees also lose out on the protections and benefits of employment status, including public law benefits and employer-provided fringe benefits.

In the last Congress and now in the 118th Congress, FCA International will support the Small Business Payment Performance Act, which would assist small business construction contractors receive timely payment for change orders. Construction firms of all sizes, but especially small businesses, have had to weather the effects of the pandemic and soaring construction materials costs. This commonsense and bipartisan legislation would help ensure that our nation’s small business construction contractors do not go bankrupt waiting to be paid for work the federal government ordered them to perform.

Additionally, on September 23, 2022, the Federal Acquisition (FAR) Council released the final rule implementing a FCA International backed reform that will bring unprecedented transparency and accountability to federal agencies’ change order processes.  FCA International, along with the Construction Industry Procurement Coalition (CIPC), successfully led the legislative effort to include these reforms in the FY18 NDAA responsible for this final rule.

Effective on October 28, 2022, this regulation applies to any federal solicitation for small business construction contracts and will require agencies to:

  • Publish their policies and procedures for processing change orders (REAs);
  • Begin to track the time it takes the agency to definitize change orders; and
  • Publish this data on those solicitations and on a public website.

The new regulation will bring transparency to an issue that has long been costing federal contractors time and money. Federal agencies will have to focus on creating coherent policies and procedures for processing change orders.

During the negotiations of the Infrastructure Investment Jobs Act (IIJA) of 2021, FCA International worked to include in it legislative language directing the U.S. Department of Transportation to ensure public-private partnership (P3) projects using Transportation Infrastructure Finance Innovation Act (TIFIA) financing have appropriate payment and performance security bonds.  For nearly a hundred years, the federal government has recognized the importance of surety bonding requirements for its direct public works projects.

Surety bonds play a vital role in ensuring contractors in financial distress avoid bankruptcy, allow subcontractors and workers of public works projects to receive compensation and allow the project to be delivered within budget and on time. Over 95% or more of all public projects require bonding under the Miller acts.

However, Miller acts’ bonding requirements are not clear on public private partnerships (P3s), and therefore often do not maintain the same level of protections that have been required on public infrastructure projects over the past century. The IIJA addresses that shortcoming and FCA International intends in this Congress to advocate for similar bonding requirements for P3 projects funded by the Water Infrastructure Finance and Innovation Act (WIFIA).

Without question, FCA International is on the move as we educate, advocate, and legislative the 118th Congress.