Contractors: Make Public Works Projects Work For You

Some contractors have noticed residential projects lagging, however commercial and government projects are booming. It may be easier than you think to tap into the lucrative market of public works– projects constructed with government funds for public use.

Small Business Certification:
Companies with fewer than 100 employees, and less than $12 million in revenue over the past three years are eligible for Small Business Certification from the State of California. The online application takes only minutes to complete, and sometimes the process can be completed the same day. Log on to the San Diego Contracting Opportunities Center. Benefits of being a Certified Small Business (CSB) include:

• A 5% bid preference on applicable state solicitations.


• State agencies may use a streamlined process known as the “SB/DVBE Option” by contracting directly with a California-certified small business for goods, services, and information technology valued between $5,001 and $99,999 after obtaining price quotes from at least two California-certified small businesses. For public works projects, the contract value can be up to $131,000.


• The Department of General Services, Procurement Division charges state and local agencies an administrative fee when contracting with a California Multiple Award Schedules vendor. As an incentive, the fee is waived if the CMAS vendor is a CSB.


• As an incentive, non-small business prime contractors who use CSB subcontractors are eligible for a bid preference of up to five percent (5%) of the highest responsible bid (or score).


• When applying bidder preferences in which non-small business bidders may be eligible, CSB bidders have precedence over non-small business bidders.


• As a CSB you are eligible for the state's Small Business Participation Program. The program sets a goal for the use of small businesses in at least 25% of the state's overall annual contract dollars.


• CSBs increase their visibility and expand their business networking opportunities by being automatically listed in the online Certified Firm and Application Status Search.

What About Prevailing Wage?
Contractors and subcontractors on public works projects must pay prevailing wage rates to employees. The California Labor Code section 1770 et seq. sets forth the prevailing wage requirements. Prevailing wage consists of two parts: base wage and employer payments (fringe) which are designed to provide employees with a benefit plan, and ensure that union and non-union contractors are bidding projects competitively. The fringe includes payments for Health & Welfare, Pension, Vacation, Training, etc. Wage rates can be downloaded from the Department of Industrial Relations. Fringe employer payments can be made by paying for employee benefits through certain group insurance plans and qualified hour bank plans, or these amounts can be paid to the employee as additional wages. Fringe paid as wages is subject to payroll taxes and workers compensation, resulting in higher cost to the employer.

The Paperwork:
Contractors can prepare and submit the required paperwork themselves, or they can outsource this task to a service provider who specializes in certified payroll, such as a Professional Employers Organizations (PEO) or an Administrative Services Organizations (ASO). Both of these types of services provide comprehensive, cost-effective labor management solutions. A PEO employs the workers and leases its employees to the contractor for a flat fee. Under the ASO model, the contractor continues to be the employer, while outsourcing a “human resources department.” Contractors working with a PEO can save a great deal of money by benefiting from the PEO’s low workers’ compensation and unemployment insurance rates.