Contractors competing for U.S. embassy design and construction work face various requirements not present on typical federal government contracts, and work in foreign countries poses significant risks that most U.S. contractors don’t normally encounter.
The State Department’s Bureau of Overseas Building Operations (OBO
) is responsible for carrying out the Embassy Construction Program. OBO acquires properties, qualifies and hires architects and contractors, and administers the design and construction for all foreign State Department projects. OBO also determines the project delivery system to be used, evaluates bids and proposals, conducts contract negotiations and makes award determinations.
In recent years, OBO placed an emphasis on green building practices, mandating that all new embassies be built to the specifications of LEED certification. Additionally, OBO instituted a design excellence program with the goal of delivering “embassy complexes that represent the best of American architecture, engineering, technology, art and culture.”
Despite unprecedented State Department funding for the Embassy Construction Program, OBO recently indicated it was experiencing a shrinking contractor database for embassy work. Contractors have expressed concerns with the location of projects, political instability and war, as well as OBO’s lack of “partnering,” its dilution of pre-qualification standards, and the participation of foreign contractors that may not be held to the same standards as U.S. contractors. The OBO says it plans to address these issues to attract new contractors to participate in the Embassy Construction Program. Citizenship Requirements
The Embassy Construction Program establishes a clear preference for U.S. contractors, which becomes a mandatory requirement for large projects or projects involving technical security. The criteria for qualifying as a U.S. corporation to perform diplomatic design and construction projects are more stringent than those for other State Department projects. Prospective contractors that cannot satisfy these criteria may not have access to necessary information, including drawings and specifications related to diplomatic building projects.
In order to qualify as a U.S. contractor, a company must be:
- 50 percent or more owned by United States citizens or permanent residents, or
- incorporated in the United States for more than three years and employ more than half of the company’s permanent full-time professional and managerial positions in the United States.
If the project’s value exceeds $10 million or involves technical security, a company must be incorporated under the laws of the United States and maintain its principal place of business within the country. The contractor must have been incorporated in the United States for at least five years before the project issuance date if the project’s value exceeds $10 million, or at least two years prior to the issue date if the project involves physical or technical security. For contracts exceeding $10 million in value, the prospective contractor must demonstrate sales volume greater than the value of the project during at least three of the required five years the firm has been incorporated in the United States.
The employment and management criteria for U.S. companies seeking to perform diplomatic construction contracts also are more comprehensive for embassy projects. If the project’s value exceeds $10 million or involves technical security, the prospective contractor must employ U.S. citizens in at least 80 percent of its principal management and supervisory positions in the United States. In addition, at least half of the contractor’s permanent, full-time workforce must be U.S. citizens.
Federal law also requires contractors to demonstrate experience and competency to participate in the Embassy Construction Program. Specifically, prospective bidders must demonstrate they have performed services similar in type and complexity in the United States or at a United States diplomatic or consular establishment abroad. Security Clearances
When an embassy project involves areas for storing classified materials or conducting classified activities of a U.S. diplomatic mission, prospective contractors must obtain security clearances. Other projects implicating national security concerns may require additional clearance for contractors, supervisors or employees. The required levels of security clearance are typically described in the project synopses in Commerce Business Daily. Subcontracting Limitations and Bonding Requirements
In performing an embassy construction project, a qualified contractor may not subcontract more than 50 percent of the project’s total value. Contractors also must post a surety bond or other guarantee to ensure contract performance. The amount of the bond or guarantee is left to the discretion of the director of OBO. Small Business and Minority Business Set-Asides
As with other federal procurement programs, small business contractors and minority-owned contractors may benefit from set-asides within the Embassy Construction Program. In the past, these criteria tended to diminish participation in the program. However, recent changes improved the program’s accessibility. Contractors entering the program can benefit from increased appropriations, streamlined qualifications review and opportunities for multi-project bidding.
To the extent practical, 10 percent of the amount appropriated for diplomatic construction or design programs is allocated to contracts with U.S. minority contractors. Another 10 percent is allocated to contracts with U.S. small business contractors. Prequalification Procedures
The State Department encourages prospective contractors to prequalify to participate in the Embassy Construction Program. In the interest of strengthening security procedures that apply to contractors involved in diplomatic construction and design projects, and in the interest of identifying qualified contractors for those projects, the State Department permits design firms to demonstrate compliance with the nationality and security requirements before bidding on a project or group of projects.
Prospective contractors must complete the “State Department Certifications Relevant to Public Law 99-399,” a 10-page form that requests information related to the criteria outlined above. Through prequalification, a firm can avoid the qualification process on each individual project, provided its ownership or employee composition has not changed. While the State Department’s conditions for participating in the Embassy Construction Program are stringent, the prequalification process allows qualified firms to bid on projects in the growing market of embassy construction in a more streamlined manner.
The State Department’s Embassy Construction Program provides contractors with the opportunity to participate in highly visible, complex, green building projects that demonstrate design excellence. Despite various heightened standards and requirements, the State Department’s emphasis on, and increased funding for, embassy construction projects provide a welcome opportunity for qualified contractors.