The U.S. House of Representatives Small Business Committee is holding a hearing this month on the Federal Acquisition Regulation that allows federal agencies to withhold up to 10 percent of design fees until the project completion. The AIA has a representative—a small-firm principal who has been affected by this regulation—who will testify on your behalf. If you have been affected as well, we’d like to hear your story, too. Read on …
In February 2008, the Small Business Administration announced its 2008 Top 10 Rules for Review and Reform. The SBA’s Regulatory Review and Reform Initiative is designed to identify and address existing federal rules creating barriers to small business that should be reviewed and may need reforming. In choosing the top 10, the SBA reviewed more than 80 constructive suggestions received from small businesses and associations.
Included in this top 10 was an item brought forward by the AIA, the Federal Acquisition Regulation (FAR) rule for fixed-price architectural-engineering services, 48 CFR 52.232-10, which allows federal government agencies to withhold up to 10 percent of design fees from an A/E until the project is built (called “retainage”) and at the discretion of the contraction officer.
In selecting this regulation for needed reform or elimination, the SBA determined that the withholding restricts the cash flow of small businesses, with little benefit to government, and in some instances is in addition to any bonding requirements. The SBA also determined that while the regulation was intended to protect the government’s interest, the provision is counter to the Brooks Act, which allows A/E firms and the procuring agency to meet to discuss the design and scope of services before bidding on the work, thus guaranteeing the government’s interest is met.
According to Nancy Hiteshue, manager of federal regulatory relations, the issue was first brought to the AIA’s attention by an AIA member who had the withholding included in his firm’s contract. “For small design firms with very small profit margins and tight cash flows, having 10 percent of their fee held back for what could be years is a very troubling and unnecessary burden. We were glad that the SBA agreed and wanted to work with us to address this problem. We are also pleased that Congress will begin to explore this issue through the upcoming hearing.”
Later this month the House Small Business Committee will hold a hearing on issued raised by the Small Business Administration in their 2008 Top 10 Rules for Review and Reform report, including this withholding issue. An AIA member from Florida, Paul Renker, AIA, will testify before the committee on the effect of this regulation on his small business.
AIA Government Affairs staff is looking for anecdotes and examples from our members of them having part of their fee withheld by the federal government and how it hurt them economically. Please share your story with AIA Government Advocacy staff.