Issues & AdvocacyFederal
The Six Percent Fee Limitation on Federal Design Contracts
Since 1939, federal construction agencies have been required by law to limit the fee payable to an architect or engineer to six percent of the estimated construction cost. Presently, there are at least four statutes that prescribe limitations on architect-engineer fees, and apply to all civilian and military construction agencies, with the exception of the U.S. Department of State.
Federal agencies have interpreted the statutory fee limitations as applying only to the part of the fee that covers the production and delivery of "designs, plans, drawings, and specifications." The agencies, therefore, consider that the six percent fee limitation does not apply to the cost of field investigation, surveys, topographical work, soil borings, inspection of construction, master planning, and similar services not involving the production and delivery of designs, plans, drawings, and specifications. Most direct federal awarding agencies have, as part of their supplement to the Federal Acquisition Regulation, a list of those items exempt from the six percent fee limitation.
The Brooks Act calls for public announcement of opportunities for design contracts. The government posts these on a website known as FedBizOpps.
All intended procurement actions of $25,000 or more, whether for military or civilian agencies, are now posted at FedBizOpps.gov. FedBizOpps.gov does not list procurements that are:
- Classified for reasons of national security
- For perishable items
- For certain utility services
- Required within 15 days
- Placed under existing contracts
- For personal professional services
- Made only from foreign sources
- Not be given advance publicity, as determined by the Small Business Administration
- Notices posted to FedBizOpps.gov provide the location and scope of projects and may also contain such information as:
- Estimated construction contract award range
- Project schedule and the date and time limit for receiving replies
- Categories of evaluation criteria and weight factors
- Any requirements for submitting supplemental information
Usually, opportunities for A/E services are listed under the “R” (professional, administrative and management support services) and “C” (architecture and engineering services) sections. However, design opportunities can be included in other sections, such as those for design/build services (listed under “Y,” Construction of Structures and Facilities).
A/E firms with an interest in being considered for design services contracts must submit the required statements of qualifications to each agency with which the A/E wants to contract. The Standard Form 330, Architect-Engineer Qualifications, may be filed each year with a field office of each agency with which the architect intends to do business. This form may be updated and resubmitted at any time. A completed form furnishes the federal agency with general information on the size, capabilities, personnel, and past experience of an interested firm.
Many federal agencies keep SF 330 Part IIs (General Qualifications) on file and review them for prospective design firms if they have a small project that will not be advertised. The A/E firm can submit this form at the same time as the required project-specific form, the SF 330 Part I, is submitted.
Following the review of the notices on FedBizOpps, if an A/E firm wants to be considered for a specific project listed in it, then it must submit SF 330 Parts I and II. This form is submitted in response to a specific solicitation and, when completed, contains the data relative to the specific project.
When a project is advertised on FedBizOpps, the agency does not notify firms that have previously filed a SF 330 with them. The project advertisements or notices that appear on FedBizOpps are tailored to each specific project, and invite interested firms to submit a new SF 330, along with any supplemental data requested in the announcement. Firms that have a current SF 330 Part II on file with the listed procurement should resubmit it, along with Part I of the SF 330 to be considered for a specific project. Instructions on how to complete the SF 330 are contained in the form.
The evaluation/selection process for A/E begins with evaluation boards composed of members who, collectively, have experience in architecture, engineering, construction, and government and related acquisition matters. The members of the boards are usually appointed from among the professional employees of the agency or other agencies. In some situations, private practitioners sit on these boards if authorized by agency procedures. Of course, when these private practitioners sit on an evaluation board, they or their firms are not eligible for award of a design contract.
The evaluation boards then review the statements of qualifications (SF 330). The boards must evaluate the submissions in accordance with the criteria cited in the FedBizOpps notice. For example, some of the criteria in a notice may include the following: professional qualifications and experience of the firm with design of a specific type of project; experience and professional qualifications of the firm's staff to be assigned to the project; location of the main office of the proposing firm and its consultants; overall performance record of the firm; and analysis of the firm's current workload.
Following the evaluation of the statements of qualifications, the boards prepare reports that recommend the firms to be named to the short-list. The report ranks at least three of the firms for the purpose of discussing the project with them. The boards are not limited in the number of firms that they can select; it is left to their discretion.
The interviews usually involve discussions on project concepts and the relative utility of alternative methods of furnishing the required services. Before the interview, some agencies send detailed selection criteria and other information about the project to the firms recommended for further consideration. Under the system established by QBS, the architect-engineer designer does not produce any design product in competing for the project.
Usually these interviews are held at the agency's office. Occasionally, and in special circumstances, phone interviews are conducted. The interviews are brief, usually lasting only 30 to 60 minutes.
Following the interviews, the boards' reports are presented to the agency head or individual who is designated to act on the agency head’s behalf. The reports list, in order of preference, at least three firms that are considered to be the most highly qualified to perform the services. This is considered to be the final selection of the competing firms. If the firm listed as the most preferred is not the firm that was recommended as the most highly qualified by the evaluation board, the head of the agency must provide a written explanation for the reason for the preference. The head of the agency, or that person's designate, may not add names of other firms to the final report. The report reviews the recommendations of the evaluation board and, from that, the agency head makes the final selection.
When the final selection is made by the agency head, the contracting officer is authorized to begin negotiations with the top-ranked firm. The negotiations are conducted pursuant to the procedures set forth in the FAR. Usually, the firm is requested to submit a fee proposal listing direct and indirect costs as the basis for contract negotiations. Contract negotiations are conducted following an evaluation of the fee proposal and an audit when the proposed design fee is more than $100,000.
If a fee is not agreed upon within a reasonable time, the contracting officer will conclude negotiations with the top-ranked firm and initiate negotiations with the second-ranked firm. If a satisfactory contract is not worked out with this firm, then this procedure will be continued until a mutually satisfactory contract is negotiated. If negotiations fail with all selected firms, the contracting firms, which are ranked by competence and qualifications, are identified. The negotiation process will then continue until an agreement is reached and a contract awarded. On a practical note, it is rare that a contract is not successfully negotiated with the top-ranked firm.