Pandemic Appropriations for Education Create Construction Opportunities
The pandemic has had an enormous impact on America’s education system. Recognizing the need for students to safely resume in-person learning, Congress has allocated substantial funding to help schools rebuild and recover from the COVID-19 pandemic through three bills:
- the Coronavirus Aid, Relief, and Economic Security Act (CARES) ($13.2 billion);
- the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSA) ($54.3 billion); and
- the American Rescue Plan Act ($122.7 billion).
The Department of Education established a fund specifically for K–12 school districts known as the Elementary and Secondary School Emergency Relief Fund (ESSER).
United States Secretary of Education Miguel Cardona said the funding allows districts to “hit the reset button” and added “with successful implementation, our students are going to have a better experience than they did before the pandemic.” In many cases, ESSER funding is two or three times what would have been allocated prior to the pandemic.
ESSER funds are intended to support upgrades to critical school infrastructure related to disease prevention and projects must be precisely targeted to a very limited segment of approved school facility repairs and improvements. Examples include improved ventilation filtration systems and indoor air quality, heightened hot water pressure and quantity requirements (for hot water handwashing), and efforts to enhance physical social distancing.
Contractors can find projects using private bid Web sites such as Bidclerk.com or Dodge Construction Central and some even specifically designate ESSER funding. For example, in California, the Wasco Union Elementary School District currently is seeking a Request for Qualifications for the “Comprehensive Assessment of Existing District HVAC Systems,” where the district “intends to utilize state programs, such as AB 841, utility incentive programs, federal programs, such as ESSER, and/or other available funding solutions.”
As is the case with all federally funded construction contracts that exceed $2,000, ESSER-funded projects must meet Davis-Bacon Act prevailing wage requirements and contractors must include bid language attesting to correctly pay craft professionals Department of Labor established wage rates for the locality of the project.
When bidding on these projects, merit shop bidders will be at a cost disadvantage if fringe obligations are allocated to payroll. While lawful, fringes paid directly to workers incur payroll taxes such as Social Security and unemployment (FICA, FUTA, SUTA) as well as insurance premiums for general liability and, in most cases, workers’ compensation.
However, if the contractor allocates fringe obligations toward bona fide benefits (the intended use and how unions allocate the obligation) the contractor will realize savings of approximately 25% of the total fringe obligation from the reduction in payroll taxes and insurance premium obligations. Paying fringes toward a pre-tax line item (bona fide benefits such as health or retirement plans for example) typically saves the contractor approximately 4% to 6% of total labor costs and these savings allow the bidder to submit lower costs and be awarded the contract.
Contractors interested in learning how much they can potentially save when bidding on government jobs–like those funded by ESSER or other pandemic appropriation acts–can visit https://contractorsplan.com/calculator for an interactive calculator that will estimate their potential savings.