House Sends 3% Withholding Repeal to the President

November 17, 2011

Engineering News-Record

By Pam Hunter

In an unusual show of bipartisanship, House lawmakers have unanimously approved legislation that would repeal the requirement that federal, state and local agencies withhold 3% of their payments to contractors beginning in 2013.

The bill, which cleared the House 422-0, also includes a provision that would make it easier for businesses to hire veterans.

The President has said he will sign the measure, which the Senate had passed on Nov. 10 by a 95-0 vote.

The bill’s approval is a victory for construction, engineering and other business groups, who had lobbied heavily for it. Some of the organizations that were active in opposing the 3% mandate were the American Council of Engineering Companies, Associated Builders and Contractors, Associated General Contractors of America and the U.S. Chamber of Commerce.

Construction industry officials say that if the requirement—initially signed into law as a revenue raiser in 2006—had gone into effect in 2013, businesses from virtually all sectors of the economy would suffer.

Construction executives add that with relatively little private funding available for projects, many firms are relying on government projects, increasing the importance of the withholding requirement.

According to a recent AGC nationwide survey of its membership, 55% of the firms that responded said that public projects accounted for more than half of their revenue in 2010. At the same time, 63% said that their average profit margin for public projects was less than 3%.

Because profit margins are so low, contractors would essentially be forced to carry a loss on public work for months at a time, AGC officials say.

Moreover, if the 3% requirement had gone into effect in 2013, jobs would have been lost, says Liam Donovan, ABC director of legislative affairs. “The real thing to take away from this is that people got together to save jobs…this was about not killing jobs,” he says.

Jeff Shoaf, AGC senior executive director for government affairs, says that the 3% requirement would have had “huge upfront costs” associated with putting in systems to comply with the requirement and putting in new procurement policies at federal agencies.

Shoaf adds that the vote finally gives some certainty to firms that were unsure about whether the requirement would actually go into effect .“This was one more…regulation that people weren’t sure if they were going to have to comply with ,” he says.

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