The secret federal contract hack almost no contractor knows exists

By Sean & Doug Reitmeyer — GCExperts. Originally posted on Skool: .

There are five types of payment protections the federal government can use on a construction contract under far 28.102-1(b)(1): 1. Payment bond 2. Irrevocable letter of credit 3. Tripartite escrow agreement 4. Certificate of deposit 5. Any other security the Government considers acceptable In this training, I’m focusing on tripartite escrow agreements, because hardly anyone knows they exist — even though they’re right there in the far and fully legal. Why does the Government even allow tripartite escrow agreements? Congress understood that not every small business can qualify for a bond. They knew not everyone can get an irrevocable letter of credit. So they created five different ways to satisfy the payment protection requirement. A tripartite escrow agreement is one of those options, and it’s completely safe: - The money sits with a neutral escrow agent - No one gets paid until the agreement authorizes it - Everything is transparent and controlled It’s simply another federally approved tool small contractors can use to get started. How payment protections work in the real world Most of the time, the Government selects two of the five protections — usually a bond and an LOC. Then, under far 28.102-1(b)(2), you get to choose one of the two they selected. Here’s the catch: If the Government didn’t list “tripartite escrow agreement” as one of their two protections, you can’t choose it… unless you negotiate it before award. And under far 13.004, everything in an RFQ is negotiable up until the Government accepts your quote. When to bring this up You bring it up when the contracting officer contacts you to award the job — the moment when: - You’re the apparent winner - They’re ready to finalize - Nothing is locked in - Everything is still negotiable This is exactly when you raise the tripartite escrow agreement. What to actually say “I don’t qualify for a bond or an irrevocable letter of credit, but this contract is under $150,000. When I turned in my bid, I turned it in intending to use a tripartite escrow agreement. It’s one of the five payment protections authorized by Congress under far 28.102. A tripartite escrow agreement puts the money with a neutral third party and only releases payments based on the agreement.