Masonry Magazine January 2007 Page. 11
In recent years, due to increases in costs from suppliers, materials and labor, many firms simply will choose, or be forced, to withdraw from public-sector work.
Another concern is the impact this will have on the ability of contractors to secure bonding. When evaluating the health of a contractor, surety companies look for a healthy cash flow, strong margins and timely payments. To suddenly strip a contractor of 3 percent of his or her working capital increases the risk of performance failure and potentially jeopardizes performance bonding. Similarly, payment bonds are likely to be affected.
Section 511 is seriously flawed. It hits honest taxpayers in an attempt to get at those underreporting income. It's antithetical to competition; fewer firms will be able to bid on government contracts, as companies with tight margins or irregular cash flows would lose vital funds for day-to-day operations and would be at a competitive disadvantage in the bidding process. Section 511 also is inflationary; as the cost of doing business with all levels of government is raised, many contractors will have to assume higher levels of debt or equity to ensure regular cash flows necessary for operations. The cost of this increase in capital structure will be passed on to the government through increased price of goods and services, and ultimately will be borne by the taxpayer.
There will be a large number of harmful, unintended consequences if the provision is not repealed prior to 2011. Section 511 hurts honest, taxpaying businesses by essentially forcing companies to provide the government interest-free loans with their hard-earned profits and company equity.
Jessica Johnson Bennett is director of Government Affairs for MCAA. She brings to the Association an extensive background in public affairs and government relations. Her expertise in strategic planning, PAC management and operations help leverage the position of the MCAA on key policy issues that are important to the masonry industry.
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January 2007
Masonry