With an Emphasis on Immediate Spending, the Stimulus Package Will Directly Affect a Large Number of Industries
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act, a $789.2 billion stimulus package intended to rescue the nation’s struggling economy. With a focus on job creation, the stimulus package will create the biggest public works program since the construction of the interstate highway system in the 1950s. From education and energy to transportation and healthcare, the American Recovery and Reinvestment Act will provide direct stimulus to a variety of American industries.
Through the American Recovery and Reinvestment Act, the federal government is providing an unprecedented opportunity for private companies in a wide range of industries — steady work and assured liquidity in a time of economic peril. In order to reap the benefits of over $460 billion in new federal spending, businesses must begin properly positioning themselves today by not only anticipating the compliance obligations that will be bundled with the spending, but also preparing for the likely increase in challenges facing actual and potential contractors, from an uptick in protests arising out of hastily-awarded contracts to a surge of oversight to ensure spending meets anticipated goals. Even portions of the tax cuts contain measures that will require a competitive bidding process. Therefore, knowledge of the government bidding processes will be mandatory for businesses that are not even remotely interested in government procurement.
With tax cuts accounting for $326 billion of the stimulus package, the government will spend $463 billion on infrastructure, technology and job creation. The vast majority of the stimulus package’s actual spending will be administered by state and local governments and will go to private companies entering into contracts with local, state and federal governments.
Of the $463 billion in government spending, approximately $150 billion will be spent on a wide range of infrastructure projects. Beyond highway, bridge and road repair, the government will be spending money on port construction, hazardous/nuclear waste removal, military hospital construction, rural broadband implementation, water treatment projects, dam repair, fish hatchery construction, school technology modernization and residential housing for military personnel, to name just a few of the Act’s infrastructure provisions. The following represent some of stimulus package’s larger spending provisions:
- $27.5 Billion – “Ready to Go” highway, bridge and road projects
- $19 Billion – Implementation of Electronic Medical Records
- $11 Billion – Electrical Grid Projects
- $9.3 Billion – Public Transportation Projects
- $7.2 Billion – Implementation of Rural Broadband
- $5.1 Billion – Nuclear Waste Clean Up
- $5 Billion – Energy-Efficient Modifications to Federal Buildings
- $5 Billion – Home Weatherization
- $4.6 Billion – Flood Control and Navigation Projects
- $4 Billion – Water Treatment Projects
- $3.8 Billion – Restoration and Modernization of Defense Facilities
- $3 Billion – Airport Renovation and Construction Projects
- $1.4 Billion – Residential Housing for Military Personnel
- $1.3 Billion – Amtrak and Intercity Rail Projects
While infrastructure projects account for a large portion of government spending, the stimulus package also allocates money to other areas. For example, $2 billion will be spent on manufacturing advanced vehicle batteries, $1 billion will be spent on explosive detection systems and checkpoint technologies, $300 million will be spent on replacing federal vehicles with alternatively-fueled or hybrid vehicles and $230 million will be spent on sensory equipment for studying the weather.
The Race Is On
Because the most fundamental goal for the stimulus package is to create jobs immediately, many of the spending measures contain spending deadlines and/or give preference to projects that can begin immediately. For example, the $27.5 billion for highway, bridge and road projects requires states to obligate at least 50 percent of the funds within 180 days in order to receive the remaining 50 percent of funding, and the $1.3 billion for Amtrak rail projects requires funds be awarded within 30 days of the bill’s enactment.
In anticipation of these “use it or lose it” provisions, states have already compiled lists of infrastructure projects to be submitted to the federal government for funding approval. Similarly, the U.S. Conference of Mayors issued a report entitled “Ready to Go: Jobs and Infrastructure Projects” on January 17, 2009, in which the organization noted that, “in 779 cities of all sizes in all regions of the country, a total of 18,750 local infrastructure projects” are “ready to go.” These projects represent an infrastructure investment of $149 billion that would be capable of producing an estimated 1,604,371 jobs in 2009 and 2010. The organization has also identified existing funding vehicles under which the stimulus dollars may pass and proposed projects, including the following:
- Community Development Block Grants – Projects include the construction of public facilities and improvements, water and sewer facilities, streets, and neighborhood centers; the conversion of school buildings for eligible purposes; activities relating to energy conservation and renewable energy resources; and assistance to profit motivated businesses to carry out economic development and job creation/retention activities.
- Energy Block Grants and Green Jobs – Projects include energy retrofits of public and private buildings in local areas, installation of solar panels or wind turbines for the production of electricity on local buildings, deployment of new energy distribution technologies (such as distributed generation or district heating and cooling systems) that significantly increase energy efficiency and development of systems to capture and generate power from methane at landfills.
- Transit Equipment and Infrastructure – Funds have been marked for the purchase of street cars, rail car and other rolling stock, and equipment needed to create additional capacity; to help stabilize fare increases; to improve reliability; and to expand station capacity, improve rail tracks and provide customer information screens.
- City Streets/Metro Roads – Funds to be administered by the Surface Transportation Program (STP) for bridge, bus and rail, and road projects in metropolitan areas.
- Airport Technology and Infrastructure – Funds to be administered under the Airport Improvement Program (AIP) for runway and taxi rehabilitations, extensions and widening; obstruction removal; apron construction, expansion and rehabilitation; rescue and firefighting equipment and facilities; airside service or public access roads; and noise mitigation and abatement (Part 150) associated with aircraft operations, including voluntary home buyout, which would fuel the local housing market, and residential and business insulation programs.
- Amtrak – Projects include necessary upgrades to bridges and tunnels, electric traction, interlockings, signals and communications, and stations on the Amtrak system, and refurbishment of rail cars that are currently in storage in order to return them to service.
- Water and Wastewater Infrastructure – Funds to assist local governments with rehabilitating water and sewer infrastructure, complying with sewer overflow issues and promoting water protection and availability.
- School Modernization – Projects include repairing and modernizing school buildings in both largeand small-city school districts, improving their energy efficiency and installing first-class technology in classrooms.
- Public Housing Modernization – Projects include repair (including safety repairs) and construction projects.
- Public Safety Jobs and Technology – Grants to local police departments for additional police officers on the streets, and in schools as school resource officers, as well as to hire personnel, support those personnel and purchase equipment technologies which make law enforcement personnel more effective in their jobs.
From those categories, the U.S. Conference of Mayors has identified thousands of “shovel-ready” projects across the country that could start in 2009 and be completed by 2010 when federal funds become available under the stimulus package.
What this means for contractors is that the procurement process will be much faster and less forgiving than usual — and with accelerated procurements come greater risks of mistakes by procurement officials. Private companies with limited experience in government contracting must quickly become familiar with all of the rules and regulations associated with government contracting in order to be in a position to win a contract award.
Sophisticated contractors also should take note of rules and regulations unique to the Act. For example, the Act contains a “Buy American” provision which mostly bars foreign steel and iron from infrastructure projects. In addition, the bill contains a measure that requires all employers receiving contracts under the agreement to pay their workers the prevailing union wage under Davis-Bacon laws.
Because a majority of the spending is immediately obligated and the contractual requirements are more stringent, contractors must quickly position themselves to best be able to obtain these contracts arising from the stimulus package. They should educate themselves about the types of projects that may receive such funding, secure suppliers and subcontractors for the projects and understand the unique obligations a contractor assumes when contracting with the government.