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So You 'Won' An ARRA Funded Project: Now What?
California Constructor
Recognizing the need to address our Nation’s deteriorating infrastructure and to combat the painful recession in economic activity, the federal government seized a chance to “kill two birds with one stone” and enacted the American Recovery and Reinvestment Act of 2009 (“ARRA”), popularly known at the “stimulus” bill. ARRA represents an opportunity for contractors to obtain federally funded contracts that rebuild our infrastructure, reduce unemployment and stimulate economic recovery. Of course, Uncle Sam is notorious for attaching “strings” to his dollars and ARRA is no different. This article briefly highlights some important “strings” for contractors to look for when working on ARRA funded contracts, which include many local government public works.
1. Identify whether your job is ARRA funded. ARRA is intended to provide funding for infrastructure improvements as a means to create jobs. A wide variety of construction projects have been identified in the bill. For example, the Army Corps of Engineers has been directed to spend over 4 billion dollars on new construction, levee maintenance and flood control projects in the next three years. GSA will invest over 5 billion dollars on new construction on federal buildings and courthouses before 2012. The Federal Highway Administration has been allotted over 27 billion dollars for new highway construction, bridges and overpasses. Other government agencies will be issuing contracts for energy and water pipelines, port facilities and dam projects. In short, if you are working on an infrastructure project that an owner recently awarded, there is a fair chance it could be funded in whole or part with ARRA funds. If so, then somewhere in your contract, perhaps buried somewhere in boiler-plate conditions, the project should reference ARRA as a funding source. If yours is an ARRA funded project, the project owner is required to contractually mandate that the contractor comply with ARRA reporting, registering, ethics, buy American, wage and other requirements that may mean changing the way many contractors and subcontractors ordinarily do business.
2. “Buy American” materials. The expenditures under ARRA are intended to have a ripple effect throughout the economy. With that aim, ARRA requires contractors to use American made iron, steel and other construction materials, with certain exceptions. Contractors on ARRA-funded projects are required to use American made materials unless domestic materials are either unavailable or are 25% more expensive than foreign equivalents. ARRA also has substantial recordkeeping and reporting requirements to ensure compliance with the goals of the Act. So, if a contractor will rely on an exception, it is important that the contractor identify the potential necessity of using foreign materials early and to document that need in an ARRA compliant manner. For instance, if American made materials are either too costly or unavailable, then the contractor must submit an application to use foreign materials prior to the use of federal funds on the project. The application must contain the backup documentation that American made materials are either too costly or unavailable. If the contractor does not obtain approval for the use of foreign construction materials until after the funds are obligated, then the contractor must explain why the request for the use of foreign materials could not have been anticipated earlier, which could affect funding and the contract price. These rules apply at both the prime and subcontract tiers. So, to avoid issues with funding or adjustments to the contract price, contractors would be smart to obtain the necessary approvals as soon as possible.
3. Comply with Davis-Bacon prevailing wages and document wage payments and job creation. ARRA also requires detailed wage documentation, reporting and information. First, all contractors must comply with the Davis-Bacon Act. Even if the construction contract is not a federal contract but is fully or partially funded by ARRA funds, then the contractor must also comply with the prevailing wage laws and properly classify employees and document their wages. The federal government will use the wage information to calculate the number of jobs ARRA created and to track overall effectiveness of the stimulus spending, so do expect the government to follow up. Contractors will be required to retain payroll records for three years and to make them available to the federal agencies monitoring the disbursements of stimulus funds, as well as to the Office of the Inspector General.
4. Implement a whistleblower’s program. ARRA also codifies certain “ethical” whistleblower protections that that were already incorporated into the Federal Acquisition Regulations (FAR) Mandatory Disclosure Requirements. There is substantial overlap between existing FAR requirements and ARRA whistleblower protections. However, both FAR and ARRA require posting worksite notices of rights and whistleblower protections. ARRA requires contractors to report any credible evidence of a false claim or other misconduct, including fraud, conflict of interest or bribery. While this sounds basic, this requirement may substantially change the way certain contractors do business.
5. Policing subcontractor and supplier compliance. ARRA also applies to subcontractors and suppliers. For instance, the ethical and whistleblower requirements obligate the prime contractor for subcontractor and supplier conduct. Contractors should make sure that ARRA requirements and standard ARRA contract terms are included in each subcontract and purchase order. However, that may be insufficient, and certain trades may have to scrap the “usual” way of business if they include things like frequent buyer awards programs.
How to get more information on ARRA-funded projects. The federal government is attempting to make the expenditures of stimulus funds transparent to taxpayers. The recordkeeping requirements discussed above allow the federal government to provide information at Recovery.gov, allowing taxpayers to track stimulus spending and the progress of the recovery. The government also is making every effort to publicize the availability of ARRA funding for construction projects. Each federal agency will have a list of ARRA projects at the agency’s website. All agency websites can be found by visiting Recovery.gov. Furthermore there is a central location of available projects at FedBizOpps.gov. The government is also funding, training professionals, and implementing a program to ensure compliance with ARRA’s requirements. Therefore, contractors should be prepared for audit inquiries.
In sum, Contractors prepared to work on ARRA funded projects will encounter some additional paperwork and reporting requirements, but will realize the benefits of working on a well funded project backed by the government while also improving our nation’s infrastructure and putting Americans back to work.
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