Construction Opportunities in the 2009 Economic Stimulus Package

Category | Briefing Papers

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (“ARRA”) into law, delivering on a campaign promise to “stimulate” the U.S. economy with billions of dollars in new spending. While economists debate whether such spending will, in fact, revive our lagging economy, the potential benefits for the construction industry are beyond dispute. ARRA authorizes billions of dollars of new construction-related spending on projects ranging from green building to defense projects to high speed rail, and many points in between. This Briefing Paper briefly summarizes some of the significant areas of spending authorized for construction, and provides a listing of resources for contractors interested in pursuing these opportunities.

A. Transportation and Infrastructure Spending

Perhaps the best-advertised feature of the stimulus package is the spending for transportation and infrastructure. ARRA contains $27.5 billion in funds for highway construction and over $20 billion in other transportation funding. This includes $9.3 billion for Amtrak improvements and high speed rail construction, $1.3 billion in airport improvements, and $8.4 billion for public transit improvements.

The money for these projects will be allocated by state governments and DOTs, in conjunction with the FHWA and other federal agencies. In Minnesota, MnDOT and the Metropolitan Council have already begun the process of allocating dollars to projects in the state. MnDOT advertised eleven projects totaling $46 million the week of Feb. 23 and scheduled the first project lettings to take place on March 13, 2009. According to MnDOT, work could begin as early as May 1. The South Dakota Transportation Commission similarly has approved 46 projects valued at over $100 million and scheduled its first Stimulus letting for March 6, 2009. Wisconsin and North Dakota are likewise vetting their projects now. Information on these programs can be found online as described by the following table:

Description	Internet url
US DOT	http://www.dot.gov/recovery/
FHWA	http://www.fhwa.dot.gov/economicrecovery/index.htm/
Federal Transit Admin.	http://www.fta.dot.gov/index_9118.html/
MnDOT	http://www.dot.state.mn.us/federalrecovery/
Met Council	http://www.metrocouncil.org/
NDDOT	http://www.dot.nd.gov/business/bidinfo.htm
SDDOT	http://www.sddot.com/pe/projdev/planning_stip.asp
WisDOT	http://www.dot.wisconsin.gov/localgov/highways/localstimulus.htm

B. Military Spending

In addition to the transportation, ARRA includes approximately $7.4 billion in appropriations to the Department of Defense (“DoD”), including billions of dollars in construction projects for facilities, hospitals, and housing:

– $4.2 billion for upgrades and energy-related improvements to DoD facilities
– $1.3 billion in military construction for hospitals
– $240 million in military construction for child development centers
– $100 million in military construction for warrior transition complexes
– $600 million for other military construction projects such as housing for troops and their families

DoD officials are finalizing details such as which bases will receive construction projects. More information on these projects can be found at http://www.defenselink.mil/recovery/.

C. Housing and Development

ARRA includes $13.61 billion for projects and programs administered by the Department of Housing and Urban Development (“HUD”). Nearly 75 percent of HUD’s recovery money was allocated to state and local recipients on February 25, 2009. These include $4 billion for energy efficient renovation of public housing, $510 million for Native American housing, and $250 million for other energy retrofits for assisted living facilities for low-income, elderly and disabled persons.

ARRA likewise will support a number of “Shovel-Ready” housing and community development projects that have been stalled due to the credit crunch with the following programs:

– $2.25 billion in HOME funds for the Tax Credit Assistance Program for production and preservation of affordable housing units.

– $1 billion in Community Development Block Grants to approximately 1,200 state and local governments. Most local governments use this investment to rehabilitate affordable housing and improve key public facilities.

– $2 billion in Project-Based Rental Assistance for Section 8 project-based housing contracts. See http://www.hud.gov/recovery/ for more information.

D. Education Spending

Education spending was a hotly debated issue during the ARRA negotiations, but in the end the law includes $77 billion of direct education funding to save or create hundreds of thousands education jobs as well as $40 billion in state stabilization funds. School systems have discretion to use some of this money for school modernization. ARRA also provides for states and school systems to issue $24.8 billion dollars in bonds for renovation, repairs and school construction that will be retired through a combination of local, state and federal dollars. A summary of the relevant provisions and appropriations may be found at http://www.ed.gov/policy/gen/leg/recovery/modernization/index.html.

E. Bidding, Oversight and Accountability

As the foregoing discussion makes clear, ARRA’s unprecedented investment in new construction spending has been spread throughout construction sectors. Projects funded by ARRA will be awarded by federal, state, and local governments as well as by private recipients under grant programs supported by the stimulus funds. In addition to the Internet sites mentioned above, the following sites provide overviews of ARRA funding and provide resources to locate particular opportunities:

Description	Internet url
Overview describing where ARRA funds are going, with links to individual states and agencies	http://www.recovery.gov/
U.S. Department of Health and Human Services’ website to find and apply for federal grants	http://www.grants.gov/
U.S. General Services Administration’s website for locating federal business opportunities	https://www.fbo.gov/

ARRA likewise requires additional oversight, including separate line item appropriations for inspector general oversight and also establishing the Recovery Act Accountability and Transparency Board (“the Board”) to “coordinate and conduct oversight of covered funds in order to prevent fraud, waste and abuse.” The Board is composed of the Inspectors General of each federal agency appropriated ARRA funds, led by a chairperson designated by the President. The Board is specifically authorized to review compliance with competition requirements applicable to contracts using ARRA funds, among other things, by conducting audits or investigations relating to covered funds.

F. Competitive Bidding and Bid Protests

It may go without saying, but construction projects awarded through federal, state and local government agencies generally require projects to be awarded by public bidding. In a memo dated February 18, 2009, the White House director of Management and Budget issued detailed guidance for implementing ARRA. In that memo, the White House indicated that contracts using ARRA funds should be let competitively “[t]o the maximum extent practicable” to protect the well-known benefits of competition, further stating:

Although the law calls on agencies to commence expenditures and activities as quickly as possible consistent with prudent management, this statement, by itself, does not constitute a sufficient justification to support award of a federal contract on a non-competitive basis. Agencies are expected to follow the same laws, principles, procedures, and practices in awarding non-competitive contracts with Recovery Act funds as they do with other funds. Competition is the cornerstone of our acquisition system. The benefits of competition are well established. Competition saves money for the taxpayer, improves contractor performance, curbs fraud, and promotes accountability for results. Agencies should review their internal procurement review practices to ensure they promote competition to the maximum extent practicable. (Emphasis added.)

Yet with competitive procurement, disputes arise even during the best of times, including claims of bid mistakes and awards to non-responsive or non-responsible contractors or design-builders. Under ARRA, preference is given for projects that can be initiated not later than 120 days after enactment (in other words, by June 17, 2009). For this guideline to be met, projects will need to be advertised for bid, a contractor selected and contracts awarded on a very aggressive timetable. It stands to reason that errors will be made, both by the agencies letting the work and the contractors submitting proposals to perform it.

It also stands to reason that agencies deploying stimulus funds may have an incentive to change their normal practices in order to more quickly take advantage of these funds. Under the circumstances, contractors should be especially vigilant in their review of procurements before putting in their bids or proposals. Careful review will not only limit bid errors, but also help bidders ferret out small but important changes in normal agency procurement documents, avoiding potentially larger problems.

In both the federal and state systems of procurement, a disappointed bidder normally has standing to protest an award of a project for public work (with some notable exceptions), as does an affected taxpayer. Yet each state and, to some extent, each federal agency has its own system of statutes, regulations, administrative decisions and judicial law that may pertain to and govern such protests. As a result, it is always good practice to consult with an attorney who is well-versed in procurement and construction law when such issues arise.

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