June 2009 BDC Newsletter

Capitalizing on Business Opportunities Presented by the
American Recovery and Reinvestment Act

The American Recovery and Reinvestment Act (the "Recovery Act" or "Act"), signed by President Obama on February 17, 2009, is the largest single domestic spending legislation in U.S. history. The Recovery Act calls for $575 billion in spending, including $111 billion for domestic infrastructure and science, $43 billion for energy infrastructure, $59 billion for healthcare, $53 billion for education and training, and $144 billion for state and local fiscal relief. The Act also provides for an additional $212 billion in tax relief. The Recovery Act represents a tremendous opportunity for those who are involved in government contracting or those who are interested in entering the government contracting marketplace. In this article, we will provide a summary of the Recovery Act, a description of the special terms and conditions applicable to Recovery Act awards, and how to locate Recovery Act business opportunities.

Summary of the Act

The Recovery Act was enacted in an effort to "preserve and create jobs," to "spur[] technological advances in science and health," and to "invest in transportation, environmental protection and other infrastructure. . . ." Pub. L. No. 111-5, � 3(a). To accomplish these goals, the Act includes billions of dollars of funding for a wide variety of federal, state and local projects. The Act places tremendous pressure on federal agencies to get the money out the door as soon as possible. The Recovery Act directs the President and the heads of the executive agencies to "commenc[e] expenditures and activities as quickly as possible consistent with prudent management." Pub. L. No. 111-5, � 3(b). A great majority of funds appropriated by the Recovery Act will remain available for obligation by federal departments and agencies only until September 30, 2010. Moreover, the Recovery Act has set a goal of using at least 50% of its infrastructure development funds for projects that can be initiated within 120 days of the enactment of the Act.

Federal agencies will need to balance this need for haste with the obligation to award contracts in accordance with the Federal Property and Administrative Services Act and the Federal Acquisition Regulation ("FAR"). Follow-on Office of Management and Budget ("OMB") guidance regarding implementation of the Recovery Act has called for agencies to devote heightened management attention to acquisition planning and to use fixed price, competitively-awarded contracts to the maximum extent practicable. In an effort to efficiently award contracts in accordance with acquisition laws, with respect to contracts, OMB has suggested that agencies use "acquisition flexibilities," such as streamlined procedures and the award of commercial item contracts under FAR Part 12. With respect to grants, OMB has advised federal agencies that they should consider whether it is appropriate to limit competitions among existing high-performing projects instead of conducting full and open competitions.

The Recovery Act also places a strong emphasis on the need for transparency and accountability. Under OMB's initial guidance, agencies will be required to clearly identify activities undertaken pursuant to the Recovery Act and provide weekly updates regarding their use of Recovery Act funds, including contracts awarded and other actions taken to date, as well as other "major planned acquisitions," and monthly financial reports. The Act requires each federal agency to dedicate a section of its primary website to the Act and identify the key entry page to such information with a "/recovery" extension. See, e.g., Department of Defense (www.defenselink.mil/recovery/); Department of Energy (www.energy.gov/recovery/); Department of Health and Human Services (www.hhs.gov/recovery); General Services Administration (www.gsa.gov/recovery/). Federal agencies have already begun to publicly post on their websites their plans for spending funds allocated by the Recovery Act.

The Recovery Act also includes an extensive system of oversight and supervision by a number of independent bodies. The Act calls for the creation of a new stand-alone entity known as the Recovery Accountability and Transparency Board. This Board will be comprised of various agency Inspector Generals who have been granted express authority to conduct audits and reviews, to issue subpoenas for documents and testimony, and to conduct hearings. Additionally, the Act requires the Government Accountability Office ("GAO") to periodically report on the use of Recovery Act funds and post portions of these reports on a public website. See www.gao.gov/recovery/.

More information about the Recovery Act, a timeline of events relating to the Recovery Act, and a summary of the expenditure of funds under the Act, can be found on the official Recovery Act website operated by the government, www.recovery.gov.

Unique Requirements

While the universe of requirements that will be imposed on recipients of Recovery Act funds has yet to be determined, there are at least four areas where unique requirements will be imposed on recipients of Recovery Act funds - additional contractor reporting, special Buy American restrictions, expanded audit rights, and minimum wage restrictions. All of these requirements apply to contracts of any value, including those at or below the simplified acquisition threshold of $100,000. Commercial item contracts, however, are exempt from the Buy American restrictions.

Section 1512 of the Recovery Act imposes new reporting requirements on recipients of Recovery Act funds. Such recipients are required to submit detailed quarterly reports regarding their use of Recovery Act funds using the online reporting tool at www.FederalReporting.gov, within 10 days after the end of each calendar quarter, starting on July 10, 2009. The quarterly reports must include detailed information regarding the amount of funds received and expended, all projects or activities for which funds were expended or obligated, and subcontracts or subgrants awarded by the recipient. Currently, these reporting requirements only apply to prime contractors and only requires prime contractors to report regarding their first tier subcontracts. Since the Recovery Act has conditioned contractors' receipt of funds on the submission of these reports, contractors must ensure that the information contained in the reports is accurate and complete to avoid violating the False Claims Act. Note, however, that the Act allows for redactions of information exempt under the Freedom of Information Act, which would protect from disclosure a contractor's trade secrets and commercial or financial information that is privileged or confidential. See 5 U.S.C. � 552(b)(4).

The Buy American provision of Section 1605 of the Recovery Act requires, subject to certain limited exceptions, that all of the iron, steel, and other manufactured goods used as construction material in public buildings and works projects funded by the Act be produced or manufactured in the United States. Agencies may waive these restrictions if: (i) sufficient quantities of the materials are unavailable in the United States; (ii) inclusion of the domestic products would increase the cost of the overall project by more than 25%; or (iii) applying the domestic preference would be "inconsistent with the public interest." The Buy American provision of the Act has proven to be one of the more controversial aspects of the Act based on its vague terminology and its failure to clearly define how broadly the restrictions will be interpreted and applied.

Sections 902 and 1515 of the Recovery Act provide GAO and agency Inspector Generals with broad authority to examine any records of, and to interview any officer or employee of, any contractor or grantee receiving Recovery Act funds, or any of its subcontractors or subgrantees, with respect to transactions related to a contract, subcontract, grant, or subgrant funded by the Recovery Act. Although GAO already possessed a certain amount of audit authority, the Recovery Act has expanded GAO's existing authority by, among other things, adding interviewing authority. Inspector General authority in these areas was previously far more limited than GAO's but has been made equivalent with GAO's new powers save for the ability to interview subcontractor employees. Further, although the recently-issued FAR mandatory disclosure rule only applies to contracts using appropriated funds and not to grants, the OMB's interim guidance requires all grants issued under the Recovery Act to include a provision similar to the FAR rule, mandating disclosure of wrongdoing to the agency Inspector General.

Section 1606 of the Recovery Act requires contractors and subcontractors to pay laborers and mechanics employed on projects funded or assisted under the Act no less than the prevailing wages paid under the Davis-Bacon Act. The Act does not clearly identify whether this restriction applies to all contracts funded by the Act, or only to construction contracts in excess of $2,000, as provided for under the Davis-Bacon Act.

Locating Business Opportunities

Agencies are required to post presolicitation and contract award notices for Recovery Act contracts on the Federal Business Opportunities ("FBO") website, http://www.fedbizopps.gov. The FBO website provides viewers with the ability to search for Recovery Act business opportunities and Recovery Act awards across all federal agencies. The FBO's "advanced search" feature allows viewers to search by keyword, agency, place of performance, set-aside code, classification code and/or NAICS code and viewers can limit their searches to Recovery Act actions.

Onvia, a private business, hosts a website, www.recovery.org, on which businesses can register and then receive free daily notices of upcoming stimulus projects in the geographic area in which the registered entity conducts business.

The Small Business Administration ("SBA") has created a website, www.sba.gov/recovery/, that provides small businesses with information regarding how they can find business opportunities under the Recovery Act. The website contains useful fact sheets for small businesses and summarizes the SBA programs provided under the Act, such as the temporary elimination of the SBA guaranteed 7(a) and 504 loan fees and the tax benefits offered by the Act.

Agencies are required to post funding opportunity announcements (i.e., synopses) on www.grants.gov within 20 days after enactment of the Act. Within 30 days after enactment of the Act, the synopsis posted on grants.gov must link to the full announcement on the agency website. Federal government loan opportunities are posted on www.GovLoans.gov, but the website does not currently have a separate link or list of loans relating to the Act.

State and local business opportunities are available on many state websites. The Recovery Act website, www.recovery.gov, provides links to the Recovery Act page on all of the state websites.

The political controversy that surrounded the passage of the Recovery Act will pale compared to the scrutiny given to the program's effectiveness and value to the taxpayer arising out of this enormous expenditure of public funds. All contractors receiving Recovery Act funds must have effective compliance programs in place and should anticipate post performance reviews and audits.

In sum, the Recovery Act presents a tremendous business opportunity for government contractors. The government's emphasis on spending the funds quickly requires interested contractors to act fast in locating and pursuing these opportunities.