Construction Law

The American Recovery and Reinvestment Act of 2009 and Its Impact on Federal Construction Contracting

By Michael Payne

Since President Barack Obama was inaugurated last month, he has initiated many changes which will impact federal contracting: first, he issued an executive order requiring a successor vendor on a services contract to offer a preceding contractor’s employees jobs under the new contract; second, in another executive order, he encouraged the use of project labor agreements to ensure that federal work would not be disturbed by “labor unrest” (see earlier blog article); and, in a third order, he prohibited contractors from passing along the costs of supporting or fighting their employees’ exercise of the right to unionize or bargain collectively.  Today President Obama signed the American Recovery and Reinvestment Act into law, a statute more commonly referred to as the “Stimulus Bill.”  The total amount of the stimulus is approximately $787 billion and it promises great potential for more federal construction contracting work.  
 
The purpose behind this legislation is to relieve the nation from the current state of economic distress and to create jobs.  Another priority of the stimulus package is to improve the infrastructure of the country.  This means more money for government contracts, and in turn, more opportunities for construction contractors.  The allocation of funds within the Stimulus clearly demonstrates the growth potential for federal construction contractors: nearly 40%, or $311 billion, of the total amount is allocated to federal appropriations, with an estimated $131 billion going toward federal construction projects.  Below is the breakdown:

Transportation-$49.3 billion

Defense/Veterans-$7.78 billion

Housing/HUD-$9.6 billion

Education and Schools-no specific amount is designated but $39.5 billion of the allotted $53.6 billion State Fiscal Stabilization Fund goes to local school districts who have the option of the modernizing their facilities with this money.  

Energy-$30.62 billion

Buildings-$13.37 billion

Water and Environment-$20.1 billion

A major portion of this funding remains available until September 30, 2010. 

The Stimulus also promises to help small businesses.  The terms of the Stimulus authorize the Small Business Administration (“SBA”) to temporarily eliminate or reduce fees for participation in its loan-guarantee programs.  It also increases to 90% the percentage of qualifying loans that the SBA can guarantee.  Also offered is a “small business stabilization financing” which offers small businesses in distress money to pay off existing loans.  These loans must be repaid within five years, can be for up to $35,000 and can be used to make up to six months of payments on prior loans.  The interest on these loans will be fully subsidized with no payments due for the first year.  Also offered are hiring incentives, a break on capital gains for those who invest in small businesses, increased loss accounting, and an expansion of allowable equipment expense deductions for small businesses.   

White House projections anticipate that this public works spending will lead to millions of jobs for American workers.  While there are legitimate questions about whether the employment generated by the Stimulus will be sustainable once the projects are completed, and whether the long-term effects of greater debt will lead to even greater economic problems in the future, there is little doubt that there will be an immediate benefit to federal, state, and local construction contractors.

Full post as published by Federal Construction Contracting Blog on February 18, 2009 (boomark / email).