The Economic Stimulus Bill: Where Has the Money Gone?

As of September 2010, 52% of ARRA funds that were allocated for contracts, grants, and loans -- $142.8 billion -- has been distributed, according to the Federal Procurement Data System. As fiscal year 2011 begins, many in the AEC industry are asking where has the money gone? Are strict provisions stifling distribution and spending? Is the money helping?

Where Has the Money Gone?

“It’s funny, most people don’t realize that the bulk of the stimulus money went to the Department of Labor and was used for job training programs,” says Vince Fudzie, managing member of Triune General Contractor, which is headquartered in Dallas, Texas. “So the projects that we did that were funded by the stimulus package primarily came through the Department of Labor,” Fudzie says. Three of four of the stimulus-backed projects on which Triune has worked were through the Department of Labor. Although training programs may not have an immediate impact on the economy, most experts agree that employment training programs can benefit the economy in the long run. However, the distribution of other funding is a little more controversial.

"We have to look at the overall unemployment rate in this country right now. It hasn't really changed a great deal, so it's hard to say [if the bill is effective]. Some of the programs and initiatives that were funded by the stimulus money may take longer to see the results of them." Vince Fudzie, Managing member of Triune General Contractor

In particular, signage promoting ARRA has come into question. Initially two U.S. Department of Transportation (DOT) agencies -- transit and rail -- required projects that were funded by the stimulus bill to post signage about ARRA including guidelines for size, visibility, and placement of the signs. However, the requirement was later removed, according to a recent DOT Inspector General review. Inspector Generals are in charge of monitoring spending and other activities of various government agencies. A similar requirement for signage for projects through the Department of Commerce has not been revoked. Select divisions of the Department of Housing and Urban Development also required signage for stimulus-funded projects but later strongly encouraged recipients to mark projects with promotional signage, according to the Inspector General review.

Opponents view the signs as using taxpayer dollars to unlawfully promote the stimulus package (citing 18 U.S. C Section 1913, which prohibits lobbying with government funds), while proponents of required signage believe that it is a matter of transparency, saying that the public has the right to know how the funds are being used. The debate comes down to how much of the funding is actually used for the signage and whether it is required or strongly encouraged.

The amount of money spent on individual signs varies greatly. For instance, a sign in Tennessee cost $50, while another sign leading to Dulles International Airport outside Washington, D.C. cost $10,000. According to the DOT, approximately $5 million of the $28 billion allocated for road projects was spent on signage alone -- less than .02% of the overall project spending.

Despite the fact that the Recovery Accountability and Transparency Board planned to release a detailed report on the official ARRA web site, Recovery.gov, that would explain the ARRA funding allocation, $162 million is not accounted for in the report, which leaves many unanswered questions about the whereabouts of taxpayer dollars.

Wasteful spending is not the only concern about ARRA.

Is Too Much Red Tape Counterproductive?

The Davis-Bacon Act serves as a guideline for what employers must pay workers for federally funded construction projects in four categories: heavy, highway, residential, and building. Wages vary by state and region of the country. The Davis-Bacon Act also determines prevailing wages for federally funded work. Prevailing wages were established to protect laborers during times of economic hardship and high unemployment.

"I would say the stimulus was probably a good thing for the economy. The funds are being used as well as they could be. I do think it was a stimulant to the economy. It put some projects out there that probably wouldn't have been out there if it hadn't been for the funding." Jackie Johnson, Vice President of Estimating for Group III Management, Inc.

Although the Davis-Bacon Act was suspended in 2005 after Hurricane Katrina, the standards were later reinstated. “Sometimes they’re lower, and sometimes they’re higher than the area you live in, but it’s typical for any government project,” says Jackie Johnson, vice president of estimating for Group III Management, Inc., located in Kinston, North Carolina. “Having to meet these wage rates did not come about as a result of the ‘R’ program. They’ve always been there.”

In theory, prevailing wages guarantee that the economy stays strong or grows stronger during times of high unemployment because contractors are not able to bid extremely low for available contracts, which helps stimulate the economy. However, opponents of prevailing wages believe that it unnecessarily overcomplicates the process and may actually be counterproductive to the goal of stimulating the economy.

Shannon Thompson, the former field labor manager for a lumber contracting company, says his company turned down a project that was backed by stimulus funding after he read the fine print and learned about prevailing wages and the additional reporting that would be required. “Prevailing wages extended beyond the job into the delivery, on the job site as well as everyone at the lumber company,” says Thompson.

“Checks would not be released until all parties' payroll reports were completed; therefore lumber companies would have to pay people first, then be reimbursed,” Thompson continues. “They gave the $25 million they received back to the government. It would have been an endless cycle that had no stopping point.”

To the contrary, Johnson says he did not notice a huge difference between projects funded by the stimulus bill and other projects. “There are a lot of programs, and I would say that it’s not any more difficult to go through those programs than the programs prior to the ‘R’ money being made available,” Johnson says.

Fudzie says federal contracts, particularly those backed by stimulus funding, require a little extra paperwork, but that is just something that comes with the territory. “If you’re going to do federal work, you just have to resign yourself to the fact that doing federal work can be cumbersome from the standpoint of paperwork. It’s not that unusual,” says Fudzie. “If you have your systems in place to handle that process, it’s really not a big deal.”

"I think there were a lot of opportunities for [the stimulus package] to affect small business in a positive manner. What the stimulus package did was it allowed the government to spend money during periods of time that they normally don't... If you look at it from that standpoint, it may have saved jobs. If you look at other companies like ours, we may have been able to keep people employed during those lean months, per se based on stimulus funding." Vince Fudzie, Managing member of Triune General Contractor

Additional federal requirements can also benefit those who willing to take on the extra workload. “I happen to like that the federal government can be cumbersome, that there can be a lot of bureaucracy, because that limits the competition, because everybody doesn’t want to do that,” Fudzie says.

Was the Recovery Act an Effective Measure?

Judging the effectiveness of the Recovery Act in stimulating growth in the AEC industry is difficult due to the fact that little time has passed since the bill was instated. “We have to look at the overall unemployment rate in this country right now. It hasn’t really changed a great deal, so it’s hard to say [if the bill is effective]. Some of the programs and initiatives that were funded by the stimulus money may take longer to see the results of them,” says Fudzie. However, small businesses that have worked on projects funded by the stimulus package seem to have an overall positive outlook on the matter.

“I would say the stimulus was probably a good thing for the economy,” says Johnson. “The funds are being used as well as they could be. I do think it was a stimulant to the economy. It put some projects out there that probably wouldn’t have been out there if it hadn’t been for the funding.”

Fudzie agrees, saying, “As a company, I think there were a lot of opportunities for [the stimulus package] to affect small business in a positive manner. What the stimulus package did was it allowed the government to spend money during periods of time that they normally don’t. They wrote a bulk of contracts in other parts of the year besides the fourth quarter of the fiscal year. From my standpoint, it kind of smoothed out our procurement and sales cycle, because we got projects in the middle of the year that we ordinarily would not have gotten if it hadn’t been for the stimulus money. If you look at it from that standpoint, it may have saved jobs for people. If you look at other companies like ours we may been able to keep people employed during those lean months, per se based on stimulus funding. “

The verdict on the effectiveness of the American Recovery and Reinvestment Act is still out. However, despite feelings of poor allocation of funding or bureaucracy, it may be wise for those in the AEC industry to take advantage of funding opportunities while they are still available. “My advice to anyone who’s thinking about doing anything is to do it now,” Johnson advises. “Prices are low.”