Tuesday, March 31, 2009

Senate Budget Resolution Stiffs Transport Infrastructure

Congressional Budget Committees have finally filled in the numbers in the 2010 budget resolutions, and sent the bills to the floors of the respective houses for debate. Although budget resolutions lack the detailed breakdown of spending that appears in appropriation bills with their attached earmarks, we can see in the differences between the House and Senate budget resolution proposals a dangerous trend for heavy civil construction over the next five years.

Both committee resolution proposals have essentially the same numbers for 2009 spending authority and actual outlays, since they include the appropriations already made in the stimulus legislation. However, the Senate version lags way behind the House version in every year 2010 through 2014 with respect to the spending Senators expect to authorize for road, bridge, railway, transit and waterway construction projects. The Senate version of the resolution cuts down the spending authority provided in the House bill by $12.9 billion for 2010, by $13.7 billion for 2011, by $14.1 billion for 2012, by $15.1 billion for 2013 and by $16.1 billion for 2014. These cuts represent a total slashing of over $72.1 billion from surface transport construction over the next five years.

Of course, as the legislative process works its way forward, the final result will likely fall somewhere between the present House and Senate versions, but it is frightening that more than $72 billion in construction appropriations is now at risk in the legislative arena.

Part of the reason for this is the way revenue has traditionally been raised to fund these transportation construction projects. In the last half century, road, transit, rail and waterway construction was primarily funded by cents per gallon taxes on the fuels burned by cars, busses, trucks, trains, ships and tugboats. For a long time, gallons of fuel burned was functionally equivalent to miles of road, rail, or water traveled, and the tax was a fair way of supporting infrastructure construction for transportation. Additional taxes, such as prorated truck license fees and highway tolls on express superhighways, also provided money for construction, maintenance and repair of transport infrastructure.

As fuel efficiency advanced, pushed by economic factors as well as government mandates, however, fuel taxes raised less and less money per mile traveled for infrastructure, and our transportation facilities began to suffer the effects of deferred maintenance. Now we face an era of shrinking revenues at the same time we have to do something about the accumulated maintenance and construction deficit.

Some congressional leaders and certain state governors have proposed taxing drivers on the basis of miles traveled, rather than just raising fuel taxes, as a way out of this mess. However, a whole new layer of bureaucracy would be required to assess and collect such a mileage tax, and public opposition to the idea is strong. President Obama at one point suggested the idea of breaking the "trust" status of the highway trust fund and instead funding transport infrastructure construction and maintenance out of general revenue, but so far that concept has not gained any traction. The fact remains that unless a new revenue source is found for supporting our transport infrastructure spending, increasing fuel efficiency and increasing the use of hybrid and electric cars will starve our road, waterway and rail systems to death. Any suggestions?

Thursday, March 26, 2009

Environmentalists Push 25% Renewable Power Mandate

The Union of Concerned Scientists is distributing a new analysis to key members of Congress arguing that a legislative mandate for producing 25% of American electric power from renewable sources like solar, wind and biofuels would create 300,000 new jobs and save consumers $64.3 billion in lower electric and natural gas bills, over the next ten years.

Will Open Access Stall Stimulus Broadband Construction?

Consumer advocates are pressuring the Commerce Department to make open network access a condition attached to disbursement of economic stimulus appropriations for construction of expanded of broadband networks. Wireless carriers say requiring them to permit all carriers use of their newly built towers will be counterproductive to universal service by slowing investment in construction of new networks. The Commerce Department is weighing the opposing arguments as it formulates the details of spending this $7 billion appropriation.

Experts Predict Stimulus Construction Spending Effect Late This Year

Economists for the AIA and the AGCA predict improvement in the state of the construction sector of the economy as a result of the economic stimulus appropriations, but not until the third quarter, and perhaps not as much improvement as hoped for. Kermit Baker, chief economist for the American Institute of Architects told Reuters News Service in an interview that the appropriations "will put some people to work as soon as next month, but will not be a major factor until the third quarter. ... contractors will use existing workers before they bring back people who have been laid off, or start to hire new people."

Ken Simonson, chief economist for the Associated General Contractors of America, told his organization that the appropriations are "not going to be enough to bail out construction right away ... but it's a start."

Gasoline Tax Indexing Compromise Proposed

Yesterday Senate Environment and Public Works Chair Barbara Boxer proposed indexing the gasoline tax to inflation at a meeting of the Subcommittee on Transportation and Infrastructure, as compromise between the administration's resistance to gasoline tax increases, defended by Transportation Secretary Ray LaHood, and ranking member George Voinovich, who insists on a gas tax increase, which would be the first since 1993.

Legislators predict the need for investment of half a trillion dollars in highway and bridge construction over the next six years, and the gasoline tax will fall far short of raising that much money at present rates. LaHood said the administration had not considered indexing the tax to inflation, but would be open to evaluating the idea.

Indexing the tax to inflation would be good news for highway contractors, but bad news for others in the construction industry who would have to pay the tax but who get no direct benefit from the increased highway spending appropriations which would follow.

Tuesday, March 24, 2009

Stimulus Spending Strains Energy Department

According to Energy Department Inspector General Gregory Friedman, in a memo sent to Energy Secretary Steven Chu Friday, March 20, 2009, the $165 billion in stimulus cash to be distributed by the Department so dwarfs the annual Department budget of $27 billion that the resources of the agency for getting the money spent while avoiding fraud and abuse will be sorely tested. Friedman wrote that "the infusion of these funds and the corresponding increase in effort required to ensure that they are properly controlled and disbursed in a timely manner will, without doubt, strain existing resources."

In the last four fiscal years the Department of Energy investigations into misspent federal funds have resulted in about 150 criminal convictions, and fines and recoveries of more than $190 million. This represents a little over 17.5% of budget money, and suggests the Energy Department can expect more than $29 billion in waste and fraud just within its slice of the stimulus pie. As Friedman wrote in his memo: "This history suggests that the Department's Recovery Act efforts to establish an effective set of safeguards or internal controls to prevent fraudulent activity should be a priority." You mean it wasn't a priority already?

Friedman's memo acknowledges that low income home weatherization is the program most at risk for fraud, so if you intend to be working on projects of that nature, expect a lot of extra paperwork and figure your bid overhead accordingly.

Meanwhile, Vice President Biden announced the appointment of Edward DeSeve, Bill Clinton's Deputy Director of OMB, as chief adviser to Biden and OMB Director Peter Orszag in the coordination of stimulus package spending across federal departments. According to Biden's announcement, DeSeve's "management efforts inside the Executive Office of the President will complement the oversight work led by the independent Accountability and Transparency Board chaired by Earl Devaney." Watchers watching the watchers!

Monday, March 23, 2009

Stimulus Funded "Green Jobs" Begin Sprouting

Announcements of green job creation from around the nation last week were poking up like the jonquil sprouts in my back garden. Conservation Services Group, an energy efficiency consulting firm headquartered in Westborough, Massachusetts has begun hiring 200 employees, a 50% increase in its workforce, for stimulus funded projects in 22 states. California's Governor Schwarzenegger announced the creation of California Green Corps, a 1,000 person pilot program to train young adults for solar panel installation and wind turbine manufacturing jobs over the next 20 months. Indiana Governor Mitch Daniels has begun distributing $132 million in stimulus money to not-for-profit organizations for low income homeowner weatherization projects, an 11 fold increase in that state's energy assistance program. Steven Horsford of Nevada, Senate Majority Leader, announced that his state will devote $37 million in stimulus appropriations to weatherization of low income housing, schools, and other public buildings in his state.

Internet Construction Funding Bottleneck

Jonathan Adelstein, the FCC commissioner tapped by President Obama to head up the Rural Utilities Service within the Department of Agriculture, acknowledged today that FCC has been too slow in funding Bush era projects for health information technology in rural areas. Of 69 projects for which funds were appropriated, only 37 are in the vendor selection process and only one has actually been funded thus far. This does not bode well for the pace of spending the $7.2 billion appropriated for rural broadband construction projects in the economic stimulus legislation. The bulk of these projects are to be administered by RUS, under Adelstein's leadership.

Wednesday, March 18, 2009

Half A Trillion Dollars Needed For Surface Transportation Construction

According to the testimony of two experts who testified yesterday before the House Budget Committee, the next five years will require an investment of half a trillion dollars to meet the country's expanding needs for surface transportation infrastructure construction. This is good news for the construction industry if Congress can find a way to fund the appropriations.

Robert Atkinson, chairman of the National Surface Transportation Infrastructure Financing Commission, and Debra Miller, of the American Association of State Highway and Transportation Officials, both told the committee that they estimate investments of at least $545 billion from 2010 through 2015 will be required to meet the long neglected needs of highway and mass transit construction and repair. This is about double the amount invested in the last five year period.

This year the federal highway trust fund, which consists of fuel and road use tax revenues designated for transportation infrastructure construction, required an $8 billion augmentation from general revenues simply to pay for work which was already under contract by state and federal highway and transit agencies.

Miller and Atkinson proposed increasing the gasoline tax by ten cents per gallon, and the diesel fuel tax by 15 cents a gallon, plus as doubling of truck road use taxes, to fund the massive new investment in roads, bridges and mass transit. They also discussed using part of the revenue from the proposed carbon emission cap and trade tax, and a new tax on vehicle miles traveled, to help raise the needed funds. Of course, howls and groans opposing new fuel taxes could be heard from Congressmen on the committee, who must run for reelection every two years, when the experts started speaking about fuel tax increases.

Another Funding Bottleneck

Mimicking the bureaucratic obstruction to rapid distribution of stimulus appropriations for construction projects, home appliance makers are facing difficulties posed by delays in availability of funds to pay the $300 million set aside in the stimulus legislation for rebates on purchases of hew, energy efficient home appliances. Jill Notini of the Association of Home Appliance Manufacturers wants the money to be available during spring and summer this year, then home renovations and repairs peak for the year.

The federal Department of Energy says it is working on making the cash available to states, but can't say how long it will take for state bureaucracies to distribute the money to the consumers who will be purchasing these appliances.

Tuesday, March 17, 2009

Budget Committees Begin '10 Resolutions

Next week House Budget Vice Chair Allyson Schwartz and Senate Budget Chair Kent Conrad expect to begin work separately on fiscal 2010 budget resolutions. Both committees await release of CBO's final estimates based on President Obama's proposals released earlier this month. CBO Predicts a budget deficit for '09 totaling about $1.7 trillion, including the recently passed economic stimulus appropriations.

Once CBO releases its final numbers, the Senate and House will insert numbers into their resolutions in preparation for April action on the full budget from the White House. Keep a close watch on the final budget presentation for more infrastructure construction spending, and for tax provisions which may be imposed on construction businesses. Also, some compromise will be included on treatment of highway and airport "trust fund" spending in the out years of the ten year budget Obama intents to present.

Mark To Market Revisions Discussed At FASB

In the hope of assisting with the process of pushing TARP bailout funds into the lending market and the hands of borrowers, the FASB convened on Monday, March 16 to consider proposals for reducing the restrictive mark to market rules on valuation of long term assets. FASB hopes to provide a new final guidance on these issues before first quarter results are due to be reported. The proposal would give accountants greater discretion in deciding whether or not impairment of an asset is temporary, and whether the institution intends to hold the troubled asset to maturity. Details of the staff handout to FASB at the Monday meeting can be found here:


The mark to market handout is the second one in the .pdf under this link.

Small Business Lending Reporting Imposed

In another move designed to make easier credit available to small businesses, the Obama administration has announced that it will require the 21 largest banks benefitting from TARP funding to report monthly on their levels of small business lending, and all other banks getting TARP money to report on small business lending levels quarterly. The White House announcement also encouraged banks not needing TARP assistance to "make an extra effort" to increase small business lending. Let's hope the bankers are listening.

Monday, March 16, 2009

Stimulus Transparency To Cost Money And Time

OMB's RAT Board Chairman Earl Devaney announced last Thursday that the transparency respecting expenditure of stimulus legislation funds on the Recovery.gov website will require most of his $84 million oversight budget, and over a year to develop. Federal and state agencies can't agree on how much detail should be included in reports on construction projects funded by the American Recovery and Reinvestment Act.

I have an idea that won't require creation of a single additional piece of paper. How about assigning a unique identifying number to each individual project funded in whole or in part by these appropriations. Create a database attaching the identifier with the brief project description already included in the front end of every government construction contract. Then, link the identifier to .pdf copies of the contractor's sworn statement and lien waivers already submitted with each monthly pay request on every government construction job.

This way, citizens interested in the progress and efficiency of any particular project could quickly drill down to a complete list of every business that was paid any money for labor or materials on the project. Furthermore, neither the bureaucrats nor the contractors on the project would have to write up a single document they are not already required to prepare. As far as I can tell all this information is already required to be public under the freedom of information laws in every state anyway, so no one's toes get stepped on, and no one has to do any extra work. Just run the sworn statements and lien waivers through a scanner every month and e-mail them to Devaney's folks in Washington, D.C. for electronic insertion into the database. Nobody even has to spend money on stamps. Mission accomplished.

Washington State Legislature Mandates Energy Efficiency

Both houses of the legislature in Washington have now passed slightly different bills mandating improvements in the energy efficiency of new buildings built in the state. The bill passed through the Washington Senate last week requires a net reduction by 40% as soon as 2013, and by a total of 70% by the year 2031. Observers expect the legislators to reconcile the two versions very soon and send a final bill to the governor within a few weeks.

No one has said how the architects, engineers and contractors in the State of Washington are supposed to accomplish this dramatic reduction in building energy consumption. The Senate version of the new law would require power companies to track energy use of existing large commercial and public buildings.

Friday, March 13, 2009

FASB Promises Prompt Mark To Market Rule Reform

Responding to intense congressional pressure to help unblock housing market credit, SEC Acting Chief Accountant James Kroeker promised to work with FASB Chairman Robert Herz to revise the mark to market accounting rules in a way that would give permission to banks and other mortgage lenders to assign a value to long term debt instruments according to the cash flow they produce rather than their sale value in an arms length transaction on any particular day. Both men promised to have a new rule ready within the next three weeks in an effort to unblock housing credit markets and staunch the flow of red ink in the mortgage lending industry. Trust Congress to try finding ways to solve this terrible problem without writing another trillion dollar check to the financial hot shots who got us into this mess.

Are Transportation "Trust Funds" Really Held In Trust?

Obama Transportation Secretary Ray LaHood is backing off the administration's position that all federal highway and airport spending be adjusted annually in the president's budget legislation, rather than being committed long term. Senate Banking Chairman Christopher Dodd is attempting to broker some compromise between LaHood and congressional appropriators to preserve the dedication of fuel taxes to transportation purposes, rather than opening up this cash hoard to being used for advancing other types of investment which would possibly defeat long term transportation planning in the 50 states, and open the funds to being raided for other priorities of the administration. Count on construction industry lobbyists to back every move by Dodd to protect the trust funds from raids by other interests seeking a way to finance their pet expenditures without increasing taxes on everyone.

Recovery Bottleneck Narrowing

Today is Friday the 13th. It has been nearly four weeks since the American Recovery and Reinvestment Act was signed into law, and nearly two months since President Obama was sworn in and his administration began officially asking state and local government agencies for lists of "shovel ready" public construction projects which could speed billions of dollars into the hands of contractors and construction tradespeople to help get the American economy back on its feet.

In spite of all the emphasis in the press and the city halls, county buildings, and state agencies around the country on the importance of getting this money flowing quickly, there are still 17 states and the District of Columbia which do not yet have websites linked to Recovery.gov for reporting on how this money is being spent. No one is trying to keep secrets as far as I can tell, it's just that these officials were not properly prepared for handling this much cash and information all at once. Seems like the purportedly "shovel ready" projects were not even "pencil ready" at the state and local government level. California, one of the largest, most populous, and financially neediest states, is on the list of 17 which are not even up and running in the IT department as of 7:00 a.m. California time this morning.

If you think the taxpayers who want to know where their money is being invested are frustrated by these facts, imagine how the contractors and construction workers who are depending on these projects for their continued livelihoods must feel at the snail's pace with which everything stimulus related is proceeding. If only the bureaucrats responsible for awarding these contracts and cutting these checks were as highly motivated as the Representatives and Senators who rammed the legislation through Congress at what can only be described as a breakneck pace for that deliberative body.

Recognizing the reality that the bureaucratic bottlenecks make it way too early to judge whether actually spending the first bolus of $787 billion will or will not work to stimulate the economy in any significant manner, House Speaker Nancy Pelosi has backed off her advocacy of a second stimulus package of appropriations at this juncture. Just two days after enlisting House Appropriations Chairman David Obey and House Minority Whip Eric Cantor behind her comments that a second round of stimulus appropriations may be a good idea, Pelosi said yesterday at her weekly news conference that such legislation "is just not something that, right now, is in the cards."

Thursday, March 12, 2009

Another Stimulus Bill?

This week both House Speaker Nancy Pelosi and House Appropriations Chairman David Obey have made serious reference to an additional package of economic stimulus appropriations this year. Obey says he has already instructed his staff to prepare the outline of another stimulus bill, but would give no timeline for introducing the legislation. President Obama in recent days has said he will "do what is necessary" to rebuild the American economy, but the administration has yet to comment specifically on the possibility or desirability of more emergency appropriations.

While it is possible stimulus legislation limited to extending safety net programs such as health care, food stamps and unemployment insurance could be introduced, it seems likely that a new stimulus package, if and when introduced, will include additional funding for construction projects which were cut out of the first bill in order to make room for tax reductions insisted upon by Republican legislators. Keep your fingers crossed!

In explaining the need to begin drafting another stimulus package before the last one has had any chance to perform the expected turn around, Obey commented: "Prudence would dictate that you would anticipate that you might need other things. It's a simple routine to prepare possible options if you have a next requirement. ... I said from the beginning that we would probably undershoot. The Senate squeezed it by a couple of hundred billion dollars. I regret that, but that's democracy."

Although Chairman Obey did agree to wait to see what effect the first economic stimulus package may have before introducing a second bill, his remarks reveal the hazards of relying on government officials to fix our economy. The House version of the first stimulus legislation would have cost $819 billion; the Senate passed a $787 billion package, which was then adopted by the conference committee and sent to the president for signing. Only in Congress does the difference between $819 billion and $787 billion amount to "a couple hundred billion dollars!"

Obama '10 Energy Budget Has Billions For Construction

In March 11 testimony before the Senate Budget Committee, Energy Secretary Steven Chu described his department's plans to allocate the $26.3 billion in proposed appropriations for his department. Energy Department priorities for the near future include financial support for increasing energy efficiency of government buildings and private homes, construction of biofuel refineries, clean coal power plant projects, wind and solar energy construction, and upgrades to the electric power transmission grid.

Ranking Member Judd Gregg expressed exasperation that $50 billion in loan guarantees for nuclear energy construction had been stripped from the stimulus legislation, and accused the Obama administration of reducing financial commitments to the Yucca Mountain disposal site for spent nuclear power reactor fuel materials as a back door method of restricting construction of new nuclear electric power plants. Chu responded that nuclear energy, offshore oil drilling and clean coal power plants all have a place in the administration's plans, but that priority was placed on clean coal technology development because "India and China will not turn their backs on coal" as a source of energy for generating electricity.

Whatever differences there may be between the administration and congress regarding the nuances of energy development priorities, the construction industry will see substantial government investment in energy infrastructure throughout the Obama presidency.

Wednesday, March 11, 2009

Obama Signs '09 Omnibus Appropriations

Disdaining the usual public signing ceremony associated with putting the President's name to significant legislation, President Obama signed the '09 omnibus appropriation bill sent to him by the Senate last night, complete with all 8,330 attached earmarks. While his statement to the press expressed once again his determination to alter the process of earmarking funding for legislators' pet projects, he acknowledged that under current circumstances he would accept the bill as is in order to keep the federal government functioning and addressing the serious problems the country faces.

The money spent by this bill will not show up on the Recovery.gov website, though construction projects funded by the bill will appear on the FedBizOpps.gov website. If you are looking for projects in your neighborhood, the text of the bill itself, including all the earmark letters, can be found here:


The earmark letters are attached in alphabetical order of the legislator's last name. Scroll through until you come to your Senators or Congressman, and you will find the group of earmarked projects designated for your locality.

Vislack Announces Broadband Construction Grant Process

Agriculture Secretary Tom Vislack, accompanied by some junior officials from the Commerce Department, announced the process both agencies will follow in distributing a total of $7.2 billion for broadband network construction in rural and impoverished areas. The grants will be released in three rounds, beginning with round one April through June 2009. The second release will be October through December 2009, and the final round April through June 2010. Check here for listings of the grants when they become available:


Executive, Legislative Branches At Odds Over Budget Reconciliation

OMB Director Peter Orszag suggested to the Senate Budget Committee Tuesday that legislators could filibuster-proof the Obama initiatives in the '10 budget legislation by using the budget reconciliation procedure to pass the bill, rather than letting the legislation be considered in regular order. However, in discussing the expected climate change and renewable energy package of legislation, leaders of both parties in both houses have expressed opposition to eliminating the possibility of amendments from the floor.

Tuesday, March 10, 2009

Interior Department Pushes Offshore Wind Farms

In an Associated Press interview March 9, Ken Salazar, Secretary of the Interior, promised aggressive support for offshore wind farms along the Atlantic coast. "The wind energy potential off the Atlantic may be greater than we have onshore, but what we don't have in place is the rules to move forward with energy offshore," Salazar said.

Along similar lines, Representative Bart Gordon, Chairman of the House Science Committee, predicted a single bill coming soon to address energy issues and climate change, which he says will include mandates to reduce carbon emissions, increase production of renewable energy, and promote development of new energy technology. Look for major appropriations of construction project dollars in this complex legislation sometime before Congress adjourns this year.

Transportation Reauthorization - More Funds For Highway and Transit Construction

House Transportation and Infrastructure Committee Chairman James Oberstar priced the forthcoming surface transportation reauthorization bill at approximately $500 billion over the next six years, saying he expects to have the legislation on the House floor at the beginning of June. The funding will include about $123 billion for mass transit construction and $377 billion for road and bridge construction, in addition to the funds already appropriated in the stimulus legislation.

In a speech to the American Public Transit Association, Oberstar criticized the fact that it takes the Federal Transit Administration 14 years to approve new mass transit construction projects, vowing to streamline procedures within that agency and "make the 21st century the bright age of mass transit."

Monday, March 9, 2009

Senate To Vote Tuesday On '09 Omnibus Appropriations

Working under the midnight Wednesday deadline imposed by last Friday's continuing resolution, the Senate will consider 12 more Republican proposed amendments to the '09 omnibus appropriations bill today and tomorrow, with all 12 expected to fail, and a cloture vote and passage of the bill expected late Tuesday. The two key proposed amendments come from John McCain, proposing to strip almost all of the 8,330 earmarks from the bill, and from John Thune, to prohibit FCC reinstatement of the fairness doctrine. While the Republicans protest earmarks, it appears that $51 million in earmarks belong to Senate Minority Leader McConnell. Go figure.

Sewer Funding To Advance In House

A floor vote could come this week in the House on the $13.8 billion appropriation over the next five years for waste water treatment construction, mostly through the Clean Water State Revolving Fund. Contact your state's clean water agency to see which projects are on tap for bidding once this legislation passes and is signed by the President in the next couple weeks.

House Subcommittees Start Work On '10 Appropriations

Among 20 subcommittee hearings scheduled this week on fiscal '10 appropriations legislation is Thursday's hearing by the Homeland Security Appropriations Subcommittee on beefing up rail and transit system security across the country. Given the fact we now rely mostly on bomb sniffing German shepherds for train station security right now, this hearing could lead to funding for major projects to install airport level security systems in urban rail and transit stations all over the nation. Pay attention and be at the head of the line when bidding opens on these projects in the future.

Energy Infrastructure And Climate Change - Marriage Or Annulment

Major political strategy considerations could break up the proposed marriage of energy infrastructure and climate change legislation in this Congress, as Senate leadership considers whether the push for renewable energy quotas and construction of renewable electric power transmission networks can survive being joined together with legislative debate on President Obama's proposed cap and trade tax on greenhouse gas emissions to mitigate global warming. If you are in the renewable power construction segment, stay tuned, and call in your vote for annulment of this marriage to get your appropriations flowing at a considerably earlier point in time.

Ending Mark To Market - Will Housing Rebound?

Thursday the Capital Markets Subcommittee of Barney Frank's House Financial Services Committee will hold a hearing to discuss whether ending or modifying current mark to market accounting rules for valuing the mortgages on the books of banks and other lenders could relieve the housing market's lending crunch, and help restart the moribund new home construction segment of our industry. This is one of the ways credit could be loosened up without minting another trillion dollars of funny money by the Treasury and Congress in yet another round of financial bailouts.

Stimulus In The 50 States

Thursday, President Obama holds a meeting with one official from each of the 50 states to discuss how state government agencies are using economic stimulus appropriation funds to bolster their economies. State agency officials will meet with the President, cabinet officers, and Earl Devaney, Chairman of the RAT Board, to talk about reporting requirements imposed on the states for expenditure of all this cash from Washington. Look for the federal folks at this meeting to express their displeasure that over half the states still do not have reporting web sites linked up to Recovery.gov so citizens can see where all their tax dollars are going.

Friday, March 6, 2009

Omnibus '09 Funding Bill Delayed

Falling apparently one vote short of the 60 required for cloture on the '09 omnibus appropriations bill, the Senate will receive a House continuing resolution funding government operations through midnight next Tuesday, March 10, averting a shutdown of most government operations. The Senate wants more time to vote on amendments to the House version, especially with regard to school vouchers in Washington, D.C., and FTC regulation of mortgage terms.

Both amendments are expected to fail, but short of putting them to a vote cloture could not be achieved. Speaker Pelosi has been adamant about not wanting the House to have to reconsider Senate changes to the omnibus. It will likely be on President Obama's desk, earmarks and all, before the new Tuesday midnight deadline.

Small Business Tax Increases Bog Down Obama Budget

Senators and Congressmen from both parties who fall into the center of the political spectrum are raising concerns that the President's plans to pay for his middle class tax cuts by raising the two top tax brackets will unfairly burden small American businesses, which they say are the engine of economic and job growth in our economy. The concern is that businesses employing between 25 and 249 workers will have to cut jobs, hold off expansion plans or reduce wages and benefits for existing workers in order to pay the increased taxes. A lot of construction businesses would fall into this category.

Clean Water Appropriation Clears Another Hurdle

H.R. 1262, the clean water funding bill, passed the House Transportation and Infrastructure Committee Thursday. The bill authorizes #13.8 billion through 2014 for sewer treatment construction, including $1.8 billion for sewer overflow control projects. No word yet on when the bill will come to the House floor for a vote. The only controversial provision is retention of the Davis Bacon prevailing wage requirement on these projects, many of which will be built in right to work states.

Two Factors To Play Out In Month End Energy Bill Markup

Senate energy and Natural Resources Chairman Jeff Bingaman hopes to hold a markup of the broad energy legislation the last week in March. Major contention is expected over the definition of "renewable energy," since the bill is expected to require 25% of all U.S. electric power to come from renewable sources by 2025. Everyone agrees that biofuels, wind and solar should be included, but there is intense debate over hydroelectric power and nuclear facilities as part of the definition.

This controversy could also impact the effectiveness of the proposed cap and trade credits in President Obama's long term budget proposals. If nuclear power and hydroelectric plants figure into the calculations, the revenue anticipated could fall dramatically. The outcome of this debate could have a big effect on the direction of power plant construction for the foreseeable future. Representative Chris Van Hollen of Maryland wants provisions in the cap and trade legislation directing that the revenue be returned directly to consumers to offset higher power bills.

Expenditure Controls Could Bottleneck Stimulus Funds

Highlighting the capacity bottlenecks which could thwart speedy outflow of the economic stimulus funds, OMB deputy Robert Nabors testified before the Senate Homeland Security and Government Affairs Committee Thursday that an additional 150 auditors will be needed to make sure fraud and waste are kept out of these projects. GAO acting director Gene Dodaro says they will not be fully staffed for the job until September. Meanwhile, responding to President Obama's memo making fixed price contracting the new standard for the federal government, the House Armed Services Committee created a bipartisan seven member panel to review defense contracting procedures.

Thursday, March 5, 2009

At Risk Contracting Is The New Federal Standard

On stage shoulder to shoulder with his former nemesis Senator John McCain, President Obama signed a presidential memo yesterday establishing fixed price government contracts as the new federal standard, even for defense procurement. Blasting rampant waste and fraud in Iraq, Kuwait and Afghanistan under cost-plus federal contracts, as uncovered by more than 140 investigations of those dealings, the memo directs OMB chief Peter Orszag to issue guidance by July 1 for review of all government contracting and identification of wasteful and inessential contracts which can be terminated. The second deadline, September 1, is for an overhaul of all federal procurement to increase contracting oversight, reduce privatization of government functions, and reestablish fixed price competitive bids as the standard for federal procurement.

The moral is, if you are bidding on federal projects, have a sharp pencil, but know what you are doing, because the risk of loss will be on the contractor rather than on the government.

Internet Expansion Is The New FCC Priority

Announcing his nomination of Julius Genachowski to chairmanship of the FCC, President Obama charged the new leader with designing a plan to bring broadband internet connectivity to rural and low income areas within one year, signaling additional federal spending on communications network construction in the coming months. If you are in the wireless broadband tower construction segment, keep your eyes on the FedBizOpps.gov website for your chance to bid on these projects.

Wastewater Treatment Construction Appropriations Expected Soon

Wednesday, March 4, the House Transportation Water Resources Subcommittee approved, on a voice vote, H.R. 1262, the Water Quality Investment Act of 2009, and sent the bill along to the full House Transportation Committee for consideration. The Act appropriates $13.8 billion over five years for waste water infrastructure projects, in addition to the billions already appropriated in the economic stimulus legislation. The only Republican objection to this particular appropriation is its imposition of Davis Bacon prevailing wage requirements on contractors who are awarded these projects. The bill is expected to pass both houses in regular order and create thousands of construction jobs in western and southwestern United States, as well as the Great Lakes area and along the Ohio River.

Wednesday, March 4, 2009

Stimulus Spending Challenges Agency and Industry Capacity

In a speech yesterday to employees at the Department of Transportation, President Obama announced that 200 federal construction projects funded by the stimulus legislation will break ground in the next few weeks. Nevertheless, FEMA's experience with gargantuan construction spending suggests that both the government agencies charged with spending this money, and the construction industry responsible for completing the funded projects, will have their capacity tested by this huge influx of cash.

At hearings Tuesday, House Homeland Security Chairman Bennie Thompson told the Emergency Preparedness Subcommittee that out of $10.4 billion appropriated for repairs after hurricanes Katrina and Rita, $4.7 billion still has not been spent. Thompson blamed Louisiana Governor Bobby Jindal and Mississippi Governor Haley Barbour for the delays. Without regard to who is at fault, these facts do not bode well for the pace of distribution of the stimulus appropriations which will have to be funneled through state agencies.

Transportation Funding Battle Looms

President Obama's budget proposals include a run at taking year to year control over the amount of money set aside in the federal budget for infrastructure construction, in the form of eliminating the multi-year budget authority of Congress over the highway and aviation trust funds comprised of fuel tax revenues and traditionally set aside for road and airport construction use.

Obama's budget would dump this revenue back into the general funds and return annual budget and appropriations proposing authority of this cash to the White House. Congressional leaders on both sides of the aisle oppose these changes, especially since increasing energy conservation is expected to deplete these trust funds in the near future, requiring even greater effort to keep our infrastructure modern and well maintained.

Senate Overrules Republican Appropriation Amendments

Fiscal '09 appropriations legislation is moving through the Senate with Republican efforts to reduce the $410 billion in spending defeated in vote after vote. Amendments aimed at deleting specific earmarks, as well as those designed to restrict overall spending levels to the '08 funding amounts have been voted down, and it looks like the bill will get to the Oval Office before the weekend.

Florida Legislation Would Restrict Claims Against Home Builders

State Representative Gary Aubuchon of Cape Coral, Florida has introduced a bill into that state's legislature which would restrict the ability of new home buyers to sue their builders over construction problems. The bill tightens the requirements that home purchasers provide detailed written notice of problems to the builder, provide written documentation of the defects, and promptly respond to requests for information. Home buyers must give the builders a change to repair the problem before filing suit, and are penalized for delays in providing requested information.

Chinese Drywall Problems Proliferate

Drywall products from imported from China and contaminated with sulfur compounds which corrode metal building components and emit the aroma of rotten eggs have been found in new homes built in at least 13 states. The USEPA and the Consumer Product Safety Commission have launched federal investigations into the situation.

The problems include corrosion of electrical wiring, hollow metal building components, and permeation of wood studding leaving the rotten egg smell in the homes even after the offending drywall has been removed. Apparently 550 million pounds of the tainted drywall has been imported since 2006, enough to build about 60,000 houses. Problem product has been discovered so far in Arizona, Colorado, Georgia, Louisiana, Maryland, Nevada, New Jersey, New Mexico, North Carolina, South Carolina, Virginia, Texas and Florida, where a new $1.4 million home for the Lieutenant Governor was discovered to have this problem.

Tuesday, March 3, 2009

Getting Bonded For Government Work

Smaller contractors wanting to participate in projects funded by the recently enacted economic stimulus legislation are going to encounter paperwork hurdles they may not have met before, in the form of the surety bonds required to bid on government work. Even builders wishing to do the sort of home weatherization work funded by the bill may be required to post performance and payment bonds before being permitted to proceed with construction.

Fortunately, part of the stimulus legislation itself was expansion of a program within the Small Business Administration providing government guarantees to enable contractors who may not have the capital to back surety bonds to get the bonding they need from approved insurers who are on the Treasury Department list of companies accepted as sureties on bid bonds, and performance and payment bonds, for federal and state government funded construction.

The expanded SBA guarantee program permits guarantees up to $5 million, rather than the former limit of $2 million, and SBA has discretion to go as high as $10 million if it chooses to do so. Paperwork requirements for participating sureties have also been loosened to encourage greater participation by the insurance industry. Right now these increases are temporary, in effect through September 30, 2010, but recommendations due in May of this year could result in the expanded program becoming permanent.

Contractors who have never bid on government work in the past due to the financial requirements of performance and payment bonds should investigate this expanded SBA program before making a decision to be left out of the stimulus bonanza for our industry. This program is even more important since the inclusion of so many construction projects in the funding which will likely pass Congress this week for the balance of fiscal 2009, despite Senator McCain's efforts yesterday to block the bill with an amendment offered on the Senate floor.

Senate Majority Leader Harry Reid, Senate Appropriations Chairman Daniel Inouye, and even Senate Appropriations Ranking Member Thad Cochran expect the omnibus appropriations legislation to pass the Senate on Thursday, so the House can approve any Senate changes Friday before the current continuing funding resolution expires.

Monday, March 2, 2009

Obama Will Sign '09 Appropriations Despite Earmarks

According to both Chief of Staff Rahm Emanuel and OMB Director Peter Orszag, speaking on the Sunday talk shows, President Obama will sign the appropriations legislation for fiscal 2009 Congress is expected to send him this week, after clearing the Senate and the conference committee, despite 8,330 earmarks costing about $7.7 billion out of the $410 billion appropriated, or a little less than 1.9% of the total expenditures authorized in the bill.

Despite heavy Republican criticism that the Oval Office is now backing down from the campaign pledge of "no earmarks," these two high level staffers characterized the '09 appropriation measure as "last year's business," and emphasized that Obama will not be so forgiving in connection with the future budget and appropriation bills coming to his desk.

Obama is letting no grass grow under his feet or those of his staff, naming Kansas governor Kathleen Sebelius as his nominee to head his Health and Human Services Department, and spearhead the drive for health care reform. This could indeed prove to be the first multitasking administration in a long time. We hope we can continue cutting through the blizzard of activity to keep readers focused on those legislative actions affecting the construction industry.