Stimulus Construction Funds Still In Washington's Till

Of the $787 billion appropriated in the American Recovery and Reinvestment Act, 94% is still in the till in Washington, D.C. Federal agencies have released a mere $45.6 billion, mostly in Medicaid payments to states and checks of $250 apiece to Social Security recipients. A mere $11 million has been released so far on highway projects, though promises of $10.5 billion in federal highway funds may have spurred states to start cutting checks to contractors for more than that $11 million.

It is clear the federal cash is flowing slower than molasses in January, though it's already the middle of May. Worse, more bureaucrats want a piece of the oversight pie. In a speech Tuesday to the U. S. Chamber of Commerce, Assistant Attorney General for Antitrust Christine Varney promised to "train officials at key agencies to look for 'red flags of collusion' before awarding stimulus grants and contracts." You mean, they don't already know how to do that?!

Bricks And Mortar Lose Half A Percent

Wednesday the House Oversight and Government Reform Committee approved a bill permitting state and local governments to divert 0.5% of their stimulus construction appropriations from funding projects to "protect against wasteful spending," meaning the hiring of more government employees to record and report on how the cash is spent. When was the last time hiring more government employees to prevent fraud and waste actually prevented any fraud or waste?

Stimulus Infrastructure Spending On Track [We Think]

In testimony before the House Transportation and Infrastructure Committee Wednesday, Transportation Secretary Ray LaHood said nearly $9 billion in stimulus spending by the Transportation Department has been obligated among the 50 states and the territories, putting the Department ahead of schedule for distributing the whole $48 billion within 18 months of the bill's passage. EPA reported at the same hearing that $1.5 billion of its $7.2 billion to be spent on construction by that agency has already been distributed to the states, mostly for clean water and drinking water infrastructure. Meanwhile GAO reports that in many of the 16 states it has checked up on so far, state auditors say local governments and state transportation agencies may not be able to adequately track and report expenditure of these funds.

More For Bureaucrats, Less For Bricks And Mortar

Echoing other officials who have quietly announced the diversion of stimulus cash originally intended to fund construction of public facilities, GAO Acting Comptroller General Gene Dodaro testified Thursday before the Senate Homeland Security and Governmental Affairs Committee that states which will be spending the bulk of the appropriations for infrastructure will not be able to adequately monitor the expenditures. Vice President Biden has written to Chairman Joseph Lieberman and Ranking Member Susan Collins of that committee promising that OMB sill propose new guidance permitting states to shift funding away from bricks and mortar to state auditor offices for the hiring of more bureaucrats to count the beans. House Oversight and Government Reform Committee chairman Edolphus Towns has also announced his intent to put a bill in the hopper redirecting funds from construction to state auditors.

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!

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.

Earl Devaney To Head "RAT" Board

Deftly ducking any risk of another Senate confirmation embarrassment, President Obama today named Interior Department Inspector General Earl Devaney to head the Recovery Accountability and Transparency Board ["RAT" Board] charged with overseeing the efficient and effective expenditure of the billions of dollars appropriated in the economic stimulus legislation. How much do we pay the guy who dreams up these acronyms - the RAT board to rat out waste and corruption?

Because Devaney was confirmed as Interior Inspector General by the Senate in 1999, no confirmation process will be required for this new post. Slick. Devaney, a former Secret Service agent, led investigations into the Jack Abramoff lobbying scandal, and party hearty misbehavior by officials in Interior's Minerals Management Service. Look for Devaney's hard hitting reports soon on Recovery.gov.

Obama Names Spending Oversight Chief

Mollifying some congressional critics of the prospect of unsupervised spending of $800 billion in taxpayer money, president elect Obama named Nancy Killefer, a former Clinton administration Treasury department official, to the newly created White House position of Chief Performance Officer, responsible for detailed oversight of all federal spending under his administration, including the enormous infrastructure spending and tax reduction stimulus package expected in February.

Congressional leaders are now discussing $800 billion as the price tag of the stimulus legislation, which the Congressional Budget Office expects will create a federal deficit of more than $1.2 trillion next fiscal year. The construction industry can expect to get at least $105 billion of the anticipated appropriations, with $30.25 billion for roads and bridges, $20 billion for military construction, $14.3 billion for environmental projects, $12.4 billion for public transit, $10 billion for federal office building construction and renovation, and $4.9 billion for Amtrak. Renewable energy advocates are pushing for a much larger allocation than $500 million for demonstration projects included in HR 7110. Representatives from rural areas of the nation are already looking for specific provisions guaranteeing cities don't gobble up all the infrastructure money. Some provisions likely to be similar to HR 7110 will end up in the new legislation, including "use it or lose it" claw back clauses to force the money out into the hands of contractors, suppliers and tradespeople within 180 days of passage. However, unlike HR 7110, look for language giving cities, counties and other local government units a crack at the cash before it is redistributed from one state to another. This stems from statements by the governors of Texas and South Carolina that their states "don't need the money."

Because of a precipitous drop in domestic steel production during the fourth quarter, look for the "buy American steel" requirement to expand from school construction to all of the infrastructure and transit projects, and also for "buy American" provisions across the board, possibly with limited exceptions for products and materials not available domestically. After all, the idea of this legislation is to put Americans back to work.

Congress has been in session for only two days, and the feeding frenzy is already underway. Every Representative and Senator is looking for ways to bring money to his or her state or district without having any project labeled as an "earmark" subject to elimination by Obama administration watchdogs. No matter what ultimately happens with this legislative package, there will be a big benefit for those construction managers, contractors, subcontractors and suppliers who position themselves to take best advantage of these projects as soon as they are put out to bid.