Government Contracts Monitor

What the Stimulus Law Doesn\'t Say

February 23, 2009

The American Recovery and Reinvestment Act ("ARRA") that President Obama signed on Tuesday, February 17, 2009 sets lofty goals for preventing fraud, waste, and abuse in the award of contracts using stimulus funds, but not all of the stimulus’ legal implications for procurement are crystal clear. 

For starters, the requirements that contracting entities use fixed-price contracts and employ maximum competition may be difficult to achieve in all cases.  Many contracting officers have come to rely upon cost-reimbursement and time-and-materials contracts, especially in conjunction with ID/IQ-type contracts, for good reason – they offer administrative convenience when uncertainties in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract. One contracting officer, upon hearing about Congress’ approval of the provision, asked “When are they going to stop telling me how to do my job?”

The key contradiction here is that the new legislation attempts to expediently award contracts and grants (most of the money must be spent by September 2010), while simultaneously requiring a level of transparency and accountability that mandate a more prolonged procurement process.  Ironically, the government may end up wasting more money by using fixed-price contracts in situations where contracting entities lack the time, resources, or personnel to accurately estimate costs or to solicit qualified offerors. (Not all commentators see this as a problem – the primary focus of the stimulus law is, after all, to spend money).

On the other hand, the legislation leaves significant wiggle room. Contracting officers need only use fixed-price contracts and competition to “the maximum extent possible.” Thus, the ARRA lacks a blanket requirement that all stimulus funds be distributed in this way. Whether contracting officers can and will take advantage of this exception remains to be seen.

Applicable Law

Some ambiguity persists over which law applies to grants and contracts awarded using stimulus funds. The original House version of the ARRA required all covered contracts to be governed by the Federal Acquisition Regulation (FAR). Although that provision was removed from the final bill, the new §1610(a) seems to retain the requirement that executive agency contracting officials employ FAR contracting rules - in addition to the new compliance and oversight provisions of the ARRA - unless otherwise exempted by statute.

Elsewhere, the statute seems to call for the application of state laws – at least for contracts awarded by state and local governments. For instance, under §1511, grants to state and local government for infrastructure investments require a local official to certify that the investment has "received the full review and vetting required by law and that the chief executive accepts responsibility that the infrastructure investment is an appropriate use of taxpayer dollars." It does not specify which law state officials are to follow in disbursing funds.

The law applicable to contract awards under the ARRA could have an impact on competition requirements, government audit powers, and bid protest procedures. In short, whether federal, state, or local law applies to a particular procurement under the ARRA, contractors should be prepared to for stringent compliance obligations.

Long-Term Impact

Will the ARRA's new contracting provisions change the procurement process forever?  The law introduces aggressive competition and transparency requirements. It is likely that he public and Congress will demand a similarly high level of transparency and accountability for non-stimulus contracts in the future. However, if these requirements become administrative burdens and raise costs for the entire procurement system, Congress may again seek to streamline the acquisition process. Regardless of the outcome, the ARRA's procurement initiatives promise to influence procurement policy for the foreseeable future.

This article was authored by Samuel W. Jack, Jackson Kelly PLLC.