What Contractors Should Know

Understand the requirements for projects funded by ARRA

Funds from the American Recovery and Reinvestment Act of 2009 (ARRA), the $787 billion economic stimulus package enacted and signed into law in February 2009, are now being disbursed. According to http://www.recovery.gov, the government’s official ARRA spending website, of the $25 billion in ARRA funds that had been awarded, only $18 billion has been disbursed.

A significant portion of ARRA funds is earmarked to 28 federal agencies to finance contracts, grants and loans around the country.

This translates into construction jobs being financed through the federal agencies. If your company is involved in the construction industry, it is important that you understand the “strings” attached to these funds. Although many restrictions are technical, keep in mind these pointers to better understand how the fire and life safety systems market fits into the scope.

How is Funding Directed?
There are three main avenues through which a project can receive funding from federal agencies. Because much of the funding went directly to state and local governments, the first opportunities are state/local government projects.

Other possibilities include current federal program initiatives or open and new solicitations/grants from the federal agency. The point to remember is that any project is a potential recipient of ARRA money. Make sure you find out from your customer whether it has received ARRA money, and which ARRA requirements apply to the project.

The requirements create challenges for building contractors and suppliers that hope to work on ARRA-funded projects.

Reporting. Because the act promised accountability and transparency in how money would be spent, it requires quarterly reporting from two types of ARRA recipients: direct-grant recipients and prime contractors to a federal agency. While it is unlikely that a fire and life safety system contractor would grant money, it will still have to submit some routine administrative information to the grant recipient, such as name and address of the business and its DUNS number.

If a fire and life safety contractor is a prime contractor to a federal government agency, it will need to do full ARRA reporting. Prime contractors also must report certain information on their first-tier subcontractors. Reporting is done through the online reporting tool available at http://www.FederalReporting.gov, where the contractor must register in advance.

Prevailing wages. All construction projects that receive ARRA funds must pay Davis-Bacon wages; all standard Davis-Bacon requirements apply. This is true whenever the project receives any funding, in whole or in part, from ARRA. This is a significant expansion of the reach of the Davis-Bacon Act, as it formerly applied only to projects owned by federal government agencies.

If you have ever worked on a project for a federal government agency, you are already familiar with Davis-Bacon requirements.

If not, a good place to start is the website of the Wage and Hour Division of the Department of Labor at http://www.dol.gov/whd/ contracts/index.htm.

Buy-American provisions. One of ARRA’s more complicated provisions is the Buy-American requirements. On its face, it sounds simple: All iron, steel and manufactured products used in ARRAfunded projects must be manufactured in the United States. In reality, applying this to an individual project is complicated. The key point to remember is: Don’t assume a product can’t be used just because it isn’t made in the United States. Numerous conditions and exceptions may allow the use of foreign-made products. Your supplier sales representative should be able to help you determine the products that can be used.

To start, it is important to know that the Buy-American requirements apply to manufactured goods; Each manufactured item must be manufactured in the United States. Importantly, there is no requirement for the origin of the components. A manufactured good is compliant if it is manufactured in the United States, even if all of its components are foreign.

What is a manufactured good? It is anything that is brought to a project site for installation into the project. This is an important point for fire alarm panels. If a panel can be assembled off-site, then brought to the site and installed as a single item, it is probably compliant. Remember, there is no requirement for the origin of its components.

General Guidelines
Here are some guidelines to follow: First, the Buy American requirements apply only to projects for public works or buildings. If your project is on a commercial or private building rather than a government-owned building, the requirements may not apply. Ask your customer.

Next, if a product is not available from a U.S. source, it may qualify for an unavailability exception. In most cases, though, these must be requested before a contract is awarded. If the product you are considering is not made in the United States, ask your supplier sales representative for help on this.

In addition, if the total project value is more than $7.8 million, the project owner might be required to follow U.S. trade agreements and allow products from certain countries, notably Mexico, Canada and most European countries. Ask your customer whether any trade agreements apply. If they are unsure, your supplier sales representative might be able to help.

There also is an exception that applies when the use of U.S. products would increase the cost of the overall project by 25 percent or more. This would be unlikely in most projects, but if the project scope is primarily a life safety system, it could happen. Coordinate this with the project owner to find out if it might apply.

If the project owner is a federal agency, there is an important caveat to the rules. The Federal Acquisition Regulation treats an entire life safety system as a single product, no matter how the individual components or devices are brought to the project site. That means that when a project is ARRA-funded, the system is automatically compliant because the components can come from anywhere. (This works only for an ARRA-funded project owned by a federal agency. For non-ARRA-funded projects, the traditional Buy-American Act applies, and it has a component test.)

In short, you can’t disqualify a product just because it is made outside the United States. In fact, because of the many rules and exceptions, a non-U.S. product might be compliant on one project but not on another. Never assume that the answer on one project will be the same on the next.

There are other ARRA requirements that the project owner will be required to insert in all contracts. These include audit and oversight; central contractor registration; whistleblower protection; and mandatory disclosure.

Although ARRA-funded projects include many provisions, being prepared for the numerous restrictions will enable contractors to better understand expectations and make informed decisions on pursuing ARRA funded jobs. Your supplier sales representative will likely have access to resources to help in analyzing ARRA requirements. Don’t hesitate to ask for assistance if you are unsure about any requirements.

This article originally appeared in the March 2011 issue of Security Today.

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