Contracting with Stimulus Funds

The federal government has promised “unprecedented” oversight to reduce “waste and fraud” in the use of stimulus funds.

OMB has the first guidance to recipients of stimulus funds on the requirements for this spending (OMB Guidance February 18,2009 – Initial Implementing Guidance for the American Recovery and Investment Act of 2009).

The initial guidance (they anticipate a series of directives) offers primary guidance to agencies in documenting on they use funds.

Primary recipients of funds are defined as Federal agencies and the first level of recipients from the federal level (with an exception for tribal entities). This first level could be a state, a local government or a contractor. Levels below that first tier are not subject to the same reporting rules. Thus state grants to cities, or state or local contracts with contractors would not be subject to the tier 1 reporting rules.

Two key points are evident in the spending requirements:

First, contracts are expected to be lump sum contracts in accordance with FAR Part 16. Other types of federal contracts are permissible, but only if the decision to use other than a fixed price contract is approved by the granting authority.

This means percentage of construction cost, cost plus a percentage of cost and some other contract types are prohibited in the use of stimulus funds. The risk to grant recipients is that the grant can be rescinded if an improper contract type is used.

The other key requirement is reporting of jobs created or sustained in the use of funds. This will require firms using stimulus funds to report somewhat different information, equivalent to the FTE expectations for a contract.

Agencies should start adding this requirement immediately to contract proposals in order to meet OMB and stimulus legislative requirements.