Stimulus Funds Include All Federal Contracting Rules

As the stimulus rules are issued by the various agencies dispensing funds and grants, it is very clear that all federal contracting rules apply to all stimulus funds, no matter who actually does the contracting.

For A/E contracts this includes:

Project selection must be by Brooks Act (QBS) procedures

Contracts must be an acceptable federal contract type, and lump sum contracts are the preferred form of agreement

Costs must be estimated and costs accumulated in accordance with Federal Acquisition Regulations (FAR) cost principals

Proposals and contracts are subject to audit

For some local government or agencies, these requirements may not be in synch with their normal A/E contracting policies. Not acceptable contracting includes bidding for A/E contracts and percentage of construction cost contracts.

Agencies the do not adhere to the applicable federal rules risk the revocation of grant funds, which could place agencies at risk for reimbursing stimulus funds.

One message is becoming exceedingly clear as the rules are issued. Not only are all rules applicable to stimulus funds, even past exemptions are prohibited for these funds. Added rules have been enacted on reporting spending progress as well so the contracts must clearly adhere to the stimulus rules.

FAA Issues Stimulus Grant Guidelines

On March 3rd the FAA issued guidance to recipients of grants from the Stimulus bill.

This guidance instructs airports to use all existing contracting regulations for any funds received from the Stimulus bill.

For A/E services, this means projects selections must be by QBS (Brooks Act) procedures.

Contracts are subject to the Federal Acquisition Regulations (FAR) so costs and fees must meet these regulations.

Of particular interest is that airports must not “mix” stimulus funds with other grant funds. This means that stimulus funds may not be used to modify existing contracts funded from other grant sources. Since the local matching funds are 0% for, this should mean all stimulus funs are stand-alone projects, not extensions of other current projects.

Auditors May be Everywhere!

For the projects that will be performed using Stimulus Act funds, there is extra access for auditors on Stimulus funding.

1. The Government Accounting Office (GAO) is granted the right to audit all stimulus funded contracts.

2. The Inspector General (IG) of each agency can audit any contract using stimulus funds.

3. There is going to be a new Accountability and Transparency Board (to be appointed) that will also have the right to audit all stimulus fund contracts

The audit rights of each of these groups have also been expanded. Each of these audit groups will now have the right to interview any officer or employee of the contracted firm.

Another item of note is that these offices may accept information from the public and must investigate the information if they believe it has credibility.

Clearly, stimulus funds are going to be subject to a very high degree of scrutiny.

Ethics Program Requirements

The new more formal requirements for government contractors to have in place ethics programs require firms to have more extensive documentation on business ethics.

Every contractor with a “covered contract” (defined as a contract of over $5 million and lasting more than 120 days) must have:

1. A written business ethics plan.

2. A written process for employees to report possible ethics violations by the business or its subcontractors (supported by notification of employees of how this works)

3. Processes in place to show that all employees have been instructed in how the plan works

4. Principal employees must have sufficient background checks to determine they do not have past ethics violations that would bar them from government contracts. While Principals is not defined, it appears to mean persons with contract responsibility, such as the PM or PIC.

5. That processes are in place to verify that proposed subcontractors meet these ethics requirements

These rules are contained at FAR 52.203-13

Since most A/E contracts will require performance over a longer than 120 period, it is likely that if you have FAR covered contracts, you will need to meet these standards.
Of particular concern is the requirement to verify that subs are in compliance, since this may affect how you select teams even before you are selected for a project.