ARRA Contract Requirements
Contract Requirements for the American Recovery and Reinvestment Act[i]
The American Recovery and Reinvestment Act of 2009 (ARRA or Recovery Act)[ii] is part of the federal government’s stimulus program, which invested $150 billion in new infrastructure projects. ARRA’s transparency, oversight and accountability objectives create additional reporting and business compliance obligations for contractors and their first tier subcontractors performing ARRA funded projects directly for the federal government or under grants and assistance programs funded by the federal government. ARRA mandates that new projects funded, in whole or in part, by Recovery Act funds contain contract provisions addressing:
- Registration and special reporting requirements
- Preferences for products manufactured in America
- Business ethics and compliance
Registration and Special Reporting Requirements
ARRA requires reporting by certain recipients of federal funds appropriated by the Recovery Act. Recipients have different obligations depending upon the type of award (direct contract or grant), the level at which they receive funds (prime, first-tier, etc.), and the amount of annual revenue they receive from federal sources. Prime grant recipients can require that sub-recipients (i.e., contractors) report Federal Funding Accountability and Transparency Act (FFATA) required elements.[iii] Prime contractors with direct federal contracts must require certain first-tier subcontractors to provide information for the contractor’s report.[iv]
The information reported will be made public on the recovery.gov website and includes:[v]
- Identification of the government contract
- Amount of Recovery Act funds invoiced by the contractor for the reporting period
- List of significant services performed and expected contract results
- Progress report on the portion of the project funded by the Recovery Act
- Description of employment impact (number and description of jobs created or retained – a job cannot be reported as both created and retained)
The prime contractor is obligated to report information on most first-tier subcontractors in excess of $25,000[vi] including:
- DUNS number for the subcontractor and its parent company, if any
- Name of subcontractor, its physical address, and congressional district
- Subcontractor’s primary performance address and applicable congressional district
- Subcontractor’s North American Industry Classification System (NAICS) code
- Government agency funding work
- Subcontract number assigned by the prime contractor, description of work and dollar value of the subcontract
If a Recovery Act funded change order is performed, the prime contractor will need to track and report data on that individual modification if FAR § 52.204-11 is incorporated into the contract.
Special Data Collection
In addition to progress and economic reports, the FAR clause also implements special data collection provisions of FFATA.[vii] If certain thresholds are met, the total compensation of the contractor’s and its first-tier subcontractors’ “five most highly compensated officers” for the calendar year in which the contract was awarded must be reported, unless the public has access to the same information from certain public filings with the Securities and Exchange Commission.[viii] The monetary thresholds triggering these reporting requirements are:
- Receipt by the contractor (first-tier subcontractor) in the fiscal year prior to the award of the contract of $25 million or more in annual gross revenues from federal contracts, loans, grants (and subgrants) and cooperative agreements.
- Receipt by the contractor (first-tier subcontractor) of 80% or more of its annual gross revenues in that fiscal year from those sources.
The prime contractor is obligated to obtain similar data from any first-tier subcontractor that also meets these monetary thresholds and receives a subcontract in excess of $25,000 on a project funded, in whole or in part, by ARRA monies.[ix] Similarly situated grant recipients and sub-recipients must do the same.[x]
Reports are due no later than 10 calendar days after the end of each calendar quarter in which the recipient receives funds.[xi] Recipients of grants, their first-tier sub-recipients, and direct government contractors must maintain registrations in the Central Contractor Registration.[xii] Recipients must track ARRA funds separately for each project financed by the Act, and the contracting officer must structure awards to allow for such tracking.
Preferences for Products Manufactured in the U.S.
ARRA prohibits the use of funds appropriated or otherwise made available by the Recovery Act for “construction, alteration, maintenance or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States.”[xiii] This prohibition is in addition to, and distinct from, the Buy American Act. The Buy American Act does not apply to grants by its own terms, but some agencies impose its obligations as a condition of funding a grant.
ARRA requires that the manufacturing process that produces the construction material occurs in the US.[xiv] The prohibition does not apply, therefore, to iron and steel used as components of manufactured goods.[xv] Manufactured goods (also called manufactured construction material) are goods brought to the construction site for incorporation into the work that have been either (1) processed into a specific form and shape or (2) combined with other raw material to create a material that has properties different from the individual raw materials.[xvi] All manufacturing processes for iron and steel used as construction material (as opposed to being used as a component of a manufactured good) must take place in the US, except metallurgical processes involving refinement of steel additives.[xvii]
There are three exceptions to the ARRA’s Buy American requirements:
- Iron, steel or relevant manufactured good is not mined, produced or manufactured in the US in sufficient and reasonably available commercial quantities of satisfactory quality
- Cost of domestic iron, steel or manufactured goods will increase the cost of the overall project by 25 percent or more
- Restrictions would be inconsistent with the public interest[xviii]
While the Buy American Act does not apply to grants by its own terms, agencies may include its requirements as terms of the grant or as a supplement to the ARRA requirements for grants.[xix]
Modification of Existing Non-ARRA Contracts
It is probable that agencies will use Recovery Act monies to fund modifications to a project that is not otherwise subject to ARRA. This will trigger various ARRA requirements. A provision to subcontracts and purchase orders alerting lower tier firms of varying Buy American standards, and requiring those firms to verify that all products furnished by or on their behalf comply with the applicable Buy American provision may be an advisable addition.
ConsensusDOCS would like to thank John Wiley & Sons, Inc., Smith, Currie & Hancock and The Associated General Contractors of America for permission to use excerpts from their comprehensive publication, Smith, Currie & Hancock’s Federal Government Construction Contracts: A Practical Guide for the Industry Professional, Second Edition, which can be purchased at www.agc.org/bookstore.
[i] The above information is for information purposes only and is not meant to be legal advice. You should consult legal, insurance and/or surety advisors before finalizing any contract. Limit of Liability/Disclaimer of Warranty: There are no representations or warranties made or created with respect to the accuracy or completeness of the information provided. Neither ConsensusDOCS, the publisher nor authors of Smith, Currie & Hancock’s FEDERAL GOVERNMENT CONSTRUCTION CONTRACTS: A Practical Guide for the Industry Professional, Second Edition (Eds.: Thomas J. Kelleher, Jr., Thomas E. Abernathy, IV, Hubert J. Bell, Jr., Steven L. Reed, G. Fritz Hain, Douglas P. Hibshman, Y. Lisa Colon Herron Ramsey Kazem, Stephen J. Kelleher, Lenny N. Ortiz, Douglas L. Tabeling, and Mark S. Wierman), shall be liable for any loss of profit or any other damages, including but not limited to special, incidental, consequential or other damages.
[ii] Pub. L. No. 111-5.
[iii] Pub. L. No. 109-282, 120 Stat. 1186 (2006).
[iv] FAR § 52.204-11(d)(10).
[v] See ARRA, Pub. L. No. 111-5, § 1512(d), 123 Stat. 115, 288 (2009).
[vi] See FAR § 52.204-11(d)(10). (Simplified reporting requirements are applicable if the subcontract is less than $25,000 and the subcontractor’s gross income for the prior year was less than $300,000. See FAR § 52.204-11(d)(9).
[vii] Pub. L. 109-282.
[viii] 2 C.F.R. § 176.90.
[ix] Reporting of compensation data is not required for small firms as defined in FAR § 52.204-11(d)(9).
[x] Office of Mgmt. & Budget, Implementing Guidance for Reports on Use of Funds Pursuant to the American Recovery and Reinvestment Act of 2009, M-09-21, § 2.3, at 8-11 (June 22, 2009), available at http://www.whitehouse.gov/omb/assets/memoranda_fy2009/m09-21.pdf.
[xi] ARRA, Pub. L. No. 111-5, § 1512(c), 123 Stat. 115, 287 (2009); FAR § 52.204–11(c) (direct contracts); 2 C.F.R. § 176.50(c) (grants) (Reporting requirements related to compensation may be annual reports.) See 74 Fed. Reg. 14643.
[xii] 2 C.F.R. § 176.50(c) (grants).
[xiii] ARRA, Pub. L. No. 111-5, § 1605, 123 Stat. 115, 303 (2009). See also 2 C.F.R. §§ 176.60–176.170 (grants).
[xiv] FAR § 25.602(a)(2)(ii) (direct contracts); 2 C.F.R. § 176.70(a)(2)(ii) (grants).
[xv] FAR § 25.602(a)(2)(i) (direct contracts); 2 C.F.R. § 176.70(a)(2)(i) (grants).
[xvi] FAR § 25.601 (direct contracts); 2 C.F.R. §§ 176.140(a)(1); 176.160(a) (grants).
[xvii] FAR § 25.602(a)(2)(i) (direct contracts); 2 C.F.R. § 176.70(a)(2)(i) (grants).
[xviii] FAR §§ 25.603(a), 25.604(c)(1) (direct contracts); 2 C.F.R. 176.80(a) (grants).
[xix] 2 C.F.R. § 176.110.