The construction industry is divided on how stimulus money should be disbursed to businesses after contracts for transportation, public works and other projects are awarded
Existing government procurement procedures do not pay contractors up front when they win bids, but rather dole out monthly payments and reimbursements for bond-backed expenses.
Some construction groups and contractors want that process to change, saying stepping up the usual payment process would expedite the potential benefits of stimulus projects and spur job creation.
The Arizona Contractors Association would like to see contractors get as much as 40 percent of their money from stimulus-related projects up front. ACA President David Jones said that would allow contractors to ramp up operations, bring back laid-off workers, buy equipment and hire subcontractors more quickly.
That would be a big help to the hard-hit construction sector, which had massive layoffs as projects screeched to a halt during the recession.
The U.S. Commerce Department said April 1 that February construction activity was down 10 percent from February 2008 and 0.9 percent from January.
Jones said his proposal would “stimulate the economy faster.” He wants the federal government to allow Arizona and other states to use construction contracts as possible pilot projects for up-front payments. He has talked to
Another leading construction industry group, however, does not want to change federal procurement rules because of concerns about how effective the $787 billion American Recovery and Reinvestment Act will be in turning around the U.S. economy.
“This is no time to be experimenting with new gimmicks that could fuel skepticism about delivering projects funded by ARRA,” said David Martin,
“I know payment methodologies vary worldwide, but ARRA is very clear that payments to contractors follow currently established processes and, in the case of funding, established distribution formulas,” Martin said. “I think it’s dangerous to be talking about lump-sum payments to contractors before there are established reporting criteria. The industry should focus on creating a uniform methodology to limit confusion about reporting. That is what AGC intends to work on.”
Bill Kelton, senior vice president of
“I feel the procurement rules are just fine as they are. We have already made so many unprecedented changes in the system, and we don’t really know how it will all turn out,” Kelton said. “If we have a bunch of contractors that ultimately defraud the taxpayers by getting front money and failing to complete the work, then we will have a scandal similar to the AIG bonuses that will give the taxpayers even more reason to be afraid of the economy.”
Stimulus contracts are governed by federal and state procurement rules. Paul Senseman, spokesman for Gov. Jan Brewer, said federal rules are attached to stimulus money coming into the state that govern how and when the money is to be allocated.
Arizona Department of Transportation spokesman Timothy Tait said stimulus highway contracts, for example, follow federal rules that offer little up-front money. Most of those contracts are paid on a monthly or quarterly basis as the work is done. Tait said changing those rules would have to occur at the federal level.
Stimulus money already is being allocated for Arizona construction projects, including $10.5 million for runway improvements at Phoenix Sky Harbor International Airport, $36 million for Metro light rail and $14.8 million for repairs, renovations and construction at Luke Air Force Base.
The city of
Greg Jones, a construction and real estate attorney with Phoenix-based law firm
“I do think there could some areas where you could front-load a little bit,” he said.
Jones said some contracts might qualify for up-front payments, but that would depend on the project and the governing agency. He does not expect major changes to federal procurement rules, and he acknowledged questions could arise if money is disbursed differently to certain stimulus projects.
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