Although many aspects of our economy are suffering, the federal construction market will most certainly be booming.  On Friday March 20, 2009, the Department of Defense issued a 191 page Report to Congress detailing how it plans to spend the money it has received as part of the American Recovery and Reinvestment Act of 2009, also known as the “Stimulus Package.”  The DoD has “identified specific investments in construction, facility improvements, and energy efficiency projects that will help improve the quality of life for our troops and their families.” Included in the Report is a very detailed breakdown of how the money will be spent. For each project anticipated, the included spreadsheet provides cost, a brief description of the work, and the project location

The Recovery Act includes approximately $7.4 billion in Defense-related appropriations, which accounts for less than 1 percent of the total $787 billion stimulus package.  The Department intends to spend this funding with “unprecedented full transparency and accountability.”  A website, www.Recovery.gov, is the main vehicle to provide every citizen with the ability to monitor the progress of the recovery.

The DoD plans to spend $2.3 billion of the Stimulus funds on military construction and family housing construction projects.  The Department also indicates that it will be “pursuing architectural and engineering services greater than $1 million for 5 projects, conducting repair projects greater than $7.5 million for 56 projects, and carrying out 45 Energy Conservation Investment Program projects, respectively.”  In addition, the DOD provided a list of 3,300 Facilities Sustainment, Restoration, and Modernization (“FSRM”) projects costing an estimated $3.4 billion, representing 80% of the total FSRM funds appropriated to the DOD.  The FSRM projects account for over $3.83 billion of their entire Stimulus spending. The following are the areas where DoD plans to spend money as quickly as possible:

• $4.2 billion in Operation and Maintenance accounts to improve, repair, and modernize DOD facilities, including energy-related improvements
• $1.3 billion in military construction for hospitals
• $240 million in military construction for child development centers
• $100 million in military construction for warrior transition complexes
• $535 million for other military construction projects, such as housing for the troops and their families, energy conservation, and National Guard facilities
• $300 million to develop energy-efficient technologies
• $120 million for the Energy Conservation Investment Program (“ECIP”)
• $555 million for a temporary expansion of the Homeowner’s Assistance Program (“HAP”) benefits for private home sale losses of both DOD military and civilian personnel
• $15 million for DOD Inspector General oversight and audit of Recovery Act execution

The federal agency that is the most heavily involved in construction, the U.S. Army Corps of Engineers (“USACE”), has provided Congress with “informed estimates” of existing capability to perform additional work. The Corps has set forth project selection criteria as projects that will:

(1) Be obligated/executed quickly

(2) Result in high, immediate employment

(3) Have little schedule risk

(4) Be executed by contract or direct hire of temporary labor

(5) Complete either a project phase, a project, or will provide a useful service that does not require additional funding

For the USACE Civil Works Program, the Recovery Act includes $4.6 billion in funding.  Of that, $2.1 billion is appropriated for construction and $2.3 billion for Operation and Maintenance (O&M). Appropriations are also included for the Mississippi River and Tributaries account.  The Corps estimates that it will award contracts on approximately 400 maintenance projects with O&M funding by the end of April with contract values ranging from $250,000 to $10 million and construction durations of 6 months to 2 years.  The Corps also estimates the award of approximately 300 construction contracts ranging in value from $1 million to $30 million by the end of April with construction durations ranging from 6 months to 3-1/2 years.

These projects will provide tremendous opportunities for federal construction contractors.  It remains to be seen whether the government has enough procurement people to issue so many solicitations in such a short time and whether the specific agencies have the capability to properly administer all of this work.  On the bright side, however, the surge of work created from all of these new projects should give our economy the boost that it needs.

On February 18, the Office of Management and Budget (“OMB”) director Peter Orszag issued guidance to agencies regarding the administration of federal Stimulus funds. Just this past week, on March 4, President Obama signed a memorandum designed to reform federal government contracting. These directives mark the beginning of reform in the world of government contracting, and reflect the greater accountability and transparency the new administration promises to American taxpayers.

The OMB memo requires agencies to submit spending and performance data to their website on a regular basis. The website is a web portal that demonstrates exactly how the Stimulus funds are being spent, and it calls itself the “centerpiece” of efforts to implement the American Recovery and Reinvestment Act with “accountability and transparency.” In a video message to Americans on the website, President Obama pledges greater accountability and transparency in government spending. In his address, he notes that the “size and scale of this effort demand unprecedented efforts to root out waste, inefficiency and unnecessary spending,” and he refers to the Stimulus as a “significant investment in our country’s future.”

The OMB memo also increases the requirements for those doing business with the federal government. Starting on March 3, agencies must submit weekly reports breaking down how they have spent Stimulus funding. They must also summarize any major actions taken as well as any future activities. Beginning May 1, they must provide recovery plans outlining their individual agency goals and any coordinating efforts. By May 8, they must being submitting monthly financial reports detailing their obligations, expenditures, and other pertinent financial information.

Under the new requirements, agencies are now required to post pre-solicitation and award notices for any task and delivery order acquisition contracts on FedBizOpps, a clearinghouse for federal government contracting opportunities. Any Stimulus-related prospects must be specially formatted to differentiate them from regular projects. For any contracts or orders over $500,000, the agencies must summarize the contract or order, provide a description of the particular goods or services required, and then post that information to the recovery.gov website, making it available to the public.

Agencies are also urged to use fixed-price contracts wherever possible and appropriate. Several types of fixed-price contracts exist. They are designed to facilitate proper pricing under varying conditions. Generally, they place more cost responsibility on the contractor than on the Government, and encourage greater efficiency in contract management. According to Orszag, these kinds of contracts “expose the government to the least risk.” Fixed-price contracts are outlined in more detail in Subpart 16.2 of the Federal Acquisition Regulation (“FAR”).  More detailed instructions will be provided to agencies in the coming months.

Obama’s presidential memo comes out of the recent government responsibility summit and calls for massive overhaul in government procurement. In his announcement regarding this memo, President Obama noted that, “last year, the Government Accountability Office, looked into 95 major defense projects and found cost overruns that totaled $295 billion…That’s $295 billion in wasteful spending.”
Continue Reading Obama Issues Memorandum Ordering Reduced Wastefulness in the Federal Procurement Process

Since President Barack Obama was inaugurated last month, he has initiated many changes which will impact federal contracting: first, he issued an executive order requiring a successor vendor on a services contract to offer a preceding contractor’s employees jobs under the new contract; second, in another executive order, he encouraged the use of project labor agreements to ensure that federal work would not be disturbed by “labor unrest” (see earlier blog article); and, in a third order, he prohibited contractors from passing along the costs of supporting or fighting their employees’ exercise of the right to unionize or bargain collectively.  Today President Obama signed the American Recovery and Reinvestment Act into law, a statute more commonly referred to as the “Stimulus Bill.”  The total amount of the stimulus is approximately $787 billion and it promises great potential for more federal construction contracting work.  
 
The purpose behind this legislation is to relieve the nation from the current state of economic distress and to create jobs.  Another priority of the stimulus package is to improve the infrastructure of the country.  This means more money for government contracts, and in turn, more opportunities for construction contractors.  The allocation of funds within the Stimulus clearly demonstrates the growth potential for federal construction contractors: nearly 40%, or $311 billion, of the total amount is allocated to federal appropriations, with an estimated $131 billion going toward federal construction projects.  Below is the breakdown:

Transportation-$49.3 billion

Defense/Veterans-$7.78 billion

Housing/HUD-$9.6 billion

Education and Schools-no specific amount is designated but $39.5 billion of the allotted $53.6 billion State Fiscal Stabilization Fund goes to local school districts who have the option of the modernizing their facilities with this money.  

Energy-$30.62 billion

Buildings-$13.37 billion

Water and Environment-$20.1 billion

A major portion of this funding remains available until September 30, 2010. 

The Stimulus also promises to help small businesses.  The terms of the Stimulus authorize the Small Business Administration (“SBA”) to temporarily eliminate or reduce fees for participation in its loan-guarantee programs.  It also increases to 90% the percentage of qualifying loans that the SBA can guarantee.  Also offered is a “small business stabilization financing” which offers small businesses in distress money to pay off existing loans.  These loans must be repaid within five years, can be for up to $35,000 and can be used to make up to six months of payments on prior loans.  The interest on these loans will be fully subsidized with no payments due for the first year.  Also offered are hiring incentives, a break on capital gains for those who invest in small businesses, increased loss accounting, and an expansion of allowable equipment expense deductions for small businesses.   

White House projections anticipate that this public works spending will lead to millions of jobs for American workers.  While there are legitimate questions about whether the employment generated by the Stimulus will be sustainable once the projects are completed, and whether the long-term effects of greater debt will lead to even greater economic problems in the future, there is little doubt that there will be an immediate benefit to federal, state, and local construction contractors.

The U.S. Army Corps of Engineers, through its Office of Safety and Occupational Health, has released a new edition of the Corps’ Safety and Health Requirements Manual, EM 385-1-1, that streamlines information for easier access and quicker use.  According to the Corps, “The safety manual is a major key to the success of the USACE safety program.”  The 1,050 page book is used during construction, operations, maintenance, research The manual was last revised in 2003, and the 2008 version parallels Occupational Safety and Health Administration (OSHA) regulations and other national standards.  It deviates from these standards only when research and/or accident experience deem it necessary.

The new manual went into effect Jan. 12 and can be downloaded by clicking on this link.   It is also available in bid packages and from the Government Printing Office for about $27 a copy. Improvements in formatting and layout allow users of the manual to move through it with relative ease.  For example, crane requirements are clearer, up to date, and most importantly, centrally located in one section, including information that was located in appendices in past editions.  In the same way, all fall-protection requirements are now contained in Section 21 instead of scattered throughout the manual.

As stated on the Corps’ website, “With an organization as far-reaching as USACE, revising the safety manual was no small task.  This was one of the largest revisions since the manual’s original production, and has taken nearly two-and-a-half-years.”
 

On February 6, 2009, President Obama issued an Executive Order encouraging agencies to use Project Labor Agreements ("PLAs") in federal construction projects with a total cost to the Government of $25 million or more.  The purpose of the Order is to avoid some of the problems which typically arise during the completion of such large projects causing various delays in their timely completion. 

"Project Labor Agreements" are defined as, "pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project and is an agreement described in 29 U.S.C. 158(f)."  Title 29 governs the relationship between management and labor as well as national labor relations and section 158 governs unfair labor practices.  While the Order is effective immediately, the FAR Council has been given 120 days-until June 6, 2009-to take "whatever action is required" to implement this order.  President Obama also instructs the Director of the Office of Management and Budget, in consultation with the Secretary of Labor and other appropriate officials, to evaluate whether broader use of such PLAs would help promote the economical, efficient and timely completion of such projects. 

This Order repeals George W. Bush’s Executive Order 13202 which forbade federal agencies and other recipients of federal funding to require contractors to sign union-only PLAs as a condition of performing work on federal projects.  Interestingly enough, the history behind the most recent Order clearly demonstrates the divide between the Democratic and Republican Parties’ divergent view of the role of unions.  Bush’s Order repealed an Order issued by former President Clinton, the purpose of which was to overrule an Order issued by his predecessor George H.W. Bush. 

Many in the construction industry are concerned about this order and feel that the implementation will negatively impact the 84% of U.S. construction workers who are not union members.  However, the Order only encourages PLAs for large-scale construction projects, it does not mandate them. "Executive agencies may, on a project-by-project basis, require the use of a project labor agreement by a contractor where use of such an agreement will…advance the Federal Government’s interest in achieving economy and efficiency in Federal procurement…"  Under the terms of the Order, the government cannot compel a contractor to enter into these agreements, and cannot exclude from competition those contractors that choose not to use them.  Additionally, contractors are not required to obtain their labor from any particular labor organization.  We will just have to wait and see how the FAR is updated before we can determine the ramifications for federal construction contractors.

In recent years, the U.S. Army Corps of Engineers has attempted to employ "innovative" contracting methods but, in doing so, has often limited the number of contractors who have had the opportunity to perform major construction projects.  One of the justifications for these “innovative” methods has been that there will be a reduction in the administrative workload resulting in a "savings" for the government.  As a result, it seemed as though fewer solicitations were being issued using the sealed bidding procedures in FAR Part 14, with a corresponding increase in the procurement of construction under FAR Part 15, Contracting by Negotiation.  Construction contractors began to find that competition was no longer based on price alone, but on subjective factors as well, such as past performance, technical ability, or client satisfaction.  Of course, even though these procurements were purportedly “negotiated,” the instances where discussions or negotiations actually occurred were relatively few in number.  It was for that reason that we continued to wonder whether the Corps ever actually intended to “negotiate” a negotiated contract.  Could the reason possibly be that the Corps wants to be able to use subjective evaluation factors, under the guise of “best value,” as an excuse not to award construction contracts to responsible, bonded, contractors who offer the lowest price?

In a further extension of the use of "Contracting by Negotiation," the Corps has also adopted the Multiple Award Task Order Contracting (“MATOC”) procedures provided under FAR Part 16.5, "Indefinite-Delivery Contracts," to the procurement of major construction projects.  We have been involved in on-going legal challenges to the use of MATOC for construction  because we believe that the preference for sealed bidding in construction, as expressed in FAR Part 36, is being ignored by the Corps.  Through the use of MATOC, the Corps has found a way to limit the competition for the design and construction of facilities in entire regions of the country to only a few of the very largest construction companies.
 
Just as the shift to large, regional MATOCs has decreased the number of contractors, both large and small, who are able to perform these projects as prime contractors, the adoption of design-build as the favored mechanism for major construction projects has also tended to limit competition.  Design-build contracting has permitted the government to shift more and more risk and responsibility to the contracting community, but it seems to be a community that is shrinking in size.  Does this make any sense at a time when the country is suffering from rapidly increasing unemployment and the government is planning to spend billions of dollars on improving the infrastructure?  There are many small and medium-sized business concerns who have capably performed thousands of federal construction projects over the years under sealed bidding.  We continue to wonder why that successful system is being systematically abandoned.

Now the Corps is beginning to issue solicitations for major construction projects under the provisions of FAR Part 16.403, Fixed Price Incentive Contracts, using a project delivery method referred to as "Early Contractor Involvement," or “ECI” for short.  Under ECI, the Corps engages the services of a general contractor to provide "preconstruction services" concurrent with the design of a project that is being performed by a design firm.  The construction contractor reviews the partially completed design for constructability and biddability.  As the design work nears completion, construction is then procured through the exercise of an option under the ECI contract.  An ECI procurement requires the construction contractor to compete on both technical and price factors long before the project’s design is developed to the point that facilitates meaningful and well-informed cost proposals, however.  With so little detailed information on the construction that is being procured, the competition among construction firms has the real possibility of being nothing more than a popularity contest in which the government procurement officials make choices based on who they think they want to work with, rather than the contractor they should be working with based on the technical aspects of a particular project.  The competitors also must provide a ceiling price for the project as part of their proposals, long before the design has reached the point where a price estimate is anything more than an educated guess.  Although a Corps spokesman, in an article published in Engineering News-Record, indicated that the Corps is turning to ECI for classic reasons, that it is "better, faster, cheaper,"  we wonder what the basis is for such a bold conclusion.

In a recent press release, the New Orleans District of the Corps reported that it will use Early Contractor Involvement (ECI) to construct the $500 Million Gulf Intracoastal Waterway West Closure Complex project.  Colonel Alvin Lee, New Orleans District Commander, indicated that although "the New Orleans District has never used ECI as an acquisition strategy before," the District was "excited about the benefits it brings to this momentous project.”  In addition to the West Closure Complex project, the New Orleans District is proposing to employ ECI on a series of levee improvement projects on the Chalmette Loop Levee in St. Bernard Parish, Louisiana.  These additional ECI contracts will total between $850 Million and $1.75 Billion.

Other Corps districts have had some experience using a similar method of procurement under a strategy known as "IDBB," or "Integrated-Design-Bid-Build."  Two of these IDBB projects are the new Community Hospital and the National Geospatial Intelligence Agency Complex at Fort Belvoir, Virginia.  Very recently, other Corps districts have advertised the intention to issue ECI solicitations, notably for the construction of a Replacement Hospital at Fort Riley, Kansas ($250 to $500 Million).  Other Federal agencies can be expected to increasingly employ the ECI procurement method; the U.S. Navy already intends to construct a $68 Million Helicopter Maintenance Hanger in San Diego using ECI.  In private construction, ECI is called Construction Management (or Manager) at-risk, "CM@R."   A joint committee of the AIA and AGC have described CM@R as follows:

Construction management at risk (CM@R) approaches involve a construction manager who takes on the risk of building a project. The architect is hired under a separate contract. The construction manager oversees project management and building technology issues, in which a construction manager typically has particular background and expertise. Such management services may include advice on the time and cost consequences of design and construction decisions, scheduling, cost control, coordination of construction contract negotiations and awards, timely purchasing of critical materials and long-lead-time items, an
d coordination of construction activities.  In CM@R the construction entity, after providing preconstruction services during the design phase, takes on the financial obligation for construction under a specified cost agreement. The construction manager frequently provides a guaranteed maximum price (GMP). CM@R is sometimes referred to as CM/GC because the construction entity becomes a general contractor (GC) through the at-risk agreement. Primer on Project Delivery, AIA/AGC (2004).

A question remains as to whether the government can exercise the flexibility that a private entity can employ to insure that the ECI, or CM@R, process can be successful.  Whether or not such flexibility is possible, use of ECI will certainly further diminish the competitive nature of the government procurement of construction projects in the future.

As the government has expanded its uses of Contracting by Negotiation through the issuance of RFPs ("Requests for Proposals"), as opposed to Sealed Bidding and the issuance of IFBs ("Invitations for Bid"), contractors have had to adapt to this new way of doing business.  All too often, a perfectly capable contractor is not selected for award, even though its price was the lower than its competitors, because it failed to adequately address the evaluation factors listed in the solicitation.  A recent decision by the GAO in the Matter of Capitol Drywall Supply, Inc. ("CDS"), decided on January 12, 2009, highlights the difficulty that a contractor faces when the agency and the GAO conclude that a proposal misses the mark.

The proposal by CDS was one of six submitted to the Corps of Engineers, and was the second lowest in price.  The problem, however, was that CDS was rated as the lowest on the technical merit evaluation factor due, primarily, to a lack of detailed information describing the firm’s proposed procedures to perform the statement of work requirements, as well as a failure to demonstrate experience performing contracts similar in size, scope, and complexity, and which were valued at $1 million or more.  Finding that the lowest-priced and third lowest-priced proposals, which received significantly higher technical ratings than the CDS’ proposal, represented the best value to the agency, awards were made to those firms; with respect to the latter award, the agency concluded in a price/technical tradeoff determination that the higher technical merit of the higher-priced proposal warranted the payment of the price premium associated with it.

Specifically, the agency evaluators found that while the firm’s proposal provided a brief response to the detailed technical approach requirements, in which CDS mentioned the firm’s intention to maintain inventory and warehouse operations, specific statement of work requirements were not referenced, as was required (e.g., regarding subcontractor relationships, safety and health plans, quality control, and planned communication and information management), and no planned procedures or detailed methodologies were provided to explain how the firm intended to perform the statement of work requirements. Similarly, under the delivery evaluation factor, while the CDS proposal mentioned the use of certain vehicles and noted that certain reports could be produced, the evaluators found that insufficient detail was provided to ensure an adequate number and type of vehicles would be readily available for simultaneous deliveries, as required, and no detailed methodology was presented to either explain what procedures would be followed to ensure that materials would be expeditiously obtained and delivered, including delivery to remote locations, or to explain in any meaningful detail the firm’s planned procedures to meet stated reporting requirements.

In reiterating its position when a protester has failed to adequately respond to the requirements of a solicitation, the GAO stated that "In reviewing protests of alleged improper evaluations and source selections, our Office examines the record to determine whether the agency’s judgment was reasonable and in accord with the solicitation’s stated evaluation criteria and applicable procurement laws. See Abt Assocs. Inc., B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. It is an offeror’s responsibility to submit an adequately written proposal that establishes its capability and the merits of its proposed technical approach in accordance with the evaluation terms of the solicitation. See Verizon Fed., Inc., B-293527, Mar. 26, 2004, 2004 CPD para. 186 at 4. A protester’s mere disagreement with the evaluation provides no basis to question the reasonableness of the evaluators’ judgments. See Citywide Managing Servs. of Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD para. 6 at 10-11. Further, where, as here, technical factors are to be given greater importance than price in the determination of which proposal offers the agency the best overall value, price/technical tradeoffs may be made, and we will not disturb awards to offerors whose proposals have higher technical ratings and higher prices so long as the result is consistent with the evaluation factors and the agency has reasonably determined that the technical superiority outweighs the price difference. See Structural Preservation Sys., Inc., B-285085, July 14, 2000, 2000 CPD para. 131 at 7."

Author’s Note:  The lesson to be learned from this case, and others like it, is that a contractor cannot take anything for granted when responding to an RFP.  It is a mistake to assume that the agency knows about your capabilities as a result of previous contracts, and it is similarly a mistake to assume that the government evaluators will learn about your capabilities even though you do not provide detailed information.  Every proposal stands on its own and it is important to prepare your proposal in a manner that provides information that is responsive to the evaluation factors.  Contractors need to make certain that every evaluation factor is addressed clearly and thoroughly.  It is no longer enough to be the best contractor, you now need to be the "best" at putting proposals together, as well.  Most assuredly, you should do everything possible to avoid a conclusion like the one the GAO reached in the CDS case that "[g]iven the lack of detail in CDS’s proposal under each technical evaluation factor, we have no basis to question the evaluation."

The Department of Homeland Security has postponed the start date of the E-verify requirement (please see our earlier article).  The new rule will go into effect no earlier than Friday February 20, 2008.  Proponents of the new rule insist that the rule remains intact with as much legal force as before and that it is only being postponed.  Opponents of the new rule hope that the delay will allow the Obama administration ample time to evaluate the impact it could have on the world of government contracting.

For over twenty years, the federal government and private industry, including contractors, mining companies, developers and builders, have debated the extent to which land clearing and dredging activities should be regulated. Since the 1970’s, the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency have regulated the discharge of pollutants into the waters of the United States under 33 U.S.C. §1251 et seq., [the Clean Water Act]. Section 404 of the Act includes the discharge of dredged or fill materials as a regulated activity, and the Corps, by issuance of Section 404 permits, has regulated excavation activities in navigable waters and wetlands. 

In the 1980’s, "discharge of dredged material" was not considered by the agencies to include the “de minimis incidental soil movement that occurs during normal dredging.” In the early 1990’s, the Corps and EPA redefined the term to include the redeposit of dredged material. This regulatory definition was challenged in court, and in 1998 the U.S. Court of Appeals for the District of Columbia Circuit ruled that the agencies could not regulate "incidental fallback."   National Mining Association v. U. S. Army Corps of Engineers, 145 F.3d 1399. In August 2000, the Corps and EPA included a definition of the term "incidental fallback" in the regulations. The agencies also added that the use of mechanized earth-moving equipment in waters of the United States was presumed to result in the discharge of dredged material, except where the equipment usage could be shown to only result in incidental fallback. The adoption of these definitions was apparently the agencies’ "reasoned attempt to more clearly delineate the Clean Water Act jurisdiction" rather than develop a "bright line" rule for determining which activities would require a Section 404 permit.

 

In response to an adverse decision issued by the United States District Court for the District of Columbia in January 2007, National Ass’n of Home Builders v. U.S. Army Corps of Engineers, Civil Action No. 01-0274, January 30, 2007, the U.S. Army Corps of Engineers and the Environmental Protection Agency recently adopted a Final Rule on December 31, 2008, 73 FR 79641, that deleted the definition of "incidental fallback" from 33 CFR 323.2(d)(2)(ii) and 40 CFR 232.2(2)(ii), as well as the language indicating that the Corps and EPA "regard" the use of mechanized earthmoving equipment as resulting in a discharge subject to regulation.

 

With the re-issuance of the Section 404 regulations, the situation now will be as it was in 1999 where the decision as to when a particular redeposit of dredged material is subject to Clean Water Act jurisdiction will entail a case-by-case evaluation. This regulatory roll back may create additional burdens to parties that engage in activities that involve incidental fallback and the use of mechanized earthmoving equipment. Corps and EPA guidance in the 1990’s identified these activities as including:

 

· Mining activities, including sand and gravel mining, aggregate mining, precious metals and gem mining, recreational mining, and small instream hydraulic dredges

 

· Ditching and draining activities, including ditching to lower the water table, ditching to drain

wetlands, and removal of beaver dams

 

· Maintenance dredging activities and excavation for currently used flood control projects or for

previously abandoned flood control, and irrigation or drainage projects

 

· Channelization and the reconfiguring or straightening of streams

 

(See 1997 Corps/EPA Memorandum)

In November, 2008, the Department of Homeland Security (DHS) implemented a new rule through the Federal Acquisition Regulation (FAR) that would force companies doing business with the federal government to clear their workers through a verification database. This database is called E-Verify and it electronically confirms whether a new hire is in the United States legally and therefore eligible to work on a federal project.  It works by comparing the name of the queried worker against submitted I-9 forms – the Social Security Administration’s paper based means of verifying worker status – and the DHS’s 60 million records of immigrants. Currently, participation in E-Verify is voluntary. According to the October 23, 2008 DHS press release, over 92,000 employers have used E-Verify, with nearly 7 million queries made in Fiscal Year 2008, and 450,000 queries so far in Fiscal Year 2009.  In 96% of the queries made, the worker is deemed eligible to work on a federal project.

The new rule was placed into effect on June 6, 2008 by President Bush as part of an Executive Order, and pending the outcome of the case discussed below, it will be implemented on January 15, 2009. If implemented, it will require contractors and subcontractors who win federal contracts to verify their employees’ status and makes it very difficult for any company to knowingly employ illegal immigrants. In the past, illegal immigrants have been discovered working on U.S. military bases and in other federal offices on multiple occasions. The rule is not without limitation – it would only apply to contracts valued at over $100,000.00 and subcontracts valued over $3,000.00, and to the workers assigned to that particular project.

The legality of this new requirement is being challenged in federal court where many groups, including the U.S. Chamber of Commerce and Associated Builders and Contractors among other co-plaintiffs, have filed suit to prevent its implementation. The Complaint names Michael Chertoff, Secretary of Homeland Security, et. al., as Defendants and was filed on December 23, 2008 in the United States District Court for the District of Maryland.  The lawsuit contends that it is illegal to require participation in a program such as E-Verify. The law in question, an amended version of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, designated E-Verify as one of several pilot programs that contractors can enroll in, but it also asserts that their participation cannot be made mandatory, as it would be if this new rule were implemented.

The rule has the potential to impact a very large number of contractors. The rule could make participation in federal government contracting more costly for contractors: the Complaint notes an estimated increased cost of $188 million to private employers if the rule is implemented, a very negative outcome given the current state of the economy.  In a statement issued by the U.S. Chamber of Commerce, Randy Johnson, Vice President of Labor, Immigration and Employee Benefits stated that, “The DHS intends to expand E-Verify on an unprecedented scale in a very short timeframe, and to impose liability on government contractors who are unable to comply.” He adds that, “Given the current economy, now is not the time to add more bureaucracy and billions of dollars in compliance costs to America’s businesses.”  Additionally, the press release includes comments regarding the legality of the rule from Robin Conrad, executive vice president of the National Chamber Litigation Center (NCLC), the Chamber’s public policy law firm, who stated that, “This massive expansion of E-Verify is not only bad policy, it’s unlawful,” adding that, “The Administration can’t use an Executive Order to circumvent federal immigration and procurement laws. Federal law explicitly prohibits the Secretary of Homeland Security from making E-Verify mandatory or from using it to re-authorize the existing workforce.” Considering all of the changes we are expecting to see with the inauguration of Barack Obama in January, it will be interesting to see how this all plays out in the coming months.