Report finds federal regulations have delayed stimulus projects

A bevy of strict federal regulations imposed on agencies and government contractors have slowed the pace of some Recovery Act projects, according to a report released on Thursday by the Government Accountability Office.

Federal agencies and state and local governments told GAO that several decades-old rules, including those designed to protect the environment, ensure that employees are paid a fair salary and guarantee that parts and manufactured goods are purchased domestically have affected their ability to select and start stimulus projects.

For example, the Commerce, Energy, and Housing and Urban Development departments, along with the Environmental Protection Agency, have faced delays in complying with the 1931 Davis-Bacon Act, which requires contractors and subcontractors to pay workers the locally prevailing wages on most federally funded construction projects.

The Energy Department's massive Weatherization Assistance Program was subjected to the Davis-Bacon requirements for the first time because of the stimulus rules after previously being exempt. The agency, however, could not allocate funds to state and local governments for the program until the Labor Department determined the prevailing wages for weatherization workers in each county nationwide -- a task that was not completed until Sept. 3, 2009.

By the end of 2009, only 9,100 of a planned 593,000 homes had been weatherized using stimulus funds, according to GAO.

"States used only a small percentage of their available funds in 2009, mostly because state and local agencies needed time to develop the infrastructures required for managing the significant increase in weatherization funding and for ensuring compliance with Recovery Act requirements, including Davis-Bacon requirements," the report said.

The Energy Department, however, said GAO's figures are out of date and, according to one news report, 124,000 homes were weatherized through the end of 2009.

Complying with the Buy American provision, which, with some exemptions, requires that raw materials and manufactured goods be produced in the United States, also became a concern for some agencies, investigators found.

The Homeland Security Department's electronic baggage screening program was delayed as officials waited for a Buy American waiver because the contractor discovered that only foreign-made components would integrate with certain airport security systems, the report said. Likewise, officials from the Chicago Housing Authority needed to wait for a waiver after they found that security cameras compatible with their system were not made in the United States.

In some cases, agencies such as EPA had to develop new guidance for complying with the Buy American provisions and for issuing waivers to recipients that were unable to meet the regulation.

"An industry representative told us that the Buy American provisions could interrupt contractors' supply chains, requiring them to find alternate suppliers and sometimes change the design of their projects, which could delay project starts," the report said.

The report, which was requested by Senate Minority Leader Mitch McConnell, R-Ky., likely will add fuel to the debate over the stimulus, which was signed one year ago this week. Republicans argue the legislation has failed to spur job growth while the White House claims the stimulus has helped turn around the economy.

"We are focused on implementing the Recovery Act quickly and effectively, putting people to work today while building the long-term foundation for sustainable economic strength," said Thomas Gavin, a spokesman for the Office of Management and Budget. "Congress, in writing the law, wanted to ensure that all possible Recovery Act opportunities are available for American workers and American companies. We'll continue to strive to do that, expanding opportunities and jobs for the American people," he said.

McConnell's office did not respond to a request for comment about GAO's findings.

Federal regulations were not the only barrier to spending stimulus money quickly. State budget issues, mandatory project reviews and higher than expected staff workloads also presented challenges, officials told GAO.

To circumvent some of these problems and to expedite spending, agencies frequently chose projects that already had satisfied key federal requirements, such as environmental reviews. Others used existing funding streams or modified ongoing contracts, avoiding lengthy new competitions.

The 27 agencies reviewed by GAO had obligated $194 billion of the approximately $309 billion in stimulus project spending by the end of 2009.