Delays plague Energy’s Recovery Act spending

At the end of February, a year after receiving $36.7 billion under the Recovery Act to fund renewable energy and efficiency projects, the Energy Department had spent just 7 percent of the money, the Government Accountability Office found.

Department officials had pledged to expedite stimulus spending as a means to put people to work quickly on shovel-ready projects. And while 70 percent of the funds have been obligated, red tape -- much of it related to compliance with environmental and labor laws -- is stalling spending, witnesses told lawmakers on the Senate Energy and Natural Resources Committee on Thursday.

Patricia Dalton, managing director of natural resources and environment at GAO, said spending had been most hampered by requirements associated with the 1931 Davis-Bacon Act and the 1969 National Environmental Policy Act. Davis-Bacon requires contractors and subcontractors to pay workers locally prevailing wages on construction projects, and the second law requires agencies to consider environmental consequences before green-lighting projects.

For example, the Energy Department's Weatherization Assistance Program previously had been exempt from Davis-Bacon, but under the Recovery Act it became subject to the requirements for the first time. That meant the Labor Department had to determine the prevailing wage rates for weatherization activities in each county in the United States.

To prevent this requirement from delaying program starts, Energy and Labor in July 2009 issued a joint memo authorizing work under the program so long as recipients paid workers Labor's prevailing wage rates for residential construction and agreed to compensate them for the difference later, if Labor established a higher rate for weatherization activities.

But many states refused to spend the money until Labor determined the county-by-county wage rates for weatherization activities.

"Many states did not proceed with awarding grants out of fear of future liability," said Michele Nellenbach, director of the Natural Resources Committee for the National Governors Association. "States were concerned they would have to later divert funds from one project to retroactively pay workers on another project that were unintentionally paid less than the prevailing wage, or would have to take money away from workers who were paid more than the contractually mandated prevailing wage."

According to Energy data GAO reviewed, "as of Dec. 31, 2009, 30,252 homes had been weatherized with Recovery Act funds, or about 5 percent of the approximately 593,000 total homes that DOE originally planned to weatherize using Recovery Act funds," Dalton said.

Other factors were problems as well, Dalton said, including staffing shortages at all levels of government.

Nellenbach said even though the Recovery Act authorized recipients to use of 10 percent of funds to cover administrative functions associated with the spending, many states have across-the-board hiring freezes, "making it extremely difficult for states and local government to rapidly increase capacity to the level proportionate with the amount of funding provided."