Did A Handful of States Mistakenly Depress the National ARRA Job Total?

February 3, 2010 by Phil Mattera

It was expected that the job numbers in the latest round of Recovery Act recipient reporting that just came out would diverge from those of the previous quarter. That’s because the Office of Management and Budget changed the job-counting procedure that contract and grant recipients were supposed to follow.

What’s puzzling, however, is that the job totals for different states are veering in different directions. My colleagues Thomas Cafcas and Leigh McIlvaine and I looked at the numbers and found that some states have reported substantial increases in ARRA-funded employment while others have posted significant declines. Idaho and Alabama nearly doubled their job tally; New Hampshire, Washington and Illinois were down more than 50 percent. Texas and Alabama added nearly 9,000 jobs each to their number; California dropped by nearly 40,000.

Here are the biggest changes in absolute numbers, with percentage changes displayed as well:

Decreases
California: down 39,170 (-36%)
Washington: down 20,104 (-58%)
Illinois: down 13,074 (-53%)
Arizona: down 5,472 (-45%)

Increases
Alabama:  up 8,987 (+184%)
Texas: up 8,888 (+45%)
Ohio: 7,610 (+45%)
Kentucky: 6,475 (+154%)

To try to make sense of these contradictory trends, we examined the grants and contracts in each of the states that contributed the most to the job totals.

In all eight states above, the change is almost entirely attributable to downward or upward movement in the job numbers associated with one type of grant: the State Fiscal Stabilization Fund (SFSF). The $54 billion SFSF — one of the largest components of the Recovery Act — is designed to shore up state budgets by providing additional federal funds, primarily for education but also for other kinds of public services.

In California, the employment impact of the SFSF was said to have dropped from 71,619 jobs in the previous reporting period to 38,924 in the last quarter of 2009. The difference of 32,695 represents more than 80 percent of the overall decline in the state’s job numbers.

In Washington the SFSF drop was 20,498, which is more than the total state job decline (there were increases in other categories). In Illinois and Arizona the SFSF declines were also larger than the state total.

At the same time, higher SFSF job numbers account for nearly all of the increases in the state ARRA job totals in Alabama, Ohio and Kentucky. In Texas the SFSF job number went up by more than 12,000 but it was offset somewhat by declines in other categories.

So what is one to make of these disparate SFSF impacts?

In the case of California, a majority of the SFSF drop comes from the non-education portion of the fund. It appears that the state used a $1 billion grant to pay the salaries of correctional officers but after that money ran out it turned to other non-ARRA sources to pay the officers. The 18,229 correctional jobs that were previously listed as being saved by ARRA were then zeroed out.

California also reported that the education portion of the SFSF accounted for about 14,000 fewer jobs in the October-December quarter than during the previous reporting period. There were also declines in ARRA-funded education jobs amounting to about 20,500 in Washington, 8,700 in Illinois, and 5,500 in Arizona.

At the same time, there were increases of about 12,300 education jobs in Texas, 4,400 in Kentucky, 4,150 in Alabama, and 3,900 in Ohio.

The increases appear to reflect the fact that the states involved had not yet put the federal money to work in the previous quarter (or had only just begun), so there were few or no jobs to report. That makes sense, but why should some states be reporting substantial declines in ARRA-funded education jobs?

Those states are out of line with the rest of the country. If we exclude the four states with the big declines, the rest of the country saw an increase of 33,819 jobs associated with SFSF education funds.

In the case of California, the reason may have been that the data in the first reporting period were overestimated and were adjusted downward for the last quarter. The need for a revision was widely discussed in recent months and was alluded to in a press release issued by the state’s Recovery Task Force on Saturday.

We have seen no public indication that a deliberate downward revision was responsible for the other big job drops in Washington, Illinois and Arizona. Officials in those states should clarify the reasons for the declines, so we can be sure they do not stem from a misunderstanding of the new job-counting procedures.

If there are not good reasons for those decreases, then the national ARRA job numbers are actually a bit higher than the 599,000 prominently featured on Recovery.gov.

Reposted from the STAR Coalition website.

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The Case of the Missing Jobs Revisited

February 1, 2010 by Phil Mattera

Over the weekend the Recovery Accountability and Transparency Board posted the new ARRA recipient data for the fourth quarter of 2009. The first thing I checked was whether there was a repeat of the phenomenon I wrote about with the first round of data: projects that are well under way or even completed reporting zero jobs generated.

I found that the mystery of the missing jobs is still with us. The spreadsheets on Recovery.gov include 4,396 federal contracts and 23,719 grants with a zero in the jobs column. Some of these, however, are not yet under way or are not very far along.

If we exclude those projects whose status is designated as “not yet started” or “less than 50% completed,” we are left with 1,713 contracts and 3,316 grants, or a total of 5,029.

I then looked at the column showing how much each project has actually received in ARRA funds. Some of those 5,029 report not having received any money as yet. If we remove those 180 contracts and 426 grants, there are 4,423 remaining.

In other words, more than 4,000 ARRA projects have received funds and managed to complete a substantial amount of work but are claiming not to have generated any jobs in the process.

Keep in mind that this time around, recipients were supposed to report jobs in a different way. Rather than guessing which positions were created or retained as a result of Recovery Act funding, they were supposed to simply add up all the hours worked on ARRA-funded projects and divide the total by their definition of a full-time week.

In many cases the message seems not to have gotten through. Many recipients continue to refer to jobs created and retained in the jobs narrative column. And in many cases the narrative is inconsistent with a listing of zero jobs.

One contractor refers in the narrative to “5 full-time correctional officer positions.” Another: “Project create work for 1 month for 4 existing positions.” And yet another: “This job retained 180 jobs – it takes approx. 70 man hours to complete the piece of equipment.”

It seems evident that many contract and grant recipients still think they are supposed to be reporting jobs created and retained, and many of those are still under the misapprehension that retained jobs don’t count.

There are even cases in which recipients note the total number of hours worked-one states: “A total of 1577 hours was worked in this last quarter as a result of Recovery Act funded projects”-but still put zero in the jobs column.

Recovery.gov displays the total number of “recovery funded jobs reported by recipients” in the fourth quarter as 599,108. One can only guess how much higher the number would be if all recipients calculated their job numbers in the proper way.

Reposted from the STAR Coalition blog

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Report: States Are Making More Effective Use of Web to Inform Taxpayers About Economic Stimulus Spending

January 26, 2010 by Michelle Lee

Some states are making dramatic improvements in websites designed to disseminate information about their share of the $787 billion American Recovery and Reinvestment Act (ARRA), but others are still failing to make effective use of online technology to educate taxpayers about the impact of economic stimulus spending.

This is the finding of Show Us the Stimulus (Again), a report released today by Good Jobs First, a non-profit research center based in Washington, DC. It updates a similar study published by Good Jobs First last July.

The full text of the report as well as state-specific appendices can be found on the Good Jobs First website at www.goodjobsfirst.org/stimulusweb.cfm.

“Some states are making great strides in fulfilling President Obama’s promise that the Recovery Act would be carried out with an unprecedented level of transparency and accountability,” said Good Jobs First executive director Greg LeRoy. “Led by Maryland, which again receives the highest score, these states’ ARRA websites do a good job in helping taxpayers understand and evaluate the role of the Recovery Act in job creation and state fiscal relief.”

The Good Jobs First study examines the quality and quantity of disclosure by official state websites on the many different ways more than $200 billion in ARRA funding is flowing through state governments to communities, organizations and individuals. It looks at the availability of information on spending programs as well as specific grants and contracts, with emphasis on data relating to jobs and the geographic distribution of spending within states. Using seven main criteria, each state is graded on a scale of 0 to 100.

“We are impressed by ‘Cinderella’ states such as Kentucky and Illinois, which were ranked at the bottom in our previous assessment but broke into the top tier in the new ranking,” said Philip Mattera, research director of Good Jobs First and principal author of both reports. “Numerous others have also improved their sites and are effectively incorporating the data states are helping to collect for the federal government’s Recovery.gov website. The state sites and Recovery.gov both have vital roles to play in helping the public evaluate the Recovery Act’s performance.”

The states with the highest scores in the new report are: Maryland (87), Kentucky (85), Connecticut (80), Colorado (72), Minnesota (72), Wisconsin (72), California (69), Illinois (69), Oregon (67), Massachusetts (65), Georgia (64), West Virginia (64), New Mexico (62), New York (62), Pennsylvania (62), Montana (61) and Arkansas (60).

At the other end, there are 11 states with scores below 20, reflecting the absence of adequate data on ARRA programs or specific projects. Starting from the bottom, they are: North Dakota (5), District of Columbia (6), Missouri (10), Alaska (13), Vermont (13), Louisiana (16), Mississippi (17), Idaho (18), Oklahoma (18), Texas (18) and South Carolina (19).

Although changes in methodology make exact comparisons impossible, the following states experienced major changes in ranking from GJF’s previous survey: Kentucky, which soared from 47th place to 2nd (an increase of 45 places); Illinois, which jumped from 50th to 7th (43 places); Minnesota, which climbed from 34th to 4th (30 places); and Utah, which rose from 50th to 24th (26 places).

Here are highlights of specific findings:

  • Most states do a good job of providing information on the composition of their ARRA spending, both in broad program categories (energy, housing, transportation, etc.) and in narrower ones. Only the District of Columbia provides no program allocation information at all.
  • Geographic breakdowns (by county or other division) are less common than summaries of spending by program category. Twenty-seven states provide geographic information, often with interactive maps.
  • Only three states—Kentucky, Maryland and Wisconsin—juxtapose the geographic distribution of spending with patterns of economic distress or need within the state.
  • Besides overall spending amounts, state residents may be interested to know where individual ARRA projects such as the repaving of a road or repair of a school building are taking place. More than half the states (28) now have some kind of project mapping feature on their ARRA site.
  • Via maps or otherwise, 41 states provide one or more of the following types of detail on projects funded through ARRA grants and contracts: description, dollar amount, recipient name, status, and the text of the contract or grant award. Four states—Connecticut, Kentucky, Massachusetts and New Hampshire—have all five elements.
  • Despite the ready availability of jobs data at Recovery.gov, 10 states still have none on their websites: Hawaii, Kansas, Louisiana, Mississippi, Missouri, New York, North Carolina, North Dakota, South Carolina and the District of Columbia. By contrast, 16 states have jobs data on individual projects as well as totals by program area and for the state as a whole.
  • No state provides comprehensive data on wage or benefit levels in ARRA jobs or on the demographics of the workers in those jobs.
  • Only five states—Connecticut, Kentucky, Massachusetts, Mississippi and New Hampshire—provide the full texts of at least some ARRA contract awards.
  • No state reports the share of ARRA contracts going to minority, women-owned or other disadvantaged business enterprises, though Pennsylvania is expected to begin doing so soon.

Based on our findings, Good Jobs First offers the following recommendations:

  • Put a summary of key information about ARRA spending at the top of the home page of the site. A graphic showing the main spending flows goes a long way in helping the average user begin to see what the Recovery Act is all about. There should be clear links to pages with details about the various specific programs.
  • Provide a map or table showing how overall ARRA spending and the amounts in key categories are being distributed among counties (or other geographic division) around the state.
  • Also show how the spending is distributed across the state in comparison to patterns of economic distress such as local unemployment and foreclosure rates.
  • Along with information on spending streams, provide details on individual projects—such as a particular transit improvement or weatherization effort—funded by an ARRA grant or contract. These details should include a description of the project, the dollar amount, the name of the recipient entity, the status of the project, and the number of jobs generated by the project, along with the text of the contract or grant award.
  • Where possible, display the location of the projects on maps. Interactive displays that allow one to drill down for details are better than static maps.

“At a time of intense public concern about the effectiveness of government spending designed to mitigate the economic crisis, states should be maximizing their use of online tools,” Mattera said.

Good Jobs First co-chairs the Coalition for An Accountable Recovery (www.coalitionforanaccountablerecovery.org), which works at the federal level. It also coordinates States for a Transparent and Accountable Recovery, or STAR Coalition (www.accountablerecovery.org), which works with state-level organizations.

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Report Deciphers Bond Provisions of the Recovery Act, Focusing on Accountability Issues

January 20, 2010 by Michelle Lee

Perhaps the most obscure aspect of the $787 billion American Recovery and Reinvestment Act is how it seeks to expand bond programs for public infrastructure and private economic development projects.  A report released today by Good Jobs New York explains how the Recovery Act’s new and expanded bond programs are facilitating economic recovery and where opportunities exist for public input. The report is available at www.goodjobsny.org.

The impacts of Recovery Act bonds are potentially enormous with billions of dollars in new lending authorized nationwide. Yet, there is little public discussion about how they work or if the projects they finance will create good jobs, concludes the study, Bonds and the Recovery Act: A Guide to Municipal Bonds Enabled Under the 2009 American Recovery and Reinvestment Act and Their Potential Impacts on New York Communities.

“We hope this report will become a useful organizing and educational tool for many groups of New Yorkers,” said Bettina Damiani, Project Director of Good Jobs New York. “The report documents what the goals of specific bond programs are and if there are leverage points to make sure projects are accountable and create good jobs.”

The report reviews new and modified bond programs (private activity and governmental) through the lens of community needs and increased transparency and accountability: Are there public hearings? Are there prevailing wage requirements? Is priority given to low-income communities? What projects have already received such financing?

“Thanks to the Recovery Act, there are new and expanded municipal bond programs,” said Allison Lirish Dean, GJNY’s Research Analyst and lead author of the report. “But the process for issuing these bonds hasn’t changed despite the Recovery Act’s emphasis on transparency and accountability.”

The report includes commentary on approximately $74 million in approvals for Recovery Zone Facility Bond projects in New York City such as a parking facility at St. Barnabas Hospital in the Bronx, and a retail center known as “City Point” in Brooklyn.  Both projects were controversial because of the small number or low quality of jobs expected to be created. Also, the City Point project was widely opposed by Brooklyn residents and small business owners because in 2007 the City displaced numerous small, mostly locally owned stores for the development.

Bonds and the Recovery Act, while primarily a resource guide, does include policy recommendations:

  • Where possible, the Bloomberg Administration should include jobs created by Recovery Bond projects in the New York City Stimulus Tracker.
  • Any amendments to the private activity bond programs associated with the Recovery Act should increase the requirements for public input and include mechanisms that would guarantee low-income New Yorkers directly benefit from projects. Current language in the Recovery Act and additional guidelines put in place by the City last summer are too weak to guarantee that projects benefit New Yorkers who most need jobs or that they create good permanent jobs.

Bonds and the Recovery Act is online at: www.goodjobsny.org.

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Study: States Should Grow Their Own High-Tech Jobs, Shun the Tax-Break “War Among States”

January 20, 2010 by Michelle Lee

Pennsylvania and six other states vying with one another to grow their high-tech economies will best succeed by focusing on their existing employers and shunning the “economic war among the states” involving costly tax-break competitions.

That’s the finding of a major study released today by Good Jobs First. Ohio, New Jersey, New York, Maryland, North Carolina and West Virginia are the states compared.

As states experience their most severe revenue crisis in post-war history, the study charts a positive alternative strategy for the most effective job-creation investments.

The study draws its conclusion from two unique analyses of Pennsylvania. One details where the state’s high-tech jobs have come from since 1990; the other reveals the effective tax rate for high-tech companies in all seven states. It finds only minimal differences among tax rates—even when the states’ most lucrative economic development incentives are accounted for.

“Over time, all the growth in Pennsylvania high-tech jobs comes when existing workplaces expand and new ones are born—not from smokestack-chasing,” said Greg LeRoy, executive director of Good Jobs First and primary author. “We believe the same analysis would find similar results for the six other states.”

Instead of competing with each other for specific companies, states’ resources will best be spent strengthening small, young and locally owned businesses, and improving the skills of workers to match industry needs, the study concludes.

Although interstate movement of high-tech jobs is almost negligible, offshore job flight is a far more significant issue. The study recommends redress be sought through federal trade policy, not to be confused with state tax policy. The study provides eight case studies of big-ticket incentive deals including Dell, Google, AMD, Westinghouse, two pharmaceuticals, a plastics factory, and a research lab.

The study was funded by the Pittsburgh-based Heinz Endowments, a regional philanthropic leader in developing strategies to spur high-tech job growth. The public announcement of the study came just before a meeting sponsored by the Endowments to discuss implications of the findings with participants from the seven states and other economic development organizations. Good Jobs First is a non-profit research center based in Washington, DC promoting best practices in economic development. The study is online at www.goodjobsfirst.org/PAhightech.cfm.

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OMB Moves to Fix ARRA Snafus

December 22, 2009 by Tommy Cafcas

Responding to criticisms such as those issued by the Coalition for an Accountable Recovery (CAR) and States for a Transparent and Accountable Recovery (STAR), the Office of Management and Budget (OMB) has revised its guidance that governs how Recovery Act grant and contract recipients report on jobs.

The revisions, consistent with recommendations from CAR and STAR as well as the Government Accountability Office (GAO), are intended to make job-counting less subjective and therefore less prone to errors. In the new guidance, OMB also signals that recipients that continually fail to report will be subject to penalties.

Because many recipients failed to accurately account for created or retained jobs in their October reports, OMB simplified its instructions. The new guidance says: count all work hours funded by Recovery Act dollars, divide those hours by a full-time work schedule for the quarter, and report that number. And don’t try to figure out cumulative jobs.

Although the guidance is likely to correct the most egregious reporting problems on the number of Recovery Act jobs, it fails to address CAR and STAR concerns about job quality and equity issues. Specifically, the coalitions remain on record seeking revisions in the guidance to include:

  • The wages of the jobs and whether they include access to benefits like healthcare.
  • The race, gender and nine-digit residential ZIP code of all workers performing those hours of Recovery Act-funded jobs. This will help determine if those most in need of economic stimulus are receiving their fair share.

The revised guidance also states that Federal agencies can terminate awards and/or revoke a recipient’s ability to receive future funds if a recipient or sub-recipient:

The guidance also warns that failing to submit a report or persistently filing late or negligently shall be treated as a non-compliant recipient subject to Federal action. There were more than 4,000 such cases in the first round alone. Moreover, it states, if a recipient or sub-recipient intentionally reports false information, Federal prosecutors may bring civil and/or criminal proceedings as enabled by ARRA or existing Federal procurement rules.

With clarified reporting rules, the blame for any new egregious errors will clearly rest with recipients, including state governments, not the feds. Effective February 2, corrections can be made continuously, not quarterly, at FederalReporting.gov.

While OMB should be congratulated for clarifying job reporting guidelines, the failure to include metrics on job quality and equity issues remains troubling.

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The Dog Ate My ARRA Reporting

December 16, 2009 by Phil Mattera

The Recovery Accountability and Transparency Board has just published a list of more than 4,000 prime recipients of ARRA contracts and grants that failed to comply with the first round of reporting requirements, including data on job creation and retention.

If nothing else, the document shows the difficulty of trying to get thousands of companies, non-profit organizations and state/local government agencies to follow instructions and meet a single deadline. Since the list also includes the apparent reason for each case of non-compliance, it also provides an impressive collection of excuses for screwing up.

Here’s a selection of the self-justifications offered by these recipients of federal largesse:


The rules were to blame

A company called EnGenius said its failure to report was “due to late breaking guidance” (even though the final rules were published well before the filing deadline).

Cherry Central Cooperative and other Agriculture Department recipients complained “there was confusion about the reporting requirements vs. the exemptions that are provided for reporting salary information for top executives.” (The salary requirement applied only to very large federal contractors.)


The reporting system was flawed

All American Brothers Co. LLC: “Claimed they did not receive all the correct coding information to allow for input into stimulus template & drop down menu does not contain necessary information needed for report.” (Somehow thousands of others managed to make it work.)


The Internet was broken

CBS Surveying and Mapping and others said they did submit the data but it somehow did not get recorded by FederalReporting.gov.  (Didn’t they notice their data was missing from Recovery.gov?)

D.E.L. Disaster Recovery Enterprise LLC: “The FederalReporting.gov website was down and the recipient could not report and could not get help.” (Sounds like they need their own disaster recovery help.)

Advanced Integration Group Inc.: “Website down at time of reporting.” (And they never bothered to try again?)


I forgot to finish

Speaking of the Ruffed Grouse Society, USDA said: “Draft report submitted. Recipient was not aware they had not finalized the report.“ (The organization, whose website says it is “dedicated to hunting and conservation of young forest species,” was apparently too eager to get back to the woods.)

Interactive Elements Inc.: “Contractor inadvertently did not hit ‘submit’ to finalize its draft report in the federal reporting system.” (Yes, that interactive stuff is complicated.)


I forgot to start

Green Building Construction & Electric, Inc.: “Contractor said he simply forgot to do the report, even though contracting called and reminded him. “


Reporting requirement? What reporting requirement?

Eureka Development, LLC: “Were not aware of the ARRA reporting requirements.” (This was their non-eureka moment.)


I heard that the assignment was cancelled

Chester Bross Construction Company: “Misinformed that no reporting was required – will report 1/10. “ (I swear that’s what I heard.)


I was confused

Dell Federal Systems: “Lack of understanding of the reporting requirement and associated guidance.”

State Military Department of Indiana: “Recipient lacked understanding of Recovery Act reporting requirements.”


I was on vacation

Siku Construction, LLC: “The responsible administrator was on vacation and did not receive the e-mails and phone messages left by the awarding office.”


I was really sick

City of Pauls Valley: “Reporter Contracted H1N1, no backup.”


I’m Canadian

Nanometrics Inc.: “Contractor tried to submit report, but system won’t recognize Canadian institutions. “


There was this big wave…

American Samoa Criminal Justice Planning Agency: “Grantee was given waiver due to tsunami.”


Reporting—I Don’t Need to Do Any Stinking Reporting!

Eyak Technology Limited Liability Company: “Recipient has chosen not to report.” (This from a firm that got an award from the Department of Homeland Security.)


You caught me

Johnson Controls Inc. and numerous other contractors for the Department of Veterans Affairs: “No valid reason discerned.” (Busted.)

Thanks to Tommy Cafcas for research help.

(reposted from the STAR Coalition website)

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NYC Approves Recovery Zone Bonds for Project that Won’t Aid Recovery

December 16, 2009 by Allison Lirish Dean

The New York City Capital Resource Corporation (CRC) is blurring job numbers on stimulus bond projects again. On December 15, 2009 the CRC’s board voted to issue $19.8 million in tax-free Recovery Zone bonds on behalf of Arthur Management Corp. to finance the construction of a parking facility in the Bronx. The facility will serve St. Barnabas Hospital, which created Arthur Management in order to be eligible for the financing.

CRC staff insisted the new facility will create six permanent jobs. What they didn’t mention was that 28 jobs will be displaced when the old facility is torn down because the new one will rely heavily on automation, allegedly saving the hospital $500,000 a year. Good Jobs New York staff and organizers from the Committee of Interns and Residents (CIR) who testified against the deal questioned the logic of using stimulus bonds intended to “contribute economically to the neighborhoods in which projects are located,” as the city’s own criteria state, for a project that could result in a net loss of 22 jobs.

Even the argument that saving a hospital some money aids recovery doesn’t hold up in light of the millions in bonuses St. Barnabas, despite being in financial straits, recently gave to its top executives. The hospital has also spent hundreds of thousands of dollars–and plans to spend more–attempting to overturn a 1999 National Labor Relations Board decision that cleared the way for resident physicians to legally unionize. In the meantime, the NLRB was obligated to impound secret ballots generated when staff voted earlier this year on whether to unionize, an indication that St. Barnabas’s relationships with unions and its employees is less than the standard New Yorkers should expect from companies seeking public subsidies.

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A Clawback Enforcement Trend?

December 15, 2009 by Tommy Cafcas

North Carolina officials, outraged at Dell over its closure of a heavily subsidized assembly plant, are doing everything they can to recoup subsidies given to the company. Governor Purdue, a fierce proponent of incentives to attract jobs, stated “that every red cent of incentives money had to come back to the people of North Carolina.” State and local officials have enforced clawback provisions from various grant programs recapturing $28 million, but Dell says it’s not obligated to pay back up to $6 million in tax credits given between 2005 and 2007. The state openly disagrees with Dell’s interpretation.

Secretary of Revenue Kenneth Lay stated in an interview that Dell no longer meets agreement benchmarks and is therefore ineligible for past and future tax credit subsidies. Dell’s position is that by creating the number of jobs required by past benchmarks, it is entitled to keep past tax credits awarded, even if by closing the factory it becomes ineligible for that same subsidy going forward. The law, hastily written and passed in 2004 under pressure from Dell, is unclear about who is correct.

Ambiguous legislative and contractual clawback language is also an issue in Missouri. Two years ago, Pfizer broke ground on a heavily subsidized St. Louis facility. Now, Pfizer has announced it is closing the lab, and officials appear unwilling to let Pfizer walk away from the deal with taxpayer subsidies in hand. Pfizer was offered a $7 million, 10-year tax abatement as well as sales tax exemptions on construction materials and training cash grants for creating 1,000 jobs. State and local officials are reviewing the economic development contract signed with Pfizer, Inc. to determine if a clawback of subsidies is possible.

Although no national statistics are available, clawback enforcement appears to be an increasing trend. Between 2004 and 2009, the Texas Enterprise Fund has clawed back at least $1.3 million from 12 projects. In 2008, the State of Illinois found 11 projects to be in violation of agreement terms and began recapture efforts on all of them.

Even site location consultants are recognizing that clawbacks are here to stay. Most now advise clients to seek easily obtainable benchmarks in negotiations instead of refusing clawbacks outright. “Even when a company is presented with seemingly inflexible documents, it may have some room to negotiate related points,” said site location consultant Tracey Hyatt Bosman. Many deals now contain clawbacks but lack strong standards. Clawback agreements are much less useful if they lack clear, robust benchmarks.

As clawbacks become the norm in development agreements, officials should take care to ensure that incentive standards are not watered-down or negotiated out altogether.

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Misbehaving Contractors are Recovery Act Winners

November 13, 2009 by Phil Mattera

ARRA logoThe federal government has awarded about $17 billion in direct contracts under the various provisions of the American Recovery and Reinvestment Act (ARRA). Given the Administration’s commitment to accountability, one hopes that the contractors were chosen with the utmost care and that any companies with serious blemishes on their record were excluded.

If the timing had been a bit different, such a review could have been accomplished much more easily. The General Services Administration is in the process of implementing legislation passed by Congress last year that mandates the creation of a database on the integrity and performance record of federal contractors and grantees. In September GSA published a notice in the Federal Register about its plans for what is being called the Federal Awardee Performance and Integrity Information System, or FAPIIS. The comment period on the plan ended earlier this month. Perhaps the system will be operational before ARRA reaches the end of its two-year life.

Unfortunately, the public will never know the details of how FAPIIS is used to vet contractors for ARRA or any other program. The reason is that Congress caved in to pressure from the contractor community and prohibited public disclosure of the database, which will be available only to federal agencies for internal use.

Fortunately, the public still has access to the Federal Contractor Misconduct Database (FCMD), which was created and is maintained by the non-profit Project On Government Oversight (POGO). It served as the inspiration for FAPIIS, though POGO and other watchdog groups pushed for a public version of the federal database. The FCMD, which covers the 100 largest federal contractors, documents more than 700 cases of misconduct since 1995 that resulted in more than $26 billion in fines and penalties. It covers a wider range of misconduct than will FAPIIS.

Apparently, most federal agencies did not pay close attention to the FCMD in awarding their ARRA contracts. An examination of the national Recovery Act contractor spreadsheet shows that many of those companies appear in POGO’s database as having been involved in cases of misconduct. They account for more than $6 billion in Recovery Act contract awards.

There are 12 contractors with more than one instance of misconduct and ARRA contracts of at least $150 million.* Here they are (listed by volume of ARRA contracts):

  • CH2M ($1.8 billion in ARRA contracts; 6 instances of misconduct with penalties of $2.8 million)
  • URS ($737 million in contracts; 4 instances and $2.4 million in penalties)
  • Northrop Grumman ($596 million in contracts; 29 instances and $821 million in penalties)
  • Battelle Memorial Institute ($522 million in contracts; 7 instances and $1.3 million in penalties)
  • Honeywell International ($472 million in contracts; 31 instances and $641 million in penalties)
  • Fluor ($469 million in contracts; 23 instances and $198 million in penalties)
  • SAIC ($312 million in contracts; 10 instances and $14 million in penalties)
  • Bechtel ($270 million in contracts; 15 instances and $359 million in penalties)
  • University of California ($270 million in contracts; 25 instances and $67 million in penalties)
  • Lockheed Martin ($180 million in contracts; 50 instances and $577 million in penalties)
  • University of Chicago ($163 million in contracts; 4 instances and $22 million in penalties)
  • Jacobs Engineering ($161 million in contracts; 2 instances and $37 million in penalties)

When the nation’s largest contractors have track records such as these, it is not surprising that Congress chose to keep its misconduct database a secret.

* In the case of joint ventures, the amount of the contract award is divided equally among the companies or institutions involved.

Reposted from the Dirt Diggers Digest.

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