Signed into law by President Obama on February 17, 2009, the American Recovery and Reinvestment Act (the Recovery Act) provides unprecedented levels of Federal funding, currently estimated at $787 billion dollars, to support the Nation’s economic recovery. The money will inject resources at virtually every level of the economy — for infrastructure spending, energy, healthcare system modernization, education, and others. The Recovery Act will provide great opportunities to government contractors. 

With these funds, however, also will come unprecedented levels of oversight and accountability. President Obama made clear in his address to Congress on February 24, 2009, that he expects strict oversight over how “every dollar” is spent, putting Vice President Biden in charge of that effort. To achieve this, there is a Recovery Transparency and Accountability Board (the Board) to be chaired by Earl Devaney, the former Inspector General of the Interior Department who was in large part responsible for ferreting out misconduct involving former lobbyist Jack Abramoff. 

Contractors should be aware of the significant accountability and transparency features of the Recovery Act when pursuing opportunities, whether as a prime contractor or a lower-tier supplier of goods or services.   

Fixed-Priced, Competitively-Awarded Contracts: The Recovery Act requires that fixed-priced, competitively-awarded contracts be used to the maximum extent possible. In his Congressional address, the President specifically criticized “no bid” contracts as something to be avoided as part of the recovery. 

Recovery Accountability and Transparency Board: The Board will work with agencies responsible for spending Recovery Act money to ensure that funds are awarded and distributed in a prompt, fair, and reasonable manner. Part of the Board’s objective is to ensure that projects funded under the Recovery Act avoid unnecessary delays and cost overruns. The Board will include Inspectors General from numerous Federal agencies in addition to Mr. Devaney, and is charged with auditing and reviewing information such as contract reports, competition requirements, and recovery and reinvestment spending. The Board also has broad subpoena power, to compel the production of documents but also to require testimony from officials of entities receiving funds. Inspectors General also are authorized to examine any records of contractors or subcontractors administering contracts with recovery funds and to interview any officer or employee of the contractor regarding such transactions. 

As has been true in the past with Inspectors General investigating government contracts, it is expected that if misconduct is discovered, the Board will make referrals to appropriate Federal law enforcement agencies, including the Department of Justice. Similarly, it can be expected that the Board audit reports will be provided to the Congress, which may result in Congressional investigation and oversight hearings.
 
Recovery.gov: As part of the Recovery Act, the Board is required to establish and maintain a publically available website aimed at fostering greater accountability and transparency and enhancing public awareness regarding the use of recovery funds: http://www.recovery.gov/.  The recovery website will contain information such as:

• Details about contracts, such as the competition process that was used for the award, and a summary of each contract over $500,000
• Summaries of every contract that is not fixed-price and not awarded using competitive procedures
• Findings from audits, Inspectors General, and the Government Accountability Office
• Methods for the public to provide feedback on contract performance
• Plans from each Federal agency using stimulus funds

Whistleblower Protections: Employees of non-Federal employers may not be discharged, demoted, or otherwise discriminated against as a reprisal for disclosing information the employee reasonably believes is evidence of gross mismanagement of a contract involving recovery funds; gross waste of recovery funds; substantial and specific danger to public health or safety related to implementation or use of recovery funds; abuse of authority related to recovery funds; or violation of law, rule, or regulation related to an agency contract (including the competition for or negotiation of a contract) related to recovery funds.   

With the transparency and accountability provisions of the Recovery Act coming on the heels of other “sea change” regulations in Federal contracting, such as the Federal Acquisition Regulation requirements for mandatory disclosure of certain violations of law, government contracting is plainly entering an era of significantly greater risk for contractors. The unprecedented level of government contracting that likely will be spurred by Recovery Act spending also will bring an unprecedented level of scrutiny, from Inspectors General, the Department of Justice, and the Congress. It is also probable that Recovery Act spending will lead to a flood of qui tam cases under the False Claims Act, which may remain under seal for years pending Department of Justice investigation. 

Every company looking to participate in recovery efforts funded, even in part, through the Recovery Act must appreciate this new business climate and act proactively to enhance compliance measures. Vinson & Elkins attorneys have substantial experience in government contracting matters, including investigations by the Department of Justice, Inspectors General, and Congress, and defending qui tam False Claims Act cases.

For more information, please contact VE lawyers Michael Buxton, Michael Charness, David Johnson, or Craig Margolis. Visit our website to learn more about V&E’s Government Contracts practice and White Collar Criminal Defense practice.