Construction Legislative Week in Review
www.agc.org February 17, 2011
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On the Inside
BUDGET
Congress and the Administration Begin the Budget Dance
TRANSPORTATION
House and Senate Continue Push on FAA Reauthorization
House T&I Committee Passes Highway/Transit Extension
ENVIRONMENT
Cuts in Diesel Retrofit Grants Proposed for FY 2011 and FY 2012
TAX
Administrationís FY 2012 Tax Policies Offer Mixed Bag for Construction
FEDERAL
Legislation to End Project Labor Agreement on Federal Construction Projects Introduced
SBA Finalizes Sweeping Regulations Governing 8(a) Programs
BUDGET
Congress and the Administration Begin the Budget Dance
 

This week in Washington focused on all things budget.  On Monday, President Obama unveiled his $3.7 trillion fiscal year (FY) 2012 budget, while the House of Representatives continues to debate a continuing resolution (CR) for the remainder of FY 2011 that would cut about $100 billion from last year’s spending level.

The President and House Republicans are claiming that their respective efforts show fiscal restraint and will begin to chip away at our country’s mounting federal deficit.  The fact is that neither of the approaches for dealing with the deficit really focuses on the biggest parts of the federal budget, including entitlements such as Social Security and Medicare.  Instead the budget balancing efforts focus cuts on a small portion of the federal budget known as non-defense discretionary spending.

In the federal budget for FY 2012 proposed by President Obama, the non-defense discretionary portion of the budget is only $610 billion of the total $3.7 trillion dollar budget or about 16 percent of the total federal spending. That 16 percent of the budget funds about 75 percent of the $100 billion+ in annual federal construction investment. 

The deficits are large and need to be addressed. The 2012 budget proposed by the president will result in a $1.1 trillion deficit, which will be smaller than the $1.6 trillion deficit forecast for 2011.   Over the 10 years covered by estimates in the president’s budget, annual deficits are forecast to stay between $600 billion and $775 billion.

Contractors who work for the federal government or under programs funded by federal and state dollars should be worried.  There is not a lot of fat in the construction budgets, and federal agencies are keeping score by how many total dollars are cut, not by the results of the investments.

AGC has done an analysis of the cuts in the House Republicans' CR for FY 2011and the president's budget for  FY 2012.  The House Republicans’ CR cut nearly $18 billion in construction spending (about half of the cuts are in BRAC, High Speed Rail and Water Infrastructure), while the president's budget cut non-transportation federal construction by nearly $1 billion.  The budget did propose a significant increase in transportation spending.   The plan outlines a $50 billion increase for FY 2012 but does not identify revenue sufficient to support such an increase.  A detailed analysis of the Department of Transportation’s budget request is available here.

AGC is also working to educate members of Congress on the impact of the budget cuts on programs that are successful in their districts.  Please take this opportunity to understand what construction programs are being cut and talk to your members of Congress about how these cuts will impact your state, your company and your employees.

Short-hand method for analyzing the impact of nonresidential construction on GDP, earnings and jobs:

  • An extra $1 billion in nonresidential construction spending would add about $3.4 billion to GDP, about $1.1 billion to personal earnings and create or sustain 28,500 jobs.
  • 9,700 jobs would be direct construction jobs located in the state of investment.
  • 4,600 jobs would be indirect jobs from supplying construction materials and services. The majority of these jobs would be located within the state of investment but there would be some out of state jobs supported.
  • 14,300 jobs would be induced when workers and owners in construction and supplier businesses spend their incomes locally and nationwide.

AGC issued a statement on the president's budget and the House CR. The news was covered USA Today and Engineering News-Record.

For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

TRANSPORTATION
House and Senate Continue Push on FAA Reauthorization
Transportation and Infrastructure Committee Marks-Up New Bill, Senate Scheduled to Pass Bill This Week
 

Both Chambers of Congress spent time this week on the long-delayed Federal Aviation Administration (FAA) Reauthorization.  In the House, the Transportation and Infrastructure Committee voted a new 4-year FAA reauthorization out of Committee, while the Senate is poised to vote on final passage of their FAA reauthorization bill. 

The new House  bill (H.R. 658), which now awaits floor action, would keep the passenger facility charge cap at $4.50 (as the current Senate bill does) and cuts Airport Improvement Program funding to $3 billion per year, which is $500 million less than the current appropriated level and over $1 billion less than the Senate bill.  The Airport Improvement Program is the primary source of federal funding for airport capital projects. 

AGC will continue to monitor the FAA bill as it moves through the House and Senate and eventually to Conference.

For more information, contact Sean O’Neill at (202) 547-8892 or oneills@agc.org. Return to Top

House T&I Committee Passes Highway/Transit Extension
 

The House Transportation and Infrastructure Committee this week reported out a bill to extend highway and transit program authorization through September 30, 2011, the end of the fiscal year. The legislation would continue funding at the 2010 level of $42 billion for highways and $10.3 billion for transit. These programs have been operating under a series of short term extensions since SAFETEA-LU expired on March 4.

T&I Committee Chairman John Mica (R-Fla.) would like the bill to be taken up separate from other legislation before the end of the week so that the Senate will have time to complete action before the deadline is reached. Failure to pass the extension before March 4 would result in a shut down of federal reimbursements to states for ongoing highway and transit projects. AGC is urging Congress to extend the program through the end of the fiscal year, rather than through a shorter extension, to provide some degree of funding certainty for state DOTs and to allow Congress time to complete action on a multi-year reauthorization measure.

For more information, contact Brian Deery at (703) 837-5319 or deeryb@agc.org. Return to Top

ENVIRONMENT
Cuts in Diesel Retrofit Grants Proposed for FY 2011 and FY 2012
 

As part of their efforts to cut $100 billion in federal spending, House Republicans are proposing to reduce Diesel Emissions Reduction Act (DERA) funds for FY2011 down to $50 million, a $10 million reduction from FY2010 levels and the President’s original budget for FY2011.  On Wednesday, the House defeated 352 to 73 an amendment offered by Representative Jim Moran (D-Va.) that would have eliminated FY 2011 funding for DERA entirely.  AGC opposed the amendment. 

In President Obama’s FY 2012 budget request to Congress released Monday, the Administration proposes to eliminate all funding for DERA, noting the benefits of clean diesel technology in new vehicles as fleets turn over as well as the availability of Congestion Mitigation and Air Quality (CMAQ) and Supplemental Environmental Projects (SEP) funding for diesel retrofit projects.  AGC is working with a coalition of industry and environmental stakeholders to restore funding for DERA in light of the overwhelming bipartisan support for the program and the proven cost-effectiveness of diesel retrofit projects.

For more information, contact Karen Lapsevic at (202) 547-4733 or lapsevick@agc.org. Return to Top

TAX
Administrationís FY 2012 Tax Policies Offer Mixed Bag for Construction
 

As part of the Administration’s FY 2012 Budget Request to Congress, the U.S. Department of the Treasury Monday released the General Explanations of the Administration’s FY 2012 Revenue Proposals, or “Greenbook.” 

While the Greenbook provides incentives for infrastructure, including a proposal to continue the Build America Bonds program and replace the current tax deduction for energy efficient commercial building property with a more generous tax credit to encourage building owners to retrofit their properties, the Greenbook also calls for tax increases for the upper-income tax brackets and a return to the 2009 estate tax structure starting in 2013 after current law expires.  In addition, the Greenbook calls for changes to the taxation of carried interest as ordinary income, worker classification, and inventory accounting, all of which AGC opposes. 

In contrast, like AGC, the Greenbook recommends repeal of the IRS Form 1099 reporting requirement for business-to-business transactions for purchases of goods totaling $600 or more annually.  However, the Greenbook does not mention the 3 percent withholding mandate also scheduled to take effect in 2012. 

For more information, contact Karen Lapsevic at (202) 547-4733 or lapsevick@agc.org. Return to Top

FEDERAL
Legislation to End Project Labor Agreement on Federal Construction Projects Introduced
 

On February 16, 2011, Representative John Sullivan (R-Okla.) introduced legislation (H.R. 735) that seeks to ensure that federal contracts are awarded through open competition. The Government Neutrality in Contracting Act would prohibit the use of government mandated project labor agreements (PLAs) on federal construction projects. This legislation mirrors the Senate bill, S.119, which was recently introduced by Senator Vitter (R-La.). In addition, the House is considering an amendment to the Continuing Resolution (H.R.1) by Representative Frank Giunta (R-N.H.) to prohibit the use of PLAs on federal projects for FY11.

AGC strongly supports free, open, and competitive bidding for all federal and federally-funded work – among all qualified firms, without regard to their lawful labor policies. Government-mandated PLAs effectively compel both union and open shop contractors to alter their hiring practices, work rules, job assignments, and benefits in order to compete for or to perform work on publicly funded projects.   This not only constitutes inappropriate government interference with private labor relations, it amounts to an unfair government preference that can significantly impact the cost of public works. 

Please visit the AGC Legislative Action Center to send a letter in support of The Government Neutrality in Contracting Act.

For more information, please contact Marco Giamberardino at (703) 837-5325 or giamberm@agc.org. Return to Top

SBA Finalizes Sweeping Regulations Governing 8(a) Programs
 

A year after its original proposed rulemaking, the U.S. Small Business Administration today published a package of final rules that will revise regulations to strengthen its 8(a) Business Development program to better ensure that the benefits flow to the intended recipients and help prevent waste, fraud and abuse. The rules were published February 11, 2011, in the Federal Register and will become effective on March 14, 2011.

The revisions are the first comprehensive overhaul of the 8(a) program in more than 10 years.  The regulations incorporate technical changes and substantive changes that mirror existing or new legislation enacted since the last revision in June 1998. The rules cover a variety of areas of the program, ranging from clarifications on determining economic disadvantage to requirements on Joint Ventures and the Mentor-Protégé program. Some of the components of the 8(a) program that the revised regulations will affect include:

  • Joint Ventures – requiring that the 8(a) firm must perform 40 percent of the work of each 8(a) joint venture contract that is awarded, including those awarded under  a Mentor/Protégé agreement, to ensure that these companies are able to build capacity;
  • Economic Disadvantage – providing more clarification on factors that determine economic disadvantage as it relates to total assets, gross income, retirement accounts and a spouse of an 8(a) company owner when determining the owner’s ability to access capital and credit;
  • Mentor-Protégé Program – adding consequences for a mentor who does not provide assistance to their protégé, ranging from stop-work orders to debarment
  • Ownership and Control Requirements – providing flexibility on whether to admit 8(a) program companies owned by individuals with immediate family members who are owners of current and former 8(a) participants;
  • Tribally-Owned Firms – requiring firms owned by tribes, Alaska Native Corporations, Native Hawaiian Organizations and Community Development Corporations to report benefits flowing back to their respective communities;
  • Excessive Withdrawals – amending regulations on what amount is considered excessive as a basis for termination or early graduation from the 8(a) program; and
  • Business Size for Primary Industry – requiring that a firm’s size status remain small for its primary industry code during its participation in the 8(a) program.

The SBA initially published the proposed rule on October 28, 2009 and provided a 60-day comment period for the public to submit their comments.  Many businesses requested more time, so the SBA extended the comment period an additional 30 days, allowing the public to submit their comments by January 28, 2010.  In addition to requesting written comments from the public, the SBA also embarked on a “Listening Tour” and hosted public meetings between December 2009 and January 2010 in 10 cities around the country. The SBA also conducted tribal consultations to gain further public input to the revisions in Albuquerque, Fairbanks and Anchorage, Alaska, and Seattle.  In total, the SBA received more than 2,500 individual comments from the public.

AGC provided comments to SBA and worked extensively with the agency and Congressional leaders in the development of these final rules. AGC is also pressing SBA to change current rules to allow prime contractors to receive credit for small business contracting dollars that flow down to all tiers. Current rules only allow primes to receive credit only at the first tier if the first tier subcontractor is a small business.

For more information about the revised 8(a) regulations, a compliance guide, and the 8(a) program, visit http://www.sba.gov/content/revised-8a-regulations.

For more information, please contact Marco Giamberardino at (703) 837-5325 or giamberm@agc.org. Return to Top

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