No wonder stimulus projects are moving slowly.

Though the U.S. EPA has processed virtually all of the additional $4 billion it received this year for wastewater infrastructure, only one-quarter of the projects that have been approved for stimulus funds were under contract by late November. At press time, 530 Clean Water State Revolving Fund projects in 40 states were under contract, totaling $1.1 billion.

Business halted in the first half of the year as utility managers held back approval in hopes of obtaining lower-interest loans or grants through the American Recovery and Reinvestment Act of 2009. When they realized stimulus requirements were more detailed than those of existing federal funding programs, managers re-prioritized projects according to which would most likely satisfy potential auditors while meeting local needs. Work was further delayed if the operation had to rebid jobs or analyze bid documents to ensure projects complied with provisions.

Now, with penalties ranging from returning money that's been spent to serving jail time, no one wants to run afoul of the law's “Buy American” requirement. Citing concerns about conflicting direction from federal and state authorities, waste-water managers are moving much more slowly than street, road, and bridge managers, who for decades have had to specify American-made products for federally funded projects.

Though the stimulus package didn't expand the EPA's authority or change review procedures, it boosted the agency's enforcement budget by 9% each year through 2012. More than three dozen auditors, evaluators, and investigators have been hired to investigate misconduct, review projects, execute search and seizure warrants, and make arrests. Since the legislation was signed in February, 13 project evaluations (though none related specifically to sourcing issues) have been initiated and are ongoing.

Similarly, the agency's definition of fraud hasn't changed, either: “a representation (such as a bid proposal or project invoice) about a material point, which is false and intentional, which is acted upon to the victim's damage.” But the provision has opened the door to multiple interpretations and inadvertent noncompliance.

For example, language in some international trade agreements overrides some stimulus provisions for several states but doesn't apply at all to local projects. Stimulus-funded projects in the 37 states that have signed the World Trade Organization's Government Procurement Agreement are exempt as long as they're state projects. Yet the stimulus overrides the North American Free Trade Agreement, which would allow both state and local project owners to use products made in Canada and Mexico.

In an attempt to clear up confusion, the EPA issued clarifications in April and May, one of which requires that foreign products be “substantially transformed” in the United States. (See sidebar on page 37 for more information about waivers and exemptions.)

“There's still a significant amount of guessing going on before our companies are able to sign certifications,” says Dawn Champney, president of the Water and Wastewater Equipment Manufacturers Association, whose 80 members make processing equipment such as pumps, meters, and filtration systems. “Congress felt that adding international trade agreements would help ease the pain. But where our federal government can do business with all our international trade partners, no municipalities can do business with any of them.”

'COUNTER-INTUITIVE'

Though construction bids are coming in much lower than expected, the administrative hassle required to ensure compliance with stimulus provisions is time-consuming and frustrating.