Recession Effects in United States Public Sector Construction Contracting: Focus on the American Recovery and Reinvestment Act of 2009

Abstract

The 2009 American Recovery and Reinvestment Act (ARRA) was enacted to support the economy in response to the 2008–2009 global recession. The injection of construction funds into the public sector put pressure on public agencies to award contracts as quickly as possible in an effort to immediately stimulate the economy and help reconstruct the deteriorating infrastructure. This enabled contractors to move from private sector work into the public sector to stay afloat financially. As a result, an increase in competition for public project awards was observed combined with projects being awarded at a fast rate. The main objective of this paper is to investigate evidence of the level of contractor competition and the degree to which public agencies are expediting the award process during the bidding phase on ARRA construction projects. Both positive and negative impacts caused by this dynamic are examined. To achieve this objective, the research looked into the bidding phase of ARRA construction projects from a public agency standpoint. A survey was therefore administered to three federal contracting agencies in order to evaluate bidding timelines, levels of competition, cost savings, and contractor performance. Statistical methods were then used to analyze the data and draw conclusions about the characteristics of ARRA construction projects. The paper also provides recommendations on alternative bidding strategies to public agencies for the potential reduction of negative impacts associated with the expedited and competitive awarding situation caused by the recession.