Contractors ask DoD to reimburse offshore payroll taxes

In 2008, Congress passed a law to force contractors to pay payroll taxes for employees who are U.S. citizens working for their offshore subsidiaries. The IRS is collecting more taxes as a result, but much of that new tax revenue is leaving government in the form of higher contract costs for the Defense Department.

Defense contractors have billed the department for more than $140 million in reimbursements for payroll tax expenses they've paid since the law was passed, a new Government Accountability Office report says.

And that's just on five contracts — worth a combined $6 billion — that were reviewed by GAO.

Executives from some of the biggest Defense contractors — including Lockheed Martin, Boeing, Northrop Grumman, General Dynamics and KBR — told GAO that, before the law was passed, they hired U.S. citizens at their offshore subsidiaries as a way to lower their costs and remain competitive.The companies say they only use the offshore subsidiaries to hire employees to perform work overseas.

Overall, GAO said the law is accomplishing its intended effect: forcing offshore companies to share the tax burden for social security, Medicare and federal income tax payments. GAO recommended Congress expand the legislation to force contractors offshore to contribute to state unemployment insurance programs so workers can collect when they lose their jobs.

In 2009, one state, Texas, denied unemployment claims of 140 individuals employed by several of the contractors because they were employed by offshore subsidiaries that did not contribute to the state's unemployment insurance programs. GAO chose Texas because several major contractors have corporate offices there.

Agencies need more flexibility to finance energy projects, experts say

Agencies spent more than $1.7 billion last year on energy-efficiency projects, a dramatic increase from past years, officials say.

Richard Kidd, program manager of the Energy Department's Federal Energy Management Program, said that amounted to more than an 80 percent increase from 2008 in which $935 million was spent.

"It looks like it was the best year ever in terms of federal investment," Kidd said Jan. 27 before the Senate Homeland Security and Governmental Affairs subcommittee on federal financial management, government information, federal services and international security.

About two-thirds of the investments were paid for with appropriated dollars, much of which came from the Recovery Act. The rest was financed by private-sector financing arrangements, such as Energy Savings Performance Contracts (ESPCs) and Utility Energy Services Contracts (UESCs), in which contractors pay for renovations upfront and are paid back over time with agencies' cost savings that result from reduced energy consumption.

Such private-sector financing tools are a "wonderful mechanism," since they allow agencies to make improvements they otherwise could not afford, said Dorothy Robyn, deputy undersecretary of Defense for installations and environment.

However, they do have their drawbacks, Robyn and Kidd said. For starters, projects funded through ESPCs end up costing nearly 2½ times what they would cost if funded through direct appropriations because energy service companies pass on their upfront financing costs to agencies, Kidd said.

For more ambitious projects, such as generating on-site renewable energy from solar arrays and other sources, the Defense Department uses other tools, Robyn said. Through enhanced-use leases and power purchase agreements, Defense allows underused buildings or property to be developed at no upfront cost to the government in exchange for cash or other in-kind services.

Such deals will become more critical as agencies work to cut their energy consumption and greenhouse gas emissions, as required by an executive order President Obama issued in October. Budget scoring rules prevent agencies from paying for renewable energy projects and other long-term investments over multiple years, meaning they must increasingly rely on private-sector financing or partnering arrangements.

The Pentagon has an advantage over most agencies because it has more financing tools at its disposal, Kidd said. The Defense Department and Energy's power management authorities are the only agencies allowed by law to enter into power purchase agreements for longer than 10 years. Most power purchase agreements are for 20-year terms.

Kidd urged lawmakers to allow all agencies to enter into long-term power purchase agreements, which he said would enable the development of more renewable energy projects.

Social Security Web sites earn top scores in satisfaction survey

Americans have a higher opinion of federal Web sites than of the federal government as a whole, according to American Consumer Satisfaction Index reports released Jan. 26.

Satisfaction with government Web sites scored 75.2 on ACSI's 100-point scale for the fourth quarter of 2009, the highest score in the index's seven-year history and 1.5 percent higher than in the same quarter a year ago.Overall satisfaction with the federal government dropped to 68.7 in 2009 from 68.9 in 2008 on the index's 100-point scale.

The ACSI scores customer satisfaction with both private and public-sector organizations, and the federal government traditionally lags behind the private sector. The private sector scored a 76 for overall satisfaction through the third quarter of 2009, the last scored by the ACSI. Private-sector search engines scored an 83, and private-sector e-retail scored an 82.

The highest-scoring Web sites provide easy access to information people value, said David VanAmburg, ACSI's managing director. The Social Security Administration's retirement estimator and iClaim electronic claims-filing Web sites both scored 90 because they are simple to use and provide people with the information they want, VanAmburg said.

The Interior Department ranks No. 1 among federal agencies in overall government satisfaction for the third straight year with a score of 81, up from 78 in 2008. People like Interior because of the National Park Service, VanAmburg said.

GSA signs up 18 vendors to help agencies cut energy use

Eighteen vendors will provide services to help agencies meet their energy conservation and green government goals under a contracting agreement announced Jan. 27 by the General Services Administration.

GSA established the blanket purchase agreement to help agencies achieve their energy, greenhouse gas and water conservation goals using a streamlined acquisition process.

Several of the participating companies are offering their energy services and products at discounts from previously published rates on existing GSA schedules, GSA said.

GSA awarded the one-year contracts Dec. 31. They can be extended for four additional years, and GSA said it may recompete the contract agreement at a later date to ensure additional vendors can offer their products.

Under the contracts, agencies can:

• Review their energy reduction and water efficiency measures.

• Ensure major building renovations use the most energy-efficient designs, systems and equipment.

• Assess and implement renewable energy solutions.

• Ensure that all new buildings and major renovations reduce fuel consumption as required by the 2007 Energy Independence and Security Act.

• Plan, monitor and report results of energy efficiency initiatives using Energy Star or other government-approved tools.

Recovery Act offers $1.2B boost for D.C.-area construction

The federal government offers the one promising outlook for an otherwise bleak construction industry, and nowhere is that more evident than in the nation's capital.

"Washington, D.C., is the hottest market in the country right now," said David Kessler, managing principal of Reznick Group, an accounting firm in Bethesda, Md., that specializes in real estate and construction.

The General Services Administration is driving most of the activity, with 97 million square feet of owned or leased space under its control in Washington and the surrounding suburbs. The Recovery Act provided GSA with $5.2 billion to spend upgrading or building new federal facilities, and $1.2 billion of that total is dedicated to the Washington region, said Bart Bush, who manages GSA's construction and lease projects in the Washington region as regional commissioner of the Public Buildings Service.

GSA is on track to have $4 billion of its Recovery Act funds obligated by the end of March, and nearly all of it must be obligated by the end of September, Bush said Jan. 29 at a breakfast for more than 350 brokers and vendors sponsored by Washington-based Bisnow, a business publication.

In the Washington area, major Recovery Act projects include renovations to headquarters buildings for the State, Commerce and Interior departments and the Mary Switzer Building that houses some offices of the Health and Human Services and Education departments. GSA also is spending $450 million in Recovery Act funds on the first leg of a three-phase project to consolidate 14,000 Homeland Security Department employees at the historic St. Elizabeths campus in southeast Washington.

In addition to construction and renovation projects, GSA leases sites for federal agencies that need more space than their owned buildings provide or that aren't large enough to warrant their own buildings. The renovation projects will spur a growth in leases in coming years as agencies move out of their facilities so work can be completed, developers said.