The American Recovery and Reinvestment Act of 2009 created some once-in-a-lifetime electrical sales opportunities for distributors, reps and manufacturers.
When the 1,588-page American Recovery and Reinvestment Act of 2009 hit President Obama's desk this past February with a resounding thump, if distributors, manufacturers, reps and electrical contractors were listening hard enough, they also could have heard the welcome tones of their cash registers starting to ring again.
That's because when the President Obama signed the bill into law on Feb. 17, he was waving the green flag for the start of one of the great gold rushes in the history of the electrical construction market. Other federal legislation on the books provides tax credits for the design or retrofit of energy-efficient buildings, bans the use of inefficient lamps and ballasts or encourages the use of energy-efficient motors, submeters and lighting equipment. But no other federal legislation will have more of an impact on the design, construction, retrofit, maintenance and operations of millions of square feet of offices, factories, courts, schools, hospitals and many other types of buildings, or slash as many watts. And you would have to look far back through the pages of electrical history to find another federal, state or local law that will direct as many dollars toward distributors, reps, manufacturers, contractors, utilities and other electrical professionals for the sale of green electrical products.
That's because a huge chunk of ARRA is targeted at upgrading existing federal buildings to the highest levels of energy efficiency and building new buildings to LEED standards. The numbers boggle the mind. An estimated $130 billion of the total $787 billion (16.5%) in ARRA spending is targeted at the construction market, and a big part of that chunk is intended for the renovation of lighting and other electrical systems in existing federal buildings. Billions more will be spent to encourage the research, development and use of LED and solid-state lighting, photovoltaics, wind turbines and other renewable energy sources and the smart grid, some of which are already starting to offer real-world sales opportunities.
Talk about Uncle Sam pitching a beachball right into the electrical market's wheelhouse. It's definitely a sales opportunity that this industry should hit out of the park. What makes this opportunity all the more enticing is the fact that the U.S. government has harnessed the Internet to develop websites that make it extraordinarily easy to find where the money is being spent, when contracts are open and who wins the awards. This article, the first of two articles on the opportunities ARRA offers the electrical wholesaling industry, will introduce you to a few government agencies where you will find the most ARRA business, as well as some must-visit online resources like www.recovery.gov and www.fbo.gov.
Historically speaking, relatively few electrical distributors focused on federal contracts. According to data in Electrical Wholesaling's 2010 Market Planning Guide, at 4.3 percent of distributor sales, government business will account for $3.3 billion in electrical sales. The margins for government business tend to be lower than in distributors' sweet spots of commercial construction and MRO industrial business, they get tangled up in miles of red tape just to bid on a contract, and very often choice federal contracts are set aside for minorities, veterans or other constituencies. That being said, some of the electrical distributors that focus on government contracts do so very quietly because they don't want to attract more competition to what's a niche market once you've got the hang of it. This article offers a crash course on joining the fun — and profits — the ARRA is creating.
www.recovery.gov is the main gateway to ARRA funds. While it doesn't offer much as far as specific opportunities to sell electrical products, it's a good first stop because it introduces you to ARRA funding from 35,000 feet and then provides various paths to drill down into your areas of interest. One of the beauties of ARRA is that it tries really hard to make the funding process as open, transparent and timely as possible through online communication tools such as this website, free and regular e-mail updates on bidding, funding and award opportunities; webcasts, downloadable PowerPoint presentations and other means. The site is very intuitive and gets you to where you want to go fast.
Federal Business Opportunities
While www.recovery.gov provides a good introduction to ARRA funding, you should spend more time on www.fbo.gov, which is a database of all federal government contracts in excess of $25,000 being funded by ARRA. First find your way to the web site's “Advanced Search” function. For starters, plug in “423610” into the “Keyword” field. This is the NAICS code for electrical distributors (in government-speak “Electrical Apparatus and Equipment, Wiring Supplies, and Related Equipment Merchant Wholesalers”) and will take you to contracts of interest to electrical distributors. The North American Industry Classification System (NAICS) is the standard used by federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing and publishing statistical data related to the U.S. business economy.
You will find it even faster to get the information you need by scrolling down to “Opportunity/Procurement Type” and clicking on “Presolicitation” and/or “Award.” You can also look for contracts by state or zip code. Another useful data selection is to type “238210” into the Keyword field. This is the NAICS code for electrical contractors (“Electrical Contractors and Other Wiring Installation Contractors”). Once you register as a vendor or become a regular visitor to www.fbo.gov, you will quickly find yourself first sorting your data selection by “Posted Date” because you can save time by only pulling up the most recent contracts. Now let's dig a little deeper and find out more about the specific government entities that provide the most potential sales opportunities for electrical distributors, electrical manufacturers and independent manufacturers' reps.
General Services Administration (GSA)
If an electrical distributor is targeting the government market, there's a good chance they will go after business from the General Services Administration, which manages more than 11 percent of the government's total procurement dollars and $30 billion in federal assets, including 354 million square feet in 8,600 government-owned or leased buildings and 213,000 vehicles. Founded in 1949, the GSA has been around a long time, but since ARRA stimulus funds came onto the scene, it has a much higher profile. The GSA is scheduled to get $5.6 billion in ARRA funding, including $4.5 billion for energy-efficient upgrades of government buildings.
To get a piece of this action, some electrical distributors are marketing their wares on GSA Advantage www.gsaadvantage.gov, which for the past 12 years has been a one-stop online resource for thousands of federal employees worldwide. www.gsaadvantage.gov functions much like Amazon.com and is searchable by vendor, product, price and a host of other variables. According to its website, “GSA Advantage offers the most comprehensive selection of approved products and services from GSA contracts.”
Several electrical distributors with a presence on www.gsaadvantage.gov include Border States Electric, Fargo, N.D.; Frost Electric Supply Co., Maryland Heights, Mo.; Graybar, St. Louis; W.W. Grainger Inc., Lake Forest, Ill.; and WESCO Distribution Inc., Pittsburgh. Border States Electric lists more than 10,000 SKUs from more than 70 vendors; Frost Electric Supply lists more than 7,000 stock-keeping units from eight vendors; Graybar lists 10,000 SKUs from more than 40 vendors; and WESCO lists more than 3,500 SKUs from nine vendors. If you are interested in getting involved with GSA, go to www.gsa.gov and click on the “For Businesses” tab in the left column and then on the “Getting on Schedule” header that pops up.
Defense Logistics Agency (DLA)
The DLA is the U.S Department of Defense's primary purchasing and distributing unit. It's truly massive, as it employs 25,000 civilian and military personnel, supplies the armed forces with anything from combat boots to jet engines, and in its 2008 fiscal year provided more than $42 billion in goods and services to all military services worldwide. According to information at www.dla.mil, “If America's military forces eat it, wear it, maintain equipment with it, or burn it as fuel, DLA probably provided it.”
Graybar long ago figured out the vagaries of Defense Department contracting rules and federal purchasing regulations. It currently has contracts with the Defense Logistics Agency (DLA), and the GSA. While the company does not publicly comment on its contracts, information on its website and several articles in the St. Louis Business Journal provide some insight into its expertise in this area. Through its involvement with the DLA's Maintenance Repair and Operations (MRO) Prime Vendor Program, it provides federal agencies and military facilities with an efficient process to procure MRO materials. Says the company's website, “Graybar understands that government buyers are asked to procure more items with fewer resources than their commercial counterparts. Our dedicated customer service and sales resources understand the complexities of government procurement, and are committed to providing you with outstanding service and exceptional value on the electrical, telecommunications, IT, security, and MRO products you need to serve your constituents. By providing you access to national contracts, combined with our extensive national inventory, our team will find the balance that meets your procurement needs.”
According to a report in the St. Louis Business Journal, earlier this year Graybar renewed a contract worth up to $74 million to supply the U.S. Army, Navy, Air Force, Marine Corps and federal civilian agencies. That newspaper also reported in August 2008 that Graybar won three defense contract renewals with potential to generate revenue of $165 million and that the renewals, “are among five regional contracts that Graybar has had with the Defense Logistics Agency (DLA) for a decade.”
Shealy Electrical Wholesalers Inc., Columbia, S.C., also does big business with the U.S. Department of Defense through its Construction Technologies (CTI) unit that it acquired in 2006. The company supplied $50 million in electrical equipment such as transformers, switchgear, panelboards and cable to the U.S. Government for bases in Afghanistan and Iraq and is registered in the U.S. Department of Defense Central Contractor Database.
Doe's Office of Energy Efficiency and Renewable Energy (EERE)
The Department of Energy (DOE) has $36.7 billion in ARRA funds to spend and a huge percentage of that cash will be flowing right into projects of interest to the electrical market. The biggest recipient within the DOE is the Office of Energy Efficiency and Renewable Energy (EERE), which will receive $16.8 billion — an almost 10-fold increase in its 2008 budget of $1.8 billion. Also of interest is the $4.5 billion for the Office of Electricity Delivery & Energy Reliability (OE), which focuses on the electrical transmission and smart grid projects and the $4 billion in funds budgeted for the DOE's Loan Guarantee Program Office (LGPO). Some of these projects are highlighted in the chart on page 20. The EERE has the most direct impact on the electrical industry because it's funding hundreds of building retrofits and the construction of green buildings and offering financial incentives for the development of LED lighting systems. This funding is being channeled through a variety of programs, including:
$3.2 billion toward Energy Efficiency and Conservation Block Grants for states, local governments and tribal governments to support the development of energy efficiency and conservation strategies and programs, including energy audit programs and projects to install fuel cells, photovoltaics, wind and biomass power projects at government buildings.
$3.1 billion for the State Energy Program, which gives individual states funds for the adoption of strict building energy codes and to provide utility incentives for energy efficiency measures.
$3.4 billion in matching funds for investments in smart-grid projects.
$155 million in funding for 41 industrial energy efficiency projects across the country.
To date, the Department of Energy has awarded more than 1,200 Energy Efficiency and Conservation Block Grants totaling over $1.4 billion to states and local governments, Indian tribes and U.S. territories. More grants are awarded each week, and the best way to find out about awards in your market area is to check out the updated “Grantees” listing at www.eecbg.energy.gov/grantees/default.html. And according to an Oct. 27 DOE press release, a hundred private companies, utilities, manufacturers and private citizens have already received Smart Grid Investment Grants. Details on currently funded smart grid projects and available at http://apps1.eere.energy.gov/news/news_detail.cfm/news_id=15581.
While not part of ARRA funding, it's worth mentioning that the DOE is also sponsoring the Bright Tomorrow Lighting Prizes (L Prize) competition, which is being funded through the Energy Independence and Security Act of 2007. The L Prize competition is the first government-sponsored technology competition designed to spur development of ultra-efficient solid-state lighting products to replace the common light bulb. The legislation challenges the lighting industry to develop replacement technologies for two of today's most widely used and inefficient technologies: 60W incandescent lamps and PAR 38 halogen lamps. It also calls for development of a “21st century lamp” that delivers more than 150 lumens-per-watt. The competition will award significant cash prizes, plus opportunities for federal purchasing agreements, utility programs and other incentives for winning products. The prize amounts are $10 million for the 60W incandescent replacement lamp and $5 million for the PAR 38 halogen incandescent replacement lamp.
Other Government Departments of Interest
The Department of Education, Army Corps of Engineers and Department of Veterans Affairs are also spending ARRA funds on electrical projects. The Department of Education has an estimated $9 billion “for discretionary use by governors in addressing public safety and other government services, which may include school modernization, renovation and repair consistent with a recognized green building rating system.” Local project information is available at www.ed.gov by clicking on “ED Recovery Act” in the right column.
Some of the most common electrical projects at www.fbo.gov being financed by ARRA funds are under the auspices of the Army Corps of Engineers and Department of Veterans Affairs. These projects include work at federal dams, national parks and VA hospitals.
This article introduced you to the American Recovery and Reinvestment Act of 2009 and showed you where to find electrical projects funded by this legislation. Next month's article will offer tips from industry insiders who have had success getting government contracts.
Projects Funded by the American Recovery and Reinvestment Act (ARRA) of 2009
|Award recipient||Project details||Program funding|
|Fort Lee, Va.||$4.1 million to upgrade lighting. Estimated contract award date: Sept. 2009; estimated start date: Nov. 200||Department of Defense ARRA/ Energy Conservation Investment Program Plan|
|Fort Hood, Texas||$1.5 million to install 8,000 motion sensors. Estimated contract award date: Nov. 2009; estimated start date: Jan. 2010.||Department of Defense ARRA/ Energy Conservation Investment Program Plan|
|Marine Corps Logistics Base, Barstow, Calif.||$10.6 million for facility energy improvements. Estimated contract award date: March 2010; estimated start date: April 2010.||Department of Defense ARRA/ Energy Conservation Investment Program Plan|
|CenterPoint Energy, Houston||$200 million in ARRA funding for the installation of 2.2 million smart meters and 550 sensors and automated switches that will help protect the grid from disturbances like natural disasters. Total project cost $639.1 million.||ARRA selections for smart grid investment grant awards|
|Baltimore Gas & Electric, Baltimore||$200 million in ARRA funds for the installation of a meter network and advanced customer control system for 1.1 million customers.||ARRA selections for smart grid investment grant awards|
|Kansas City Power & Light, Kansas City, Mo.||$23.9 million in ARRA funds toward the KCP&L Green Impact Zone Smart Grid Demonstration Project, which will benefit 14,000 residential and commercial customers and showcase smart grid technology.||ARRA selections for smart grid regional demonstration projects|
|Osram Sylvania LED plant in St. Marys, Pa.||$116,865 to launch Osram Sylvania's new candle-shaped light-emitting diode lamp. The funding will be used to procure mold tooling and adapt the existing facility to new manufacturing processes.||Funded by the Pennsylvania Energy Development Authority (PEDA), which received $10 million in ARRA funds.|
|Solyndra, Fremont, Calif.||$535 million loan guarantee for Solyndra to build the first phase of a factory that will produce 500 megawatts of solar panels per year and employ up to 1,000.||Department of Energy (DOE) Loan Guarantee program|
|Herbert C. Hoover Commerce Building, Washington, D.C.||$157.5 million for Phase II and Phase III of the modernization of this 1.8 milllion-square-foot federal building.||Part of the $5.5 billion the General Services Administration received in ARRA funds to retrofit existing buildings with energy-efficient systems or build new green facilities.|