The Next Economy Government Market Outlook 2010 Final

Government Market Outlook Report

2010THE NEXT ECONOMY:

© 2010 Onvia, Inc. All rights reserved.

THE NEXT ECONOMY: 2010 Government Market Outlook

CONTENTS

2

EXECUTIVE SUMMARY 3

INFRASTRUCTURE 6

Highways and Ports 6

Transportation Reauthorization Status 8

Transit 9

ENERGY 11

INFORMATION TECHNOLOGY 13

Healthcare IT 13

Broadband 14

STIMULUS AND RECOVERY 17

2010 ARRA Impact 17

Jobs for Main Street 18

CONCLUSION 20

AUTHORS 21

2010 PROJECT HIGHLIGHTS 22

2009 TOP CONTRACTORS 23

GLOSSARY 25

3THE NEXT ECONOMY: 2010 Government Market Outlook

EXECUTIVE SUMMARY

This trend will continue through 2010 with initiatives like the Jobs for Main Street Act. Spending by federal, state and local governments now represents almost half of total GDP in the United States and that percentage is expected to increase in the coming years.

Regardless of where business owners and managers fall on the political spectrum, a new reality has set in. A hybrid economy, one in which government and business operate more closely, is emerging. Forward-thinking organizations now incorporate the government sector into their overall go-to-market strategy to take advantage of this large and growing marketplace. That approach is independent of rhetoric or political views about big government, small government and conservative or liberal views. The government sector is a vast marketplace. In this “Next

Economy” companies that ignore the government sector will be significantly disadvantaged. Businesses that are not doing business in the government marketplace are guaranteed to have one or more competitors who are.

Doing business with the government is no longer an arcane process reserved only for those companies with perseverance, tolerance for bureaucratic red tape and a cadre of lobbyists. Barriers to entry have come down. For companies that don’t do business directly with a government entity, subcontractor and supplier opportunities continue to abound from companies that are doing business with government entities in the United States. With national unemployment above 10 percent, more and more businesses are turning to the government sector as a primary source of revenue.

U.S. Government Spending As Percent of GDP

Year

1903

1906

1909

1912

1915

1918

1921

1924

1927

1930

1933

1936

1939

1942

1945

1948

1951

1954

1957

1960

1963

1966

1969

1972

1975

1978

1981

1984

1987

1990

1993

1996

1999

2002

2005

2009

Percent of G

DP

60

50

40

30

20

10

0

U.S. Government spending has steadily increased to its highest sustained levels.

THE FEDERAL, STATE & MUNICIPAL MARKET

$5.5 Trillion a year.

$105 Billion per week.

$15 Billion a day.

$625 Million an hour.

$10 Million a minute.

$175,000 a second.

In 2009 trillions of dollars were spent stabilizing the economy through

the Troubled Asset Relief Program (TARP), The American Recovery and

Reinvestment Act (ARRA), Cash for Clunkers and other government-funded

programs.

Source: USGovernmentSpending.com

“The government has moved in next door and it ain’t leaving.”

— Jeffrey Immelt, International Economic Forum of the Americas, June 9, 2009


EXECUTIVE SUMMARY

In this report, Onvia’s fourth annual analysis of the government marketplace, we surveyed thousands of government officials across every level of government. We partnered with REMI, the definitive leader in economic forecasting and policy analysis modeling, to examine the impact of ARRA funding on regional economies in the U.S. as a harbinger of things to come in the government sector.

There are several emerging, general government market trends which will influence capital allocation and projects undertaken. First, transparency initiatives are here to stay. Government spending at all levels will continue to be scrutinized, and public officials will be held to a higher level of accountability for the inefficient allocation of taxpayer capital. Access to more detailed information will drive the transformation from the retrospective “auditor” view to one better positioned to be predictive in support of strategic planning. Governments will invest in tools to drive down cost and increase productivity.

Second, while the government market continues to grow there will be increased competition for government contracts as commercial markets recover into 2011. An increase in subcontracting opportunities

with large general contractors will emerge as the large players are extended across multiple infrastructure projects. Volume of projects will increase through 2010 but it will remain a buyers’ market as more companies follow the money. The impact of recovery investments, both ARRA and Jobs for Main Street, will begin to be felt in mid-2010 as heavy equipment manufacturers, material suppliers and engineering service providers fully engage in the government purchasing process. Look for a measurable rise in the cost of construction materials.

Third, information technology will be a key component of all projects undertaken, across multiple verticals. A wave of modernization, from regional health information networks and intelligent transportation systems to smart power grids coming online and green buildings being constructed, is afoot with information technology at its core. Further expansion of electronic procurement and cooperative purchasing practices by government agencies will continue to be implemented to improve efficacy of spending.

With these components as the backdrop, our analysis for 2010 focuses on impacts in three major

Businesses Pursuing Government Contracts

0%

2%

4%

6%

8%

10%

12%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09

# U

niqu

e B

usin

esse

s % U

nemployed

Period

Unemployment (%)

Government is the last client standing for many businesses that otherwise relied on the commercial sector. This chart represents activity with state and local agencies tracked in the Onvia 200 index.

“The frontier between the state and market has shifted,

the realm of the state has been enlarged.”

— Daniel Yergin, Wall Street Journal, After the Bailouts,

Washington’s the Boss, December 28, 2009Source: Onvia 2010

2010 SPENDING PRIORITIESDefined by Surveyed Officials

Public Safety

Infrastructure

Energy

Information Technology

Education

http://www.remi.com


EXECUTIVE SUMMARY

areas of upcoming spending: Infrastructure, Energy and Information Technology.

In its first year in office, the Obama administration has taken on the mantle of change and begun executing on its reform agenda across healthcare, manufacturing and energy, as well as the financial markets and other sectors. These changes and their impacts are now spreading through the state- and municipal- level government markets, and none will take place without significant business engagement.


INFRASTRUCTURE

2010 will prove to be a strong year for government contractors who serve the infrastructure market. Although 2009 saw considerable activity with the obligation of ARRA dollars, the majority of the actual spending on those ARRA-funded projects will happen in 2010. Of the more than 35,000 infrastructure projects Onvia tracked throughout 2009 only 27 percent, or 9,500, had been awarded to contractors by the end of 2009.

$90.4 billion across 25,500 fully or partially recovery-funded projects are in the pipeline and expected to begin in 2010. This represents a meaningful leading indicator for the infrastructure market in the year ahead. It is important to note that recovery dollars are funding projects in conjunction with traditional matching funds programs.

As these outstanding dollars reach local economies, expect to see resulting direct and indirect infrastructure job creation to exceed 900,000. The Southeast is expected to produce the most jobs with the Great Lakes region setting the pace for average salaries.

With continued strong government investment in infrastructure through economic recovery initiatives,

the 2010 contribution of highway spending to regional economic productivity will increase over 2009 spending levels.

Throughout 2009, Onvia analysis found that infrastructure projects came in below estimated costs driven by a combination of stiff competition and falling construction material prices. Some of these savings served to expand the scope of projects funded by ARRA .

According to the American Road & Transportation Builders Association (ARTBA), 38 states increased the real value of their contract awards between January and October 2009 compared to the same time period in 2008. The real value of contract awards for highways and bridges over the same periods was nearly $50 billion, an increase of $5 billion and an important leading indicator for the 2010 construction season. Expect these trends to carry into 2010 as more contractors vie for government projects.

Highways & Ports

Spurred by record federal investment in surface transportation and increased spending through the ARRA, the highway construction market is expected

2009 Contract Awards

73%

27%

$33,123,839,733

2010 Project Pipeline

$90,447,420,169

ARRA Infrastructure Spending2010 ARRA Infrastructure Jobs

0

50,000

100,000

150,000

200,000

250,000

300,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Average Salary Per Job

Num

ber o

f Job

s C

reat

ed


NewEngland

Mideast GreatLakes

Southeast FarWest

RockyMountain

Southwest

U.S. Region

Plains

More than 900,000 infrastructure jobs will be retained or created as a result of 2010 ARRA spending.

Source: Onvia and REMI 2010 Source: Onvia 2010

The majority of stimulus spending will hit the economy in 2010.


INFRASTRUCTURE

to grow 8 percent in 2010 as only two states, New Hampshire and Wyoming, had obligated all of their transportation stimulus funds by the end of 2009. With the addition of the prospective Jobs for Main Street Act passed by the U.S. House of representatives in December 2009, an increase from 8 percent to double-digit growth is not out of the question.

As of January 2010, Onvia was tracking more than 12,500 funded highway projects across the US, many of which are much needed maintenance efforts and upgrades that had previously been deferred.

According to the Reason Foundation, the percentage of deficient bridges has been on the rise and the condition of urban interstates continues to degrade. In their December 2009 Report on the Performance of State Highway Systems, a number of key metrics improved, such as urban interstate congestion, but the findings highlight the difficulty in “making across the board progress in road conditions.” The thousands of ARRA funded projects, many of which will start in 2010, are targeted to address the substandard areas of the nation’s transportation infrastructure.

Beyond traditional highway construction, increased

investment in smart roads, otherwise known as intelligent transportation systems (ITS), will expedite job creation.

ITS initiatives are proven to produce significant economic and environmental advantages. State and local agencies investing in ITS, for example, have found that each dollar spent on technologies such as E-Z Pass programs and synchronized and adaptive traffic signals returns at least $40 to the public in time and fuel savings while reducing emissions by as much as 22 percent.

In advance of the Jobs for Main Street bill, an American Association of State of Highway Transportation Officials (ASHTO) survey captured a summary view of the 9,588 ready-to-go (formerly known as “Shovel Ready”) highway, transit, rail, port and aviation projects across the U.S. awaiting funding. These projects, valued at $70 billion, can be ready to break ground within 120 days of enactment.

Infrastructure-related businesses of all sizes should be poised to capture contracts and to serve as indirect beneficiaries through subcontracting, materials supply and heavy equipment manufacturing.

ARRA Actual Contract Values As Percent of Government Estimated Project Value

40

48

56

64

72

80

March April May June July Aug Sept Oct Nov Dec

Source: Onvia 2010

2009

Act

ual C

ontra

ct V

alue

s A

s P

erce

ntof

Gov

’t E

stim

ated

Pro

ject

Val

ue

Competition for projects has increased resulting in lower contract values than expected on many projects.

2010 ARRA Infrastructure GDP by US Region

FAR WEST: $13 Billion

SOUTHEAST: $12 Billion

GREAT LAKES: $6 BillionPLAINS: $3 Billion

MIDEAST: $7 BillionSOUTHWEST: $5 Billion

ROCKY MOUNTAIN: $2 BillionNEW ENGLAND: $2 Billion

Source: Onvia 2010 Source: Onvia and REMI 2010

http://reason.org/news/show/18th-annual-highway-report

http://reason.org/news/show/18th-annual-highway-report

http://www.recovery.org/projectdetails.aspx?pid=ANT:10315195




INFRASTRUCTURE

The Jobs for Main Street Act builds on the investment programs initiated by the ARRA. Of the almost $37 billion in proposed transportation funding in the Jobs for Main Street Act, $27.5 billion is directed to additional highway infrastructure investments. In keeping with the 2009 stimulus package, the terms and conditions for these funds focus on expediting contracts with businesses. States will lose 50 percent of any funding that is not under contract within 90 days of apportionment. In addition, there is a stated priority to focus on projects in economically distressed areas and those that can be completed within a 3-year timeframe.

Transportation Reauthorization Status

The Jobs for Main Street Act includes an extension of highway and transit program authorization through Sept. 30, 2010 at current levels. It also provides additional Highway Trust Fund revenue to fund these programs. Since SAFETEA-LU expired on Sept. 30, 2009, these programs have been extended on a short-term basis at a funding level that is significantly below the FY 2009 authorized level.

The pending Jobs for Main Street Act includes

$10.7 billion in additional funding, which resembles the authorization for FY 2009. The bill also includes provisions to stabilize the Highway Trust Fund by restoring $19.5 billion in forgone interest payments and adds $1.7 billion based on accounting changes for fuel tax exemptions. In keeping with the ARRA, the legislation waives the requirement that states provide matching revenue to receive these funds.

Many states are concerned about the lack of a prospective reauthorization spending bill going into 2010. Although the Obama administration says states shouldn't be concerned that a new law is not yet in place, there is growing anxiety as transportation improvement plans are left in limbo. Planning for a new bridge, highway interchange or light rail line typically takes years, and states need early insight into how much the federal government will invest in transportation.

Without a reauthorized transportation spending bill in place, "Our industry surveys tell us that contractors won't be able to do long-term planning to purchase equipment," said Jeffrey Solsby, spokesman for the American Road & Transportation Builders Association.

US Transit Buses By Alternative Fuel Type

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

14,000

10,000

12,000

8,000

6,000

4,000

2,000

0

LNG & Blends

CNG & Blends

Electric & Hybrid

Num

ber of Vehicles

Year

Sales opportunities for new and retrofitted energy efficient fleets continues to increase.

Source: Public Transportation Fact Book 2008

50% of Agencies are Currently Using eGovernment

Tools and an Additional 20% are Actively Considering

Implementation


INFRASTRUCTURE

Based on spending levels from existing stimulus and other recurring programs, Transportation Secretary Ray LaHood remains confident that the billions of dollars in the pipeline for road, bridge and transit projects will suffice until a new law is in place.

Transit

In the face of an economic downturn with high unemployment, overall mass transit ridership is down as fewer people are traveling to and from work. Similar to unemployment mass transit use is a lagging economic indicator. As result, the majority of transit systems have seen a decrease in funding from state, local and regional programs. But aided by the significant transit funding through the ARRA as well as the Jobs for Main Street, prospects are strong for new light rail systems as we continue to see the benefit of economic regeneration of transit corridors such as those in Washington, D.C., Denver, Colorado and Portland, Oregon. Moving into 2010, less than half of the approximately $7 billion in transit investment dollars made available through the ARRA are under contract.

Transit agencies across the country are investing

in alternative fuel vehicles to increase efficiency, support green transit and drive down operating costs. In addition to increased federal investment in mass transit initiatives beyond traditional dollars for highways, government fleets are also driving toward a greener economy.

Businesses that will see growing demand include vehicle manufacturers, fleet maintenance providers, the alternative fuels supply chain as well firms specializing in energy performance audits and management.

Infrastructure Jobs for Main Street

The Jobs for Main Street Act allocates $8.4 billion for transit funding, the majority of which will be distributed via formula grants, which are based on predetermined criteria, such as population. $800 million is proposed for Amtrak fleet modernization and $1.75 billion is also proposed for fixed guideway modernization, which refers to any transit service that uses exclusive or controlled rights-of-way or rails, entirely or in part. This includes heavy rail, commuter rail, light rail, monorail, trolleybus, aerial tramway, inclined plane, cable car, automated guideway transit, ferryboats, that

Federal Alternative Fuel Vehicles By Fuel Type

0

30,000

60,000

90,000

120,000

150,000

LPG

E-85

CNG

H2

Electric

LNG

M-85Num

ber o

f Veh

icle

s

Year

2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: www.afdc.energy.gov/afdc/data/ 2008

The federal government has been rapidly expanding its AFV fleet.

Source: www.afdc.energy.gov/afdc/data/ 2008

“Efficiency and renewable incentives and financing programs have the most

small business and job creation opportunity here for

2010 and beyond.”

— Government Official Survey Participant, December 2009




INFRASTRUCTURE

portion of motor bus service operated on exclusive or controlled rights-of-way, and high-occupancy-vehicle (HOV) lanes. In comparison, the ARRA provided $750 million for the Fixed Guideway Modernization formula program.

Fixed guideway modernization projects typically include purchase and rehabilitation of rolling stock, track, line equipment, structures, signals and communications, power equipment and substations, passenger stations and terminals, security equipment and systems, maintenance facilities and equipment, operational support equipment including computer hardware and software, system extensions, and preventive maintenance.

As with the proposed highway funding, states will lose 50 percent of any funding that is not under contract within 90 days of apportionment. In addition, there is a stated priority to focus on projects in economically distressed areas and those that can be completed within a 3-year timeframe.

PRIMARY INFRASTRUCTURE PURCHASING CATEGORIES

Infrastructure: Roadway, Bridge and Tunnel ContractorsHeavy EquipmentSignage and SuppliesEnvironmental ConsultingEngineering ServicesTransportation & Traffic Studies

Transit: Rapid Transit VehiclesBusesSpecialty and Vocational VehiclesFleet Operations and MaintenanceCCTVSecurity Services


ENERGY

According to the Department of Energy, every $1 the government spends on state energy programs results in energy cost savings of $7.22.

As of January 2010, Onvia was tracking 2,700 energy-related initiatives funded partially or in full by $13.5 billion from ARRA, which will create jobs in 2010 and lay the foundation for energy efficiency, renewable energy, upgrades to electricity transmission, carbon capture and storage and advanced energy research. The ARRA allocated $40 billion for energy initiatives, with several billion more likely through the Jobs for Main Street Act. Most of this funding is required to be spent within the next two years. Congress has also allocated $1.6 billion for Clean Renewable Energy Bonds (CREBs) to help finance construction of renewable energy facilities run by public utilities, electric cooperatives and city, state and tribal governments.

In 2010, pilot groups of consumers and businesses will continue to be fitted with smart meters and various accessories to begin smart grid pilot programs. Other initiatives, like Energy Smart Miami, will begin to demonstrate larger scale implementations of citywide smart grids. In November 2009, Florida Power & Light

Company received a $200 million ARRA grant as part of the Energy Smart Florida initiative to advance Smart Grid, including the installation of over 2.6 million smart meters, 9,000 intelligent distribution devices and advanced monitoring equipment in over 270 substations. With a total project value exceeding $575 million, the effort will be completed in 2011. General Electric will supply the meters, Silver Spring Networks will provide the wireless network and Cisco will provide networking capabilities. The proposed meters will be based on open network architecture, so companies can create consumer applications like Google PowerMeter that use smart meter information to measure and manage energy consumption.

In 2009 a number of states created specially focused teams and programs to maximize the impact of federal energy programs across regional and local economies.

These include initiatives to support small businesses and industry through energy savings. States are creating programs to provide technical and financial assistance to businesses who proactively address energy efficiency, including grants for commercial institutions that adopt alternative energy means such

2010 ARRA Energy Jobs

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Source: Onvia and REMI 2010

Num

ber o

f Job

s C

reat

ed

NewEngland

MideastSoutheast FarWest

RockyMountain

Southwest



U.S. Region

GreatLakes

Plains

More than 100,000 energy jobs will be retained or created as a result of 2010 ARRA spending.

2010 ARRA Energy GDP by US Region

FAR WEST: $1 Billion

SOUTHEAST: $3 Billion

GREAT LAKES: $400 MillionPLAINS: $120 Million

MIDEAST: $670 MillionSOUTHWEST: $400 Million

ROCKY MOUNTAIN: $160 MillionNEW ENGLAND: $200 Million

Source: Onvia and REMI 2010 Source: Onvia and REMI 2010



http://www.google.org/powermeter/


ENERGY

PRIMARY ENERGY PURCHASING CATEGORIES

Generation: Plant Asset Management SoftwareLoad ForecastingGeneration Plan and Scheduling

Transmission & Distribution:

Grid Asset Management SoftwareCapacitorsOutage ManagementGISEnergy Management SystemsDistribution Management SystemsEnergy Balance Management

Metering: Advanced Metering InfrastructureMeter Asset ManagementMeter Data ProcessingAutomated Meter ManagementSmart MetersPulse MetersSwitches and RoutersNet MeteringSmart Appliances

Building Automation Systems:

Software That Integrates and Normalizes Data From: Building Systems, IT, Energy Supply & Energy Demand

Security Technology:

Identity management and access controlThreat defenseData center securityUtility ComplianceSecurity monitoring and managementPhysical safety and securityProfessional services

as solar, wind power and biomass.

States are also focusing on improving government energy efficiency. Upgrades will address maintenance and renovation projects at state agencies, universities and community colleges. The targets for these efforts are initiatives that generate significant energy savings, including retro-commission HVAC controls, lighting fixture upgrades, boiler and water heater improvement and incandescent exit light and bulb replacement.

Other programs promote residential energy efficiency and renewable energy. Housing authorities are promoting energy efficiency in new, affordable housing including manufactured homes. In addition, many states will subsidize energy efficiency audits for those homes that implement energy recommendations.

States are seeking innovations around renewable energy technologies and resources. Look for continued creation of grant programs to foster the development and commercialization of technology that supports green business.

Energy initiatives will continue to grow and garner recognition through 2010 as the flow of funds from ARRA and Jobs for Main Street Act reach businesses that drive the Next Economy.



INFORMATION TECHNOLOGY

Advances in intelligent transportation systems, energy efficiency and patient care are all dependent on technologies that outpace the industries they serve. With healthcare and energy front and center on the domestic agenda, technology firms of all types will benefit. Almost $20 billion in healthcare technology spending was included in the ARRA and $80 billion will be spent on energy-related initiatives approved in 2009. Funds from healthcare, energy and other programs are now funneling down to the commercial entities that will be the pioneers of Next Economy technologies.

Healthcare IT

“2010 will be about laying the eHealth groundwork, particularly at the local and regional levels, in order to develop a nationwide support structure to ensure that providers and hospitals are prepared for 2011 when the electronic health record incentive programs launch,” says Brian Wagner, Senior Director of Policy and Public Affairs at the eHealth Initiative in Washington, D.C. “Now is the time for companies that serve the eHealth market, both as a primary and secondary focus, to develop and burnish their reputations. There is a lot of money in the queue, but that comes with high expectations that companies will have to meet.”

Grants for electronic healthcare initiatives are expected to flow in earnest during the second half of 2010, setting up 2011 as a breakout year for eHealth initiatives. In the next twelve months, there will be an increased emphasis on digitizing medical records as standards and strategies fall into place. There will a considerable number of new entrants in the eHealth marketplace as venture-backed startups figure out how to create businesses on top of previously unavailable data and platforms.

Building on the $19 billion investment in the ARRA, the Administration will continue efforts to further the adoption and implementation of Health IT (HIT) as an essential tool to modernize the U.S. health care system. $2 billion in ARRA investments will continue to be implemented in 2010, while the remaining $17 billion will be available as temporary incentive payments starting in 2011 to physicians and hospitals participating in Medicare for using certified Electronic Medical Records.

With no industry standard for the use or sharing of Electronic Health Records (EHRs) widely in practice, each medical facility is an island, using whichever method of record storage they chose. Strategies for

Estimated ARRA Health IT Spending

Source: Congressional Budget Office 2009

FY 2009 ‘15 ‘19

Bill

ions

$0

$5

$10

$15

$20

$25

$30

$35

$40

Source: Congressional Budget Office 2009

PRIMARY IT PURCHASING CATEGORIES

Healthcare IT: Core Routing And SwitchingWireless InfrastructureNetwork SecurityStorage SolutionsCollaboration Solutions Telemedicine SolutionsCommunication Solutions Wireless SolutionsCore Infrastructure Interoperability Solutions

www.ehealthinitiative.org

http://www.recovery.org/projectdetails.aspx?pid=BID:11213997






hospital record keeping range from paper records to highly integrated eHealth systems which cover patients from admittance to billing, and everything in between. This lack of standardization cripples information sharing in an industry where time often means the difference between life and death.

In addition to a lack of standards, there is a significant gap in digital connectivity between the medical professionals and the data and images on which they rely to do their jobs. Without ample broadband availability across the U.S., there is no way for EHRs to be used effectively. The infrastructure necessary to achieve electronic data exchange does not exist in most states. The ARRA-provided funding that will directly impact the adoption of broadband service and electronic health records.

At the end of 2009, the government took several critical steps toward a nationwide, interoperable, private and secure electronic health information system. The U.S. Department of Health and Human Services (DHHS) released two proposed regulations affecting HIT. The first, a notice of proposed rule-making (NPRM), describes how hospitals, physicians, and other health care professionals can qualify for billions of dollars of extra Medicare and Medicaid payments through the meaningful use of EHRs. The second, an interim final regulation, describes the standards and certification criteria that those EHRs must meet for their users to collect the payments. In addition, between August and December 2009, the DHHS Office of the National Coordinator for Health Information Technology announced nearly $2 billion worth of new programs to help providers become meaningful users of EHRs and to lay the groundwork for an advanced electronic health information system. All these actions were authorized by the Health Information Technology for Economic and Clinical Health (HITECH) Act, which was part of the ARRA.

The formalization of these regulations brings a higher degree of clarity to the Health IT roadmap, with investments expected to ramp up in 2011 and funding available through the middle of this decade. Federal

agencies have until September 2010 to award all funding.

In 2010, technology providers will be vying for the business of doctors and hospitals, which will have significant incentives to make meaningful use of eRecords in 2012. Technology providers and healthcare providers need to determine the best time to get in the game. Those that wait too long may be caught far behind what is a rapidly advancing curve.

Broadband

The expansion of broadband access across the US will be a significant contributor to economic growth and global competitiveness. As part of the ARRA, several billion dollars have been allocated to create broadband-enabled jobs, close the broadband gap, stimulate investment in broadband, spread high-speed access to schools, universities, libraries, community centers, job training centers, hospitals and public safety personnel in addition to encouraging demand for broadband.

The first step in designing a national broadband strategy is an inventory initiative intended to inform policymakers' efforts and provide consumers with improved information on the broadband Internet services available to them. The ARRA provided up to $350 million to develop and maintain a broadband inventory map. In order to build a national strategic plan, states have been tasked with gathering and verifying state-specific data on the availability, speed, location and technology type of broadband services. The data they collect and compile will also be used to develop publicly available state-wide broadband maps and to inform the comprehensive, interactive, and searchable national broadband map that the National Telecommunications and Information Administration (NTIA) is required by the Recovery Act to create and make publicly available by February 17, 2011.

In 2010, inventory mapping efforts will accelerate and create short-term opportunities for:

• Early stage expansion of broadband

http://www.healthit.hhs.gov

http://www.recovery.org/projectdetails.aspx?pid=RFP:10781994

http://www.recovery.org/projectdetails.aspx?pid=RFP:10781994



NEW REGULATIONS AND PROGRAMS CREATED BY THE HITECH ACT

New Regulations Description

Meaningful Use (issued)

Criteria established for Medicare- and Medicaid-participating providers and hospitals to receive incentives for using electronic health records (EHRs) in a meaningful manner, which includes electronically capturing health information in coded format, using that information to track key clinical conditions, communicating that information in order to help coordinate care and initiating the reporting of clinical quality measures and public health measures.

Certification (forthcoming)

A defined process of ensuring the functionality, security, and interoperability of EHRs that meet the standards and certification criteria required to achieve meaningful use of those records. Providers must use certified EHRs to qualify as meaningful users.

Interim final regulation for certification criteria and standards (issued)

An initial set of standards, implementation specifications and certification criteria for EHRs.

New Programs Description Funds Allocated

Regional Extension Centers (RECs)

Establish up to 70 RECs to support providers in adopting and becoming meaningful users of health information technology (HIT).

$643 Million

Health Information Exchange

Support state programs to ensure the development of health information exchange within and across their jurisdictions.

$564 Million

Workforce Training Programs

Create several distinct programs that aim to support the education of HIT professionals, including curriculum development, competency examinations, and training. The goal is to train up to 45,000 new HIT workers to assist providers in becoming meaningful users of EHRs.

$118 Million

Beacon Communities Provide funding to create up to 15 demonstration communities in which clinicians, hospitals, and consumers show how the meaningful use of EHRs can achieve measurable improvement in the quality and efficiency of health services or public health outcomes in a given geographic area.

$235 Million

Strategic Health Information Technology Advanced Research Projects (SHARP)

Fund research focused on achieving breakthrough advances to address well-documented problems that have impeded the adoption of HIT, including: the security of HIT, patient-centered cognitive support, health care application and network platform architectures, and secondary use of EHR data.

$60 Million

Nationwide Health Information Network (NHIN)

Create a common platform for health information exchange across diverse entities, within communities, and across the country to promote a more effective marketplace, greater competition, and increased choice through accessibility to accurate information on health care costs, quality and outcomes.

$64.3 MillionStandards and Certification

Develop interoperability specifications that identify harmonized standards and provide detailed technical specifications for how those standards need to be used; work with health care organizations and standards-development organizations to ensure the standards are available for use nationally.



infrastructure.

• Acquisition of equipment, instrumentation, networking capability, hardware and software, digital network technology and infrastructure for broadband services.

• Access to existing broadband service by community anchor institutions.

• Access to existing broadband service by low-income, unemployed, aged, and otherwise vulnerable populations in order to provide educational and employment opportunities to members of such populations.

As with many of the new programs established through ARRA, timelines have progressed slower than expected. Scheduling and staffing challenges have delayed the review of broadband applications. In order to award the $4.7 billion appropriated for Broadband Technology Opportunities Program by September 30, 2010, NTIA and Rural Utilities Service (RUS) must evaluate applications and award funds in a compressed time frame. The effort is complicated by the fact that NTIA and RUS also face an increase in the number of applications that they must review and evaluate in comparison to similar programs.


STIMULUS & RECOVERY

As we move into 2010, the federal government continues to grapple with the best equation for reviving the economy without completely sacrificing sustainability through the national debt burden. Politicians, businesses and citizens alike are divided over the merits of big government and big spending versus tax relief and economic Darwinism.

2010 ARRA Impact

Although the ARRA passed in early 2009, the majority of the impact will be felt in 2010 as the dollars funnel down to local economies in the form of government contracts and resultant job creation. At the end of 2009, only 25 percent of the $275 billion in ARRA contracts, grants and loans had been paid out by the federal government. Onvia expects the creation or retention of over one million direct and indirect jobs from ARRA contract spending in 2010, in addition to the 460,000 created or saved by ARRA in 2009.

In conjunction with REMI, the recognized authority on regional economic models, Onvia has projected the expected employment increase by type in each region. Across all regions, approximately half of the employment gains are directly from ARRA funding

(direct effect), while the other half consist mainly of Intermediate Demand Employment (indirect effect) and Local Consumption Demand Employment (induced effect).

The growth in government spending increases employment and raises real disposable income, which drives consumption and ultimately the output for at least as long as those funds are flowing into the economy. Consider this example: a road repavement project increases the demand for construction workers and materials. As the workers’ real disposable income increases, their consumption correspondingly goes up, whether it be lunch at a local sandwich shop or going out to the movies with their families. The demand for materials (intermediate inputs) depends on the requirements of industries that use inputs from other sectors. In the case of road repavement, it would presumably be asphalt and machinery, and those industries would continue to employ workers as long as there is a demand for their goods and services. Essentially, every dollar spent on a project generates more than a dollar return to the economy. This spending and re-spending is the so-called “multiplier effect.”

2010 ARRA Funded Employment

Jobs

(Tho

usan

ds)

NewEngland

Mideast GreatLakes

Southeast FarWest

RockyMountain

Southwest0

50

100

150

200

250

300

350Local Government

State Government

Government Demand Employment

Intermediate Demand Employment


U.S. Region

Exogenous IndustrySales Employment

Investment ActivityDemand Employment

Local ConsumptionDemand Employment

Plains

More than 1 million jobs stand to be retained or created from ARRA spending in 2010. (For employment category definitions, see the glossary on pg 25.)


80% of ARRA-funded Agencies Expect the Majority of

Initiatives to Begin in 2010


STIMULUS & RECOVERY

Although ARRA funding is almost entirely government spending, most of the money will not be spent in the public sector. The largest employment increase from 2010 spending will take place in the construction sector, with close to 480,000 expected jobs. This corresponds with the fact that most allocated projects are in the infrastructure market. Coming in second is professional and technical services, which consists of industries such as architectural and engineering services, scientific and other consulting services, and computer systems design and related services. Transportation and warehousing, manufacturing, healthcare and social assistance, and administrative and waste services make up about a third of the total employment created by recovery spending.

As of January 1st, 2010, Onvia was tracking more than 47,000 ARRA funded projects and purchases with thousands of additional projects yet to be announced.

Jobs for Main Street

Just as spending from the ARRA began to accelerate in late 2009, the U.S. House of Representatives passed H.R. 2847, “Jobs for Main Street Act of 2010,”

to further stimulate job growth. The bill is designed to continue the momentum created by ARRA investments and to help mitigate the potential cliff effect as ARRA programs expend their allocated capital.

Included in the pending bill are funds redirected from TARP for various infrastructure investments, stabilization of public service jobs including educators and law enforcement and continued emergency funding for unemployment and healthcare benefits.

The infrastructure funds will be distributed to states by the same formulas that were used to distribute stimulus funds previously provided in the ARRA. States are not required to provide any matching dollars to be eligible to receive these funds, and will be required to have 50 percent of the funds under contract within 90 days or lose the remaining funds (to be redistributed to states which have met this requirement; the second 50 percent must be under contract within one year or be lost to other successful states).

This is a far more stringent requirement than ARRA, which required funds to be “obligated” rather than under contract. Many of the other provisions related

Construction

Transportation and Warehousing

Finance and Insurance

Administrative and Waste Services

Manufacturing

Professional and Technical Services

Other

Healthcare and Social Assistance

Source: Onvia 2010

4%

3%

39%

6%

6%

7%24%

11%

2010 ARRA Employment By Industry

Source: Onvia 2010

“We received ARRA funds in 2009. We anticipate

spending ~70% of the funds in 2010. We are seeing

jobs being created and/or retained.”



STIMULUS & RECOVERY

to the use of ARRA funds are included in the Jobs for Main Street Act.

The U.S. Senate is expected to consider the Jobs for Main Street bill in January. Passage will be hotly contested as parties debate the successes of the last several stimulus bills versus more deficit friendly strategies such as tax relief.

2010 Jobs For Main Street Act (H.R. 2847) Spending

Transportation $37.2 BillionAdditional Infrastructure Investments ($27.5 Billion)

Public Transportation Investments ($8.4 Billion)

Amtrak ($800 Million)

Airport Improvements ($500 Million)

$4.7$2.0

$27.1

$35.8$37.2

$43.7

Housing $2.0 BillionNational Housing Trust Fund ($1 Billion)Public Housing Capital Fund ($1 Billion)

Energy and Water $4.7 BillionInnovative Technology Loan Guarantee Program ($2 Billion)

Clean Water State Revolving Fund ($1 Billion)Safe Drinking Water Revolving Fund ($1 Billion)

Environmental Restoration and Flood Protection ($715 Million)

Education $27.1 BillionEducation Jobs for States ($23 Billion)School Renovation Grants ($4.1 Billion)

Healthcare $35.8 BillionMedicaid ($23.5 Billion)COBRA Subsidy ($12.3 Billion)

Labor and Workforce $43.7 Billion

Expanded Unemployment Benefits ($41 Billion)

Law Enforcement Jobs ($1.18 Billion)

Job Training ($750 Million)Summer Youth Employment ($500 Million)

Small Business Loans ($351 Million)

Funded initiatives from the Jobs For Main Street Act are intended to move quickly

Source: Onvia 2010


CONCLUSION

The 89,000 government entities across the United States represent a dynamic marketplace with opportunities in every industry vertical. The “Next Economy” in which government more actively participates in business interests through regulation, direct ownership or other means, is emerging.

Government spending as a percentage of GDP is at an all-time high and that will not change in the foreseeable future. As state lawmakers head back to their capitals they face increasing pressure to raise taxes to supplement bankrupt budgets. Tax increases are inevitable, which will have the effect of even further increasing the size of the government marketplace in coming years. Reflection on the first year of the Obama administration is a portent of the Next Economy; the reform agenda in healthcare, manufacturing, financial markets, and energy are already affecting the state and local government market.

For businesses, the debate isn’t about large versus small government but rather how to engage in and influence this vast and growing market. In 2010 it is incumbent on every business to evaluate its position in the government marketplace, not just for survival

as was the case in 2009, but rather to avoid being competitively disadvantaged in their industry. While some will determine no fit, most will define a short-term and long-term strategy for playing in this sector.

Which stakeholders do you expect will have the greatest effect on your company’s economic value in the next 3–5 years?

10 20 30 40 50 60 70 800

Customers

Government

Employees

Investors

Suppliers

Media

Non-GovernmentalOrganizations

Sour

ce o

f Inf

luen

ce

Source: McKinsey Quarterly 2010

Business must proactively and regularly engage with government or be left behind in the Next Economy

Source: McKinsey Quarterly 2010

“Stimulus programs with long term effects [such as] energy

efficiency, modernization of transportation infrastructure,

modernization of medical information systems are

promising.”



AUTHORS

About Onvia.

Onvia (NASDAQ: ONVI) is the leading provider of Business-to-Government solutions in the United States, covering the broadest set of industries and products at every level of the public sector - Federal, State, Local and Education. For more than twelve years, Onvia has delivered unparalleled coverage of government purchasing activity and commercial/residential projects for clients in a variety of industries, including:

• Architecture and Engineering• Construction• IT/Telecom• Healthcare• Operations and Maintenance• Professional Services• Transportation• Water and Energy/Alternative Energy

Businesses across the United States rely on Onvia as a comprehensive resource for industry-specific information needed to make intelligent sales decisions. Onvia was founded in 1996 and is headquartered in Seattle, Washington.

Recovery.org, a service of Onvia, is tracking American Recovery and Reinvestment Act (ARRA) spending by Federal, State and Local agencies and provides detailed information about what is happening in our States and Municipalities - from the moment ARRA funds are approved, to a government agency’s issuance of a Bid or RFP, through contract award to a business.

About REMI.

For three decades REMI has been the leading authority on how government actions and policy changes affect the world around us. REMI was founded on a transformative idea: government decision-makers should test the economic effects of their policies before they’re implemented. Their commitment to a better understanding of the economy drives an unceasing process of innovation in economic theory and practice, software development and application, and the use of quantitative economic analysis to guide policy decisions. Through a belief that improved knowledge and information will lead to better decisions, REMI’s work develops and supports the use of leading economic models that inform government and corporate decisions. REMI is headquartered in Amherst, Massachusetts and has a regional office in Washington, D.C.

Regional Economic Models, Inc.

433 West StreetAmherst, MA 01002

413.549.1169 www.REMI.com

Onvia, Inc.509 Olive Way

Seattle, WA 98101206.282.5170

www.Onvia.comwww.Recovery.org


2010 PROJECT HIGHLIGHTS

2010 PROJECTS LOCATION VALUEReconstruction of IR 090 OH $400,000,000

I-85 Yadkin River Project NC $330,000,000

Road Reconstructions CA $321,058,000

East Bridgeport Rail Yard Improvements Bridgeport, CT $90,000,000

HOV Connector between I-405 and SR-22 CA $173,253,000

Sheldon and Arleta Slab Replacement and HOV CA $160,000,000

Port Columbus Airport Security Projects Columbus, OH $35,200,000

Renovation and Improvements to the City’s Port Dock Facility

Petersburg, AK $1,000,000

Wonderland Station Garage Revere, MA $22,700,000

Lone Wolf Historic Bridge/pedestrian Bridge Tom Green,TX $1,590,201

HIGHWAYS & PORTS

Heavy Duty Transit Buses ID $51,200,000

ARRA - Fta 5307 Miami Dade Transit Urban Formula Funding

FL $69,802,389

Replacement of up to 132 buses CA $61,652,000

Preventive Maintenance Atlanta,GA $121,300,000

Replacement CNG and Electric Buses - 43 in FY 2009 and 40 in FY 2010.

Long Beach; Los Angeles;

Santa Ana, CA

$52,565,000

Acquisition of Vehicles Long Beach; Los Angeles;

Santa Ana, CA

$84,000,000

Energy Efficient Bus Components Monroe, MI $84,000

Smartbike Expansion Washington, DC

$3,000,000

Transit Security Houston, TX $3,040,560

Light Rail Projects MD $4,200,000

TRANSIT

Five Integrated Smart Grid Techology Systems AL $330,130,432

Implementation of the Smart Grid Miami, FL $578,347,232

Deploy a Smart Meter Network and Advanced Customer Control System

Baltimore, MD $451,814,234

Build a Green Smart Grid Virtual Power Plant Raleigh, NC $520,000,000

Comprehensive Grid Modernization for Duke Energy’s Midwest Electric System

Charlotte, NC $851,700,000

Integrate Smart Grid Technologies Las Vegas, NV $298,000,000

Deploy a Wide-range of Grid-related Technologies New York, NY $272,341,798

Deploy a Smart Grid Network Oklahoma City, OK

$293,201,332

Complete the Installation of 2.2 Million Smart Meters Houston, TX $639,187,435

Green Energy Works! Biogas Projects Dauphin, PA $500,000

ENERGY







http://www.recovery.org/projectdetails.aspx?pid=ant:11456057






























2009 TOP CONTRACTORS

The Toro CompanyBloomington, MN

NYSE:TTC

Deere & CompanyMoline, IL

NYSE: DE

Ford Motor CompanyDearborn, MI

NYSE:F

General Motors CorporationDetroit, MI

NYSE:GRM

Gillig CorporationHayward, CA

Private

A123 Systems, IncWatertown, MA

NASDAQ: AONE

Atlantic Machinery Inc.Silver Spring, MD

Private

Silver Ships, IncTheodore, AL

Private

Boulton Powerboats Inc.Central Point, OR

Private

Hertz Equipment Rental CorporationRohnert Park, CA

NYSE: HTZ

Navarro Research and EngineeringOak Ridge, TN

Private

Project Assistance CorporationWalnut Creek, CA

Private

Hydrogen Energy California LLCLong Beach, CA

Private

Sandia CorporationAlbuquerque, NM

NYSE: LMT

HIGHWAYS & PORTS

TOP CONTRACTORS TRADING SYMBOL

Granite Construction CompanyWatsonville, CA

NYSE: GVS

APAC-AtlanticAlcoa, TN

NYSE: CRH

Ford Construction CompanyDyersburg, TN

Private

Rieth-Riley Construction Co.Goshen, IN

Private

MRM Construction ServicesPhoenix, AZ

Private

Pike IndustriesBelmont, NH

NYSE: CRH

Ajax Paving IndustriesNokomis, FL

Private

Ballenger Construction CompanyHarlingen, TX

Private

Shelly CompanyThornville, OH

NYSE: CRH

James Construction GroupBaton Rouge, LA

Private

TRANSIT

ENERGY

http://www.recovery.org/projectdetails.aspx?pid=AWD:11132532


http://www.bloomberg.com/apps/quote?ticker=ttc



http://www.bloomberg.com/apps/quote?ticker=de



http://www.bloomberg.com/apps/quote?ticker=f



http://www.bloomberg.com/apps/quote?ticker=MTLQQ%3AUS





http://www.bloomberg.com/apps/quote?ticker=aone









http://www.bloomberg.com/apps/quote?ticker=htz









http://www.bloomberg.com/apps/quote?ticker=lmt



http://www.bloomberg.com/apps/quote?ticker=GVA%3AUS


http://www.bloomberg.com/apps/quote?ticker=crh



















2009 TOP CONTRACTORS

ENERGY (CON’T)

TOP CONTRACTORS TRADING SYMBOL

Stronghold EngineeringRiverside, CA

Private

CH2M Hill Englewood, CO

Private

Honeywell InternationalMorristown, NJ

NYSE:HON

Syska Hennessy Group ConstructionNew York, NY

Private

EnerG2Seattle, WA

Private

Burgess & NipleColumbus, OH

Private







http://www.bloomberg.com/apps/quote?ticker=hon








GLOSSARY

Intermediate Demand Employment: is the employment needed to satisfy demand for material inputs to the production of final goods.

Local Consumption Demand Employment: is the employment needed to satisfy demand for consumer goods.

Government Demand Employment: is the employment needed to satisfy demand for goods and services by government expenditures.

Investment Activity Demand Employment: is the employment needed to satisfy demand for capital goods.

Exogenous Industry Sales Employment: is the direct amount of Industry Sales entered by the user into the Industry Sales/Exogenous Production Policy Variable and converted to Employees using Labor Productivity.

State Government: Public Administration Employment within the state.

Local Government: Public Administration Employment within the region.

TARP - The Troubled Asset Relief Program: commonly referred to as TARP, is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector. It is the largest component of the government’s measures in 2008 to address the subprime mortgage crisis.

ARRA - The American Recovery and Reinvestment Act of 2009: abbreviated ARRA, is an economic stimulus package enacted by the 111th United States Congress in February 2009. The Act followed other economic recovery legislation passed in the final year of the Bush presidency including the Economic Stimulus Act of 2008 and the Emergency Economic Stabilization Act of 2008 which created the Troubled Assets Relief Program (TARP). The measures are nominally worth $787 billion. The Act includes federal tax cuts, expansion of unemployment benefits and other social welfare provisions, and domestic spending in education, healthcare, and infrastructure, including the energy sector.

Cash for Clunkers: The Car Allowance Rebate System (CARS), colloquially known as “Cash for Clunkers”, was a $3 billion U.S. federal program intended to provide economic incentives to U.S. residents to purchase a new, more fuel-efficient vehicle when trading in a less fuel-efficient vehicle. The program was promoted as providing stimulus to the economy by boosting auto sales, while putting safer, cleaner and more fuel-efficient vehicles on the roadways.

Jobs for Main Street Act: On December 16, 2009, the House passed the Jobs for Main Street Act to create or save jobs here at home with targeted investments ($75 billion) for highways and transit, school renovation, hiring teachers, police, and firefighters, small business, job training and affordable housing. These investments are fully paid for by redirecting TARP funds from Wall Street to Main Street.

The Next Economy Government Market Outlook 2010 Final

Documents

government sector

government spending

level of government

big government

government entities

government entity

government agencies

government market outlook2