The Stimulus – When Will the Cavalry Arrive?
Kegler Brown Construction Newsletter March 1, 2009
The construction industry has been on the front lines of the severe economic downturn - with double digit declines in most sectors. The collapse of the residential market and the deterioration of commercial construction have caused many to shirt their emphasis to public works. Fierce competition and eroding or evaporating profit margins are the norm. So it is not surprising that many are turning their attention to the federal stimulus bill to see what is in it for them.
While more questions than answers currently exist, here is a breakdown of the bill with respect to $135 billion in construction funding nationwide:
- Transportation: $49.3 billion, including $29.5 billion for bridge and highway construction, $6.9 billion for transit programs, $8.8 billion for high-speed rail investment and $1.8 billion for airport improvement grants.
- Energy-efficient and technological improvements: $29.8 billion, including $11 billion to improve the nation's electrical grid, $7.2 billion to expand broadband availability, and $5 billion for home weatherization assistance programs in the states.
- Building construction and improvements: $29.6 billion, including $5.6 billion to the General Services Administration to rehab government buildings, $7 billion to the Department of Defense for military housing and facility improvement, and $8 billion for housing programs.
- Environmental and water infrastructure: $21.4 billion, including $5.6 billion for the Army Corps of Engineers and Bureau of Reclamation, $7.4 billion for clean water programs, and $7.8 billion for environmental cleanup programs.
The stimulus bill expressly states what many in the industry know too well:
"Construction has been the hardest hit industry and occupation in the recession."
The new law is designed to save or create 2 million construction jobs over the next two (2) years.
While we do not yet know exactly what projects will be funded first, the law obligates states to commit its funds in the coming months so that hopefully "shovel-ready" projects can be bid and commenced in 2009. Ohio's share of highway infrastructure dollars is $936 million. States, including Ohio, will have to use the funds quickly under a "use it or lose it" approach.
The winners in the stimulus bill appear to be larger contractors on horizontal construction, as opposed to those specializing in vertical construction. Yet when larger contractors move on up to the larger infrastructure jobs, this may present bidding opportunities for mid-size contractors on other work vacated by the larger firms.
The stimulus bill requires that all projects use American-made steel, iron and manufactured goods, unless: (1) doing so would be inconsistent with the public interest; (2) iron, steel, and the relevant manufactured goods are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality; or (3) inclusion of goods produced in the United States will increase the cost of the overall project by more than 25 percent.
More information on the stimulus bill is available at www.recovery.gov.