At this point, everyone is seeking clarity on what the American Recovery and Reinvestment Act (ARRA) and the pending highway bill reauthorization will mean in terms of future projects in the pipeline. While no one can predict the future with any degree of certainty, industry experts can help shed light on what has happened up to this point, and where there could be rays of hope in the future.
According to Ken Simonson, chief economist, Associated General Contractors of America (AGC), the ARRA injected an "unprecedented amount" of government funding into construction projects - around $135 billion, much of which will be obligated in an 18- or 19-month period.
The immediate benefactor has been the transportation industry. "That is because there is already a system in place and an identifiable formula for allocating money to the states for highway and transit programs," says Stephen Sandherr, the AGC's CEO. "Unlike all of the other construction money, the money for transportation has the commitment that 50% of it has to be obligated within six months or the states would actually lose it. That sent a strong incentive for the states to identify projects that are eligible for the funding."
ARRA still holds future promise
The ARRA provided $48 billion for transportation infrastructure investments: $27.5 billion for highways; $8.4 billion for public transportation; $9.3 billion for passenger rail; and $1.3 billion for airport infrastructure. Of the bill's highway funds, roughly $18 billion was provided directly to states, and half of these funds had to be obligated in 120 days. The remaining $9 billion in state funds and the $8 billion allocated to local governments must be obligated within one year of the bill's enactment. States and localities that do not meet these deadlines will have their funds redistributed to other states.
Industrial Builders, West Fargo, ND, has been a recipient of some of the first-round projects. The company mills roads as a subcontractor to paving companies. As of early August, the company had 12 jobs in North Dakota, nine in Montana, six in South Dakota and five in Wyoming. "They are all stimulus related," says Paul Diederich, president. "Of those 32 projects, we have already completed 21 of them. They are small projects. They are easy to design; they are quick. Those are the kinds of jobs that can get the money on the street."
But Industrial Builders has not yet witnessed the flow of stimulus dollars into more design-intensive projects. "We also do a lot of structural work," says Diederich. "Out of all the stimulus money that has been let in those states, we have [seen] only one structure, and we were not successful in getting it because there were so many barriers." Still, he remains hopeful. "The bigger picture is there is so much money that has not hit the streets yet."
To discover the true impact the stimulus is having on its member contractors, AGC recently conducted a survey of its member companies. The results, as well as all statistical information, can be found at www.AGC.org.
"The analysis of the survey shows that while the stimulus is having an impact, it is far from delivering its full promise and potential," says Sandherr. "One reason the benefit has been so limited to date is, outside of the transportation arena, much of the construction funding authorized in the stimulus has yet to result in actual contracts that will allow contractors to begin work. Most agencies have committed very little, if any, of their stimulus funds."
For example, the ARRA provides $4.6 billion to the U.S. Army Corp. of Engineers. As of early August, only $716 million had been obligated and only $84 million had been paid out.
"With respect to the General Service Administration (GSA), the act provided $4.9 billion for investments in federal buildings and the procurement of more energy-efficient motor vehicles," Sandherr points out. "Only $656 million has been obligated and only $12 million has been paid out. Only half of 1% of the $6 billion in funds available for the EPA clean water and drinking water programs has been put to use at this point."