Army Chief of Staff General Raymond Odierno recently announced that the Army has deferred $788 million in military construction projects and expects to cancel over $400 million in military construction projects permanently. This week about 650,000 Department of Defense civilian employees will take the first of 11 furlough days. These actions are the result of sequestration cuts—including about $4 billion in cuts to construction—implemented March 1, 2013.
What are AGC contractors saying about sequestration’s impact on their business to date?
Many contractors who work directly for federal agencies say the pace of projects hitting the street continues to slow, resuting in increased competition. Larger contractors are bidding on work that they usually would not bid. Many of those contracts are for smaller jobs sought after by smaller contractors. Contractors have also noted increased agency requests for contractors to hold their bids for 120 days or more.
The onset of furloughs could delay agencies’ construction project management decisions, as agency decision makers cannot respond to questions or work during furlough days.
What’s the sequestration outlook?
Cuts and their ramifications on projects are still just taking hold. Undersecretary of Defense for Acquisition, Technology and Logistics recently admitted, “[i]t’s a reasonable possibility that we will go into 2014 with sequestration still underway.”
There’s a chance that another round of sequestration cuts will come on October 1, when the start of the federal government's 2014 fiscal year. The House and Senate already passed budget resolutions with different top-line figures billions of dollars apart. If the two chambers cannot agree on a top-line budget figure—at or below the Budget Control Act level—the stage is set for another round of indiscriminate, across-the-board sequestration cuts.
AGC will continue to monitor the impact of sequestration on construction and advocate against further indiscriminate cuts to construction funding. Please contact AGC Director of Federal & Heavy Construction Jimmy Christianson if you have any examples of how sequestration is impacting your business.