South Central U.S. Region - Bad News and Good News

Sept. 28, 2010

President-elect Barack Obama has given indication that he will be a proponent of infrastructure construction as a method of creating jobs and improving the economy. It worked in during the Great Depression of the 1930s. Everyone is ready for it to work again.

President-elect Barack Obama has given indication that he will be a proponent of infrastructure construction as a method of creating jobs and improving the economy. It worked in during the Great Depression of the 1930s. Everyone is ready for it to work again.

But the dollars cannot take the same route as they did in the 1930s. The federal government does not need to go into competition with state agencies and private contractors in 2009. In the 1930s, highway and hydro-electric construction were markets in their infancy, so new government agencies were set up to administer the construction. Now 75 years later, technology and business have matured. State and local infrastructure departments have their lists of projects ready in hopes of an economic stimulus plan. Federal dollars pumped into the system will allow highway and water infrastructure agencies to contract out work to improve deteriorated roadways, bridges, pipelines, and more. Contractors will be able to hire more workers.

Expanding Interstates

My forecast article in this issue touches on several markets within the South Central U.S. region. The highway and energy markets look to have the brightest prospects for 2009. Major highway work will continue to brighten the horizon, particularly in Arkansas, Oklahoma and Tennessee.

Oklahoma DOT Director Gary Ridley shared this viewpoint: “We will have a willing president who believes that if you’re going to stimulate the economy and stimulate jobs, there is no better way to do that than to invest in infrastructure. You have something when you get done. Look at the economic boom that followed the Interstate building program of the 1950s and ’60s. We certainly need to rebuild that system today. That effort would be an investment in immediate jobs and an investment in our future.”

A $46-million contract for an underground drainage structure was awarded as the first phase of the $330-million I-44 widening project in Tulsa. The next construction phase of the overall project is tentatively scheduled to bid in mid-2009. This will be followed by the Riverside/Peoria corridor bid, tentatively scheduled for early 2010, and the Lewis Avenue corridor, tentatively scheduled for bid in mid-2011.

“The prospects for highway construction in Tennessee are actually pretty good from the construction standpoint,” commented Gerald Nicely, Tennessee Department of Transportation commissioner. “The real issue we are facing is that dollars don’t go as far as they used to.”

In Tennessee, I-69 construction is keeping TDOT busy. To date, projects have followed existing corridors through western Tennessee, but this spring, TDOT will let a 4.5-mile-long section of I-69 in Obion County as the first through undeveloped land. Ultimately, about 80 miles of I-69 will be built through undeveloped land.

Major work is underway in Arkansas with more to come along the Hwy 71 corridor from Texarkana to Fort Smith. Much of the Hwy. 71 corridor will be incorporated into the new Interstate 49. In the Texarkana area, two major grading and structure jobs are under way as part of the Hwy. 71 relocation. The AHTD plans to award the base and surfacing contracts this year. This roadway will eventually become part of I-49.

Vertical Construction

The outlook for the vertical market is not nearly so bright. Dick Anderson, former executive vice president of the AGC of Oklahoma, had the bleakest outlook for vertical construction in 2009. “The enormous financial bailout affects the bond market and inner finance market that all these people have to access. Right now, for all intents and purposes, the bond market is shut down.”

According to Anderson, three major Oklahoma hospital projects have shut down construction in progress in order to maintain the credibility of their bond rating and their 501c nonprofit status, even though they realize the cost of remobilization later in the year.

The dire circumstances of the Big 3 automakers is sending ripples of pain into this region as well. Third tier OEM suppliers to the auto market, many of whom are located in Arkansas, Oklahoma, Tennessee and Texas, have begun to lay off employees.

Hurricane Protection

In Louisiana and Mississippi, hurricane protection work and preparations for 100-year flood levels will constitute the largest projects. This spring, USACE will be contracting out $15 billion to $17 billion in projects for the New Orleans area and below, along the Mississippi River. All this work has a deadline of being completed by June 2011 before hurricane season that year.

The magnitude of these projects dictate that they will go to the major firms, but the time frame in which they must be completed ensures that these firms will be hiring additional engineers, staff, workers, and subcontractors. The Shaw Group broke ground in early December 2008 on the largest design-build project ever undertaken by the U.S. Army Corps of Engineers, the Inner Harbor Navigation Canal surge barrier in New Orleans. Due to the size of the project, The Shaw Group is expanding their design staff and will have to bring several subcontractors onto the construction team. There will be places to look for work in 2009.