Stimulus Plan — Construction Sector Opportunities

In its final form, the $789-billion American Recovery and Reinvestment Act holds a number of surprises and opportunities for the construction sector. Clearly, companies with expertise in green building techniques and constructing green facilities, along with those experienced in federal government procurement, will have the advantage as they look for ways to participate in the stimulus program.

The ultimate language of the Act stated that green building adherence is required and/or preferred in many of the funds that received the most allocations. In the billions of dollars provided to federal agencies throughout the legislation, environmentally friendly techniques and projects are called for in nearly all the work on facilities and infrastructure improvements, with the language stating that "green building principles shall be strongly considered," including the use and/or production of renewable energy and energy efficiency. While not nearly as many funds as anticipated were designated for direct funding of green projects, the agencies awarding contracts must require green building technology across the preponderance of the projects that are set in motion.

Another clear directive in the Act is that the majority of the funds will be going to existing federal agencies for construction and associated projects relating to their own facilities. For the most part, those funds not assigned for federal use will still be controlled by federal agencies to allocate to state government. Big winners on the federal side include transportation, with $27.5 billion for highways and bridges, a $1.5-billion discretionary fund allocated by the secretary of transportation, $8 billion for high-speed rail, and $6.9 billion for transit assistance, among other provisions.

The Department of Defense receives about $2 billion for construction under one budget and, in a second budget, $4.2 billion for facilities sustainment, restoration and modernization, along with $300 million to improve energy efficiency and $400 million for Defense health program facilities.

The Army Corps of Engineers is also high on the list, obtaining $4.6 billion that includes $2 billion for environmental infrastructure construction and $375 million for Mississippi River corridor improvements.

The EPA, of course, is another focal point of this environment-oriented measure. Its $7.2 billion will be allocated for projects from superfund and underground storage tank remediation to clean water and state assistance grants for brownfields.

The federal government will control large proportions of grant-related funds through organizations like the National Telecommunications and Information Administration (NTIA), which will allocate $4.7 billion in competitive funding for broadband expansion; the Department of Justice, with programs to put more police officers on the nation's streets; and the Federal Emergency Management Agency (FEMA).

Where funds do flow down to the states from the feds, such as in the arenas of transportation and education, the legislation requires, for the most part, that existing formulas be used to determine allocations of $53.6 billion in state stabilization funding. For transportation, the formulas consider miles of road in place, population, gas tax paid to the federal government, and other factors. For education, these formulas take into account such factors as number of students, population and socioeconomic issues. Federal agencies are retaining the right to tell school districts receiving the funds exactly what they can do with those dollars.

While 81.2 percent of the state stabilization funds must follow such formulas, the Act allows for 18.8 percent to be spent in a discretionary fashion at the state level on K-12 and higher education buildings, public safety facilities and "government services," which might serve as a catchall category to generate broad spending opportunities. Projects funded under this portion of the state stabilization program likely will be highly sought by construction organizations.

Initially, observers had expected Congress to require agencies to use half of their funding within the first 120 days and "use it or lose it" within one year. This stipulation has been relaxed. Now the legislation "strongly encourages" agencies to spend 50 percent of their funds in the first four months and gives preference to projects ready to go in those 120 days, but the deadline for getting projects under way has been pushed back to September 30, 2010 — unless otherwise noted. A very large number of exceptions are written into the Act, extending deadlines for action past the September 30 date.

Congress is also asking for "full and open competition" in the awarding of contracts for the federal projects. Such competition can last a year or more, but preference is being given to those projects that are virtually ready to go. So this contradiction may be the cause for some concern among construction companies.

All in all, opportunities for construction abound in the new stimulus act, and the construction industry should be working to gear up rapidly for this re-engineering of America.