Government Builders Stoked
The push for a big federal spending program has Alabama’s big builders sharpening pencils and gunning engines in their government sector divisions.
ABOVE Brasfield & Gorrie led construction for the Wallace Creek North Bachelor Enlisted Quarters/Armory Complex at Jacksonville, North Carolina.
Many of the policy priorities of newly installed President Donald Trump have stirred up controversy. But his goal to rebuild much of the country’s infrastructure is perhaps the first component of Trump’s immediate agenda that has drawn bipartisan support. Crumbling roads, bridges, electrical grids and airports have long been a priority for many U.S. governors and local leaders, and a federal commitment to public works seems imminent.
Within his first week as president, Trump began assembling a task force related to overseeing infrastructure projects. Alabama-based construction companies with government experience on their resumes may benefit from some of the spending to come.
“It seems as if the majority of D.C. agrees that the public works program will benefit the country as a whole,” says Alex Edgeworth, vice president, federal division, at B.L. Harbert International in Birmingham. “There is a need for infrastructure and better roads, bridges and public works; it will just come down to how the funds are allocated. However, President Trump has continued to keep public works near the top of his agenda and millions of people will contribute in the workforce to rebuild our infrastructure.”
Federal government construction may include office buildings, housing, schools, aviation and health care, and Alabama contractors have a diversity of federal experience. For instance, since the launch of B.L. Harbert International in 1991, the company has specialized in federal construction in the United States and abroad, and federal projects make up almost 50 percent of the company’s work. Harbert completed a new U.S. embassy in Suriname in 2016 and will finish a new U.S. embassy in London this year.
In recent years, Department of Defense projects created significant work for U.S. construction companies, including those based in Alabama. The 2005 Base Realignment and Closure (BRAC) Commission recommendations, which included realigning 33 U.S. military bases from 2007 to 2011, “created a volume of construction work never before seen in the government sector,” says Doug Strohmeier, senior manager at Brasfield & Gorrie. In 2009, Brasfield & Gorrie formalized its commitment to the government market sector by establishing an operating group dedicated to federal government work, primarily with the Department of Defense and the General Services Administration.
“Despite an enormous reduction in the overall volume of government construction, due largely to the completion of the BRAC process in 2011, Brasfield & Gorrie’s government work volume has remained steady,” Strohmeier says. “Consistent funding and best-value procurements, coupled with numerous work opportunities across our service areas, make government work an attractive complement to our private sector portfolio.”
While federally funded construction projects decreased after 2011, Birmingham-based Robins & Morton has also continued to perform government work by joining the U.S. Army Corps of Engineers’ pool of approved contractors. The firm now holds six separate current contracts for the Corps of Engineers for construction and design-build projects on military bases across the country, says Phil Yance, vice president and head of Robins & Morton’s Government Services Division.
In addition, Robins & Morton has participated in several successful Mentor-Protégé Partnerships through the U.S. Small Business Administration. Currently, the firm is working on projects with a service-disabled, veteran-owned contractor, Birmingham Industrial Construction LLC, as a mentor-protégé SBA-approved joint venture. “Participating in these small business mentorship programs allows us to help enhance the capabilities of their company, improve their ability to successfully compete for contracts and help them grow,” Yance says. “We are lucky to work with such a capable small business; it has been a successful relationship for everyone involved.”
ABOVE Hoar Construction recently completed work on the Fort Campbell Physical Fitness Facilty in Clarksville, Tennessee.
Cycles of Spending
Federal government work is typically cyclical, according to contractors experienced in government projects. That’s because government spending depends on elected leaders, policy priorities and economic realities.
“Generally, over the past 15 to 20 years, federal spending on construction has had an inverse relationship to spending on private sector projects,” says Will Watson, division manager, government services at Hoar Construction, which has recently completed a new commissary at the Maxwell Air Force Base in Montgomery and a physical fitness facility at Fort Campbell in Clarksville, Tennessee. “We saw this through the last recession, with ARRA [American Recovery and Reinvestment Act] and BRAC-related projects providing a needed boost to the economy. The last few years have been rather lean relative to federal spending on major construction projects, and I am encouraged that the pendulum is ready to swing the other way.”
Other construction leaders agree that government projects come in cycles —and all eyes are on Washington to see how the new administration will approach its infrastructure priorities. “The government reacts to the needs of the country, and the workload ebbs and flows as needs of different agencies arise and subside,” says Trey Clegg, regional president at Brasfield & Gorrie. “There is a common belief that we have significantly underfunded infrastructure investment, and we are optimistic [that] the current administration will increase funding in these areas critical to the nation’s next generations.”
Robins & Morton has already noticed that the government is awarding more design-build projects. “This is right in step with our company culture of maximizing efficiency and collaboration, and we believe the structure of shared commitment among all parties greatly benefits our federal clients, just as it does in other construction sectors,” Yance says.
Because last year was an election year, Yance noted that less money was allocated on Department of Defense funding. “The stimulus dollars spent during the recession and BRAC restructuring are long gone,” he says. “A significant impact in reference to cyclical changes comes from not knowing how much funding Congress will allocate for future years.”
Planning for the Future
If government construction spending goes in cycles, the coming years are likely to be the up cycle. A group of Senate Democrats recently presented a $1 trillion plan for infrastructure spending, and the White House has suggested spending $150 billion during 2017, with continued public works spending for the following years. While no concrete plan has been announced, bipartisan support for the effort suggests that it’s only a matter of time.
“President Trump has made no secret that he wants the federal government to invest domestically in infrastructure and in the military,” says Hoar Construction’s Watson. “This proclamation should result in an uptick in opportunities for our firm to do business with the federal government.”
Because the new leadership in D.C. is especially pro-business, Harbert’s Edgeworth says his firm also expects to see more construction opportunities. And leading indicators bear that out: “The construction market is projected to remain strong into 2017 and beyond,” Edgeworth says. “We are taking measures to ensure that we can manage effectively serving our clients at the highest possible level, as they continue to strengthen mission objectives domestically and abroad.”
While President Trump has been vocal about his priorities to strengthen border security and improve infrastructure, “the president must work with Congress to enact legislation that will create construction funding,” says Brasfield & Gorrie’s Clegg. “The magnitude of that funding will reflect the cooperation between the legislative branch and the executive branch to reprioritize funding allocations from recent budgets approved.”
If campaign promises are funded with new appropriations, Clegg expects to see a net gain in activity and employment in the construction industry. “However, should current funds simply be redirected from these promised new activities, it is unlikely that noticeable gains in employment on federal government projects will be achieved. It will likely be well into 2018 before the construction industry experiences any impact from anything promised on the campaign trail.”
In addition to the potential opportunity to bid on new government projects, Yance expects to see more opportunities for “public-private partnerships, where a developer helps to fund public works projects along with the government for toll roads, toll bridges and other infrastructure,” he says. “We believe options like these will grow and continue under the new administration.”
Nancy Jackson is a freelance contributor to Business Alabama. She is based in Huntsville.