On Record – June 2009

The frustration and impatience – even from those who have first-hand acquaintance with the slow-grinding wheels of government – is evident. “We’ve seen no stimulus work come across our bid desk,” said one Bakersfield, California, precast contractor. “We’ve laid off almost half of our permanent workforce.”

Others are doing better. “We were awarded a $25 million contract in Minnesota that included ARRA funding,” says Mark Pederson, chief financial officer for Adolfson & Peterson Construction, Minneapolis, Minnesota. “It’s an immediate start.”

Both contractors were responding to an informal survey sent out by Ken Simonson, the Associated General Contractors of America chief economist. As of mid-May, Ken had received 66 responses to his question: “Has the American Recovery and Reinvestment Act led to any new orders, contracts, hiring or other changes in your organization?” In response, 80 percent of his respondents said no.

Yes, we’re still in the early days. But even as states take the first step of appropriating the funds, the bid letting and award process follows a prescribed timeline, one that pays no attention to a contractor’s rapidly declining bank account. The good news is, as of April 30th, the Federal Highway Administration said 49 states have obligated almost $9 billion for highway improvements, or about 34 percent of total ARRA highway funds available to states.

Of that, about 10.4 million, or 3 percent of the total $28 billion in the stimulus act that went to highways, had been paid to contractors as of press time.

But the FHA funding path is a super highway in comparison to the $7.2 billion water/sewer funding grants EPA is doling out under the stimulus act. Fund distribution depends on the program (clean water, brownfields, etc.), and any regulatory hoops the receiving state may have. “There’s no direct answer to that,” said an EPA spokesman when I asked when contractors would see the money.

This is going to take time, folks. In the meantime, there’s a great deal of natural hesitancy out there. Our second quarter forecast mirrored our first quarter forecast in how our reader respondents answered the question, “What measures are you taking to address today’s market?” Respondents made “delaying equipment purchases” the overwhelming No. 1 answer.

Construction equipment dealers know this all too well. In a late April forecast Equipment World did in conjunction with the Associated Equipment Distributors, 73 percent of dealer respondents said they expected a significant decrease in new equipment sales this year. It’s no secret that many are pinning their hopes to ARRA and the please-God reauthorization of the highway funding bill. When asked which market presented the best opportunity for this year, 78 percent said roads and bridges.

I’m presently reading Doris Kearns Goodwin’s saga of growing up as a Brooklyn Dodgers fan, entitled Wait Till Next Year. It would be nice if the sentiment in her title proved to be all this industry needed to do. Right now, it still looks like a maybe.