Thoughts on the Stimulus Plan

I just finished writing a report on the stimulus plan for management consulting and publishing company PSMJ Resources. The report — entitled “The Obama Infrastructure Plan: A Supplement to PSMJ’s 2009 AEC Firm U.S. Market Sector Forecast” — focuses on how the plan may affect the markets served by the AEC industry.

I’m amused, but not surprised by the fact that the stimulus debate has become politically charged only a few days into the new administration. After all, what’s in it for the Republican Party to help the Democrats succeed? If things go smoothly and the country recovers more quickly than expected, the party in control (in this case, the Democrats) would get full credit and the GOP would have a hard time getting anyone elected anywhere. That’s politics. It’s a natural function of the party out of power to be obstructionist.

That’s not to say that the Republican criticism and their desire to help shape the bill are wrong. It’s just that the fight was so darned predictable.

With that said, the plan will eventually pass in a form close to the one originally proposed. The Democrats are likely to insert a few more “soft” programs into the bill — during committee deliberations, they already increased money for some non-infrastructure investment programs. Some Democrats also want to put more union restrictions on the bill’s infrastructure funding.

To win Republican support, the Democrats may agree to include more tax cuts and, with any luck, increase some hard infrastructure spending. As it stands now, here are three important factors to remember as you follow the process and wait for the infrastructure spending to arrive:

1. The goal of creating jobs quickly is likely to result in highway projects that have already advanced pretty far down the pipeline. This include “shelved’ DOT projects that couldn’t get funding and maintenance projects that require very little design work. All isn’t lost for the design side, according to my interviews. The consensus is that there will be work for designers, both in the construction phases of “shovel-ready” projects and in long-term projects for which federal money would be withheld from the short-term spending requirement. The latter is to ensure that critical infrastructure needs are addressed, and not just quick fixes, as well as to prevent the spigot from abruptly shutting down too early in the recovery process.

2. Design-build and other “alternative delivery systems” may be a ticket to winning some stimulus-driven work. If the goal is to fast-track projects, design-build may be promoted as a way to get that done. If your firm has design-build experience or solid relationships with some allied professional firms with which you could form a design-build team, start talking now.

3. Don’t anticipate a huge influx of work or money any time soon. The Congressional Budget Office said last week that the stimulus money would trickle in. After researching this unofficial report, I believe their analysis is flawed and sells the plan short because it does not appear to take into account the provisions requiring fast appropriation of federal money. Yet, we do need to recognize that it takes time for any money to get to its final destination when infrastructure projects are involved. Contractors and designers need to do the work first, then they need to bill the work before they can get paid. So assuming you’re one of the many firms trimming costs and getting lean, it’s prudent to continue that course of action.

The bottom line is that the stimulus plan should help the industry and the nation to survive during difficult times. But it won’t signal a return to the boom times we experienced a few years ago.

My advice is to keep apprised of the bill’s progress and position your firm to take advantage of opportunities likely to emerge from the bill. This includes transportation projects (highway, aviation and transit mainly), school projects (lots of energy-related work, but also some new construction and renovation), energy (smart grid and expanding the transmission/distribution network), public works (mainly water and wastewater system upgrades, as well as flood control) and federal buildings (military bases, parkland structures, museums, border stations, etc.). There might also be some work in low-income housing, but that is likely to have a minimal effect in the grand scheme.

I suggest treating the stimulus program like you’re (I hope) treating social security as it relates to your retirement planning — if it’s there when I need it, great…but I’m not counting on it to keep me afloat. — Jerry Guerra

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