The water and wastewater treatment market is showing signs of recovery when it comes to large, private projects, but this industry is still facing challenges in the public arena due to federal cuts. While the private part of the water and wastewater market remains one of the brighter spots in that market, its overall portion of the market remains small, says Scott Berry, the director of the municipal and utilities division for the Associated General Contractors of America (AGC).

The construction put-in-place for the private sector in 2012 increased to $672 million, which was up 19% from 2011, according to the Census Bureau’s recent report. This segment, however, comprised less than 3% of the total sewage and waste disposal market of $22.2 billion. The federal category, which included projects on military bases and national lands and made up 4% of the total, declined 21% from 2011. State and local funding, which accounted for 93% of the total, was down 1.5% to $20.7 billion. Within that category, the wastewater market dropped 5.2%, and the water supply market dropped 7%.

The overall water and waste water/sewage markets are still declining, says Ken Simonson, a chief economist for AGC.  Federal funding has been falling since 2011, and he expects it to continue declining at least through 2014. State and local spending on most water and wastewater has also been waning, aside from a small pickup last year in spending on sewage lines and pump stations, he says.

Due to the challenges in this market sector, some electrical contracting firms have seen a dip in opportunities in the water/wastewater market. The decline was further intensified because some electrical contracting firms tried to bid for work in the water and wastewater market when the residential market slipped during the recession. After project owners were flooded with bids from unqualified firms, they put projects on hold temporarily or indefinitely.

Over time, however, firms with experience and expertise in this market segment have seen a gradual recovery in this industry. For example, at Seabrook, N.H.-based Richardson Electrical Co., water and wastewater projects account for 50% to 60% of its work each year.

More projects are being put out to bid due to delayed construction, says Vaughan Richardson, project manager and estimator for Richardson Electrical. A change in Environmental Protection Agency (EPA) standards is also requiring the wastewater treatment plants near the Piscataqua River Basin in New Hampshire to invest in de-nitrification systems.

“The high levels of nitrogen present in the effluent of wastewater treatment plants is disrupting the ecosystem by promoting undesirable plant growth, which destroys shellfish beds, fish stocks, and restricts travel over the waterways,” Richardson says. “In our area, there will soon be a bloom of projects coming up due to these new EPA standards.”

In addition to installing the new de-nitrification systems, Richardson Electrical has helped to construct private wastewater plants for developers looking to build residential or commercial projects on land previously thought to be unsuitable for development. The contractor has also installed occupancy/vacancy controls, solar light gathering, and LED light fixtures in plants to conserve energy along with variable-frequency drives (VFDs). The VFDs allow plant operators to match flow rates to the overall system requirements, enhancing the effectiveness of treatment plants and reducing chemical requirements and cost. By helping plants invest in new technology and meet standards, Richardson Electrical has enjoyed a steady influx of work.

On a national scale, Berry says the private sector is showing increased interest in water infrastructure due to the significant demand, decreased funding, and certainty of the level of ROI due to the predictable ratepayer base. Over the next five to 10 years, he expects to see even more interest in the water infrastructure market.
On the public side, however, the environmental public works industry has been hit by a cut in federal funding. According to McGraw-Hill Construction, the environmental public works market will dip 9% to $28.7 billion after taking a dive over the last four years. The segment that’s been hardest hit is the water resources category, which includes dams, reservoirs, and harbor projects. In fact, this market is expected to decline 20% this year. A federal budget sequestration may also inflict an estimated $89 million cut on the Bureau of Reclamation’s water resources program.

The decline in this market is not only due to the drop in federal funding, but also because of the unsteady housing market, according to Ken Simonson, a chief economist for AGC. While water and wastewater construction spending on line extensions, new pumping, and plant capacity benefited from the housing boom over the last decade, this market started sliding once the housing market crashed. At that point, the industry was fueled by a boost in federal spending on military base projects nationwide, increased funding in 2009 for the State Revolving Funds, and the American Recovery and Reinvestment Act.

“All of those sources peaked in 2010,” Simonson says. “Some of the projects are still going on, but as they wrap up, no new federal funding is forthcoming. In addition, local government budgets have been hit hard by the downturn in house prices, which not only has hammered new construction, but also property tax receipts that are the core of many local budgets. Homebuilding has finally started to pick up, but is still far below peak levels.”

The sewer and hazardous waste remediation segment is also seeing a decline, with an expected drop of 7% this year. But on the bright side, sewer agencies in many eastern and Midwestern metro areas are spending billions on separating ancient combined storm and sanitary sewers.

“These projects will take 20 years in some cases, but should keep spending from drying up completely,” Simonson says. “I don’t expect total spending for water or wastewater to pick up until 2014 or 2015.”

In fact, Simonson expects the water and wastewater markets to shrink another 1% to 5% in 2014 before slowly recovering. Fortunately, on the private sector side, the recovery is already underway, Richardson says.       

Fischbach is a freelance writer and editor in Overland Park, Kan. She can be reached at amyfischbach@gmail.com.