The stimulus plan appears to be having little influence on construction companies' ability to expand payrolls, according to a recent survey from the Associated General Contractors of America (AGC), Arlington, Va., designed to gauge the impact of the federal program's construction spending on contractors. Based in part on a survey of almost 1,000 construction firms nationwide, the survey results were combined with the association's analysis of federal and state agency stimulus activities, along with a review of employment data from the Bureau of Labor Statistics.
“While the construction portion of the stimulus is having an impact, it is far from delivering its full promise and potential,” says Stephen E. Sandherr, CEO of AGC. “With construction unemployment at almost double the national rate, it is disappointing to see so many stimulus programs getting off to such a slow start.”
According to Sandherr, after five months into the federal stimulus program that has approximately $135 billion dedicated for construction projects, there is little difference in hiring and purchasing patterns between companies doing stimulus-funded work and those that aren't. For example, he notes that while 36% of construction companies with stimulus-funded work report plan to hire new employees, an almost identical percentage of those without it also plan to make new hires this year or next. Although 36% of construction firms with stimulus-funded work plan to purchase new equipment and supplies, 43% of those without stimulus-funded work report plans to purchase new equipment over the same time frame.
One reason the stimulus is having a limited impact on construction hiring and purchasing patterns, says Sandherr, is the fact that outside the transportation arena, little of the stimulus' authorized construction dollars have resulted in actual construction work. He notes that while the Army Corps of Engineers is responsible for $4.6 billion in stimulus construction funds, the agency has only obligated $715 million and paid out $84 million. Meanwhile, the General Services Administration has only obligated $656 million and paid out $12 million of its $5.9 billion in stimulus construction funds. In addition, only half of 1% of the $6 billion in stimulus funds available for the U.S. Environmental Protection Agency's state clean water and drinking water programs has been put to use at this point. Furthermore, based on the survey's findings, the majority of firms that don't plan on seeking stimulus-funded projects says it's because they don't do the type of work that's available (click here to see Chart).
When it comes to helping construction companies save existing jobs, Sandherr says the stimulus is doing a much better job, noting that 60% of construction firms with stimulus-funded work have saved or retained jobs. Although firms with and without stimulus-funded work both plan on buying new equipment, the survey indicates that those firms with these funds intend to make larger equipment purchases in terms of dollars than those without them. For example, among construction companies planning equipment purchases, 42% with stimulus work say they will spend over $500,000, while only 18% of those without it will invest more than half a million dollars in new equipment.
“The stimulus is clearly working,” Sandherr says. “It just isn't working fast enough for many construction workers in many communities.”
As an association, AGC is urging federal agencies to address critical shortages of contracting officials within key federal and state agencies overseeing stimulus construction dollars, notes Sandherr, adding that the Administration needs to fully and finally clarify reporting and “Buy American” requirements included in the stimulus because many federal and state agencies are having difficulty interpreting the new mandates.
“Unsustainably high expectations can bring down good policy and great programs,” says Sandherr. “The stimulus will keep our industry alive, but it will not turn around a trillion dollar construction industry overnight.”
To view the survey results in their entirety, visit http://newsletters.agc.org/newsandviews/files/2009/07/final-stimulus-survey-results.pdf as well as http://newsletters.agc.org/newsandviews/files/2009/07/agc-stimulus-survey-analysis.pdf for additional analysis on this topic from AGC experts.