Survey Findings Show Stimulus is Working, Though Not at its Full Potential
August 3, 2009
"I see the stimulus as a strong swimmer swimming against a
very strong current." That's what Ken Simonson, chief economist
of the Associated General Contractors of America (AGC) said during
a recent discussion of the AGC's stimulus survey analysis. "Construction
employment is dropping at double-digit rates on a year-over-year
basis and while there is an unprecedented amount of federal money
going into construction projects
there is still not enough
to offset the steep downturn in private, local-funded construction
in those categories."
Over the past few weeks the AGC conducted a member company survey
to evaluate the impact of the stimulus on their hiring practices,
equipment purchases and their bottom line. (CLICK
HERE to view the survey results.)
"The analysis shows that while the construction portion of
the stimulus is having an impact, it is far from delivering its
full promise and potential," said Stephen E. Sandherr, AGC
chief executive officer.
Included in the survey findings, 22 percent of responding construction
companies have won stimulus-funded projects, two-thirds of which
have already begun work on those jobs.
"On the other hand, 36 percent of responding firms said they
are not doing stimulus-funded work. Half said they don't do the
kind of work available. Almost as many
that there are no/too few local stimulus-funded projects,"
said Sandherr. He also noted that survey results showed one-third
of companies responding plan to hire new employees or rehire previous
employees this year or next.
"Strikingly, that nearly matches the 36 percent positive response
among companies that have already won stimulus-funded work,"
"Based on these results, it is clear that while the stimulus
is having an impact on the industry's ability to save or retain
jobs, it does not yet appear to have much impact on companies' ability
to hire additional workers," said Sandherr, who explained that
one reasons the benefits of the stimulus have been limited to date
is that, outside of the transportation arena, much of the construction
funding authorized has yet to result in actual contracts that will
allow contractors to begin work.
"This is significant because some of the hardest hit segments
of the construction industry have been in non-transportation related
fields," Sandherr said.
One concern over the stimulus that has been raised is the fact that
some state/federal agencies have said bids are coming in lower than
expected because of the economy and competition in the construction
industry. Art Daniel, president and CEO of AR Daniel Construction
Services in Cedar Hill, Texas, said one thing that may be contributed
to this is that some firms are bidding jobs in markets where they
have no previous experience. For example, subdivision builders may
start to move into the public arena because subdivisions are not
being built currently.
"That's bringing the prices done
so as the prices go
down contractors will also try and stretch every dollar that they
until you get a lot more [work] out there you will see
that," said Daniel.
Doug Pruitt, president and chairman of the AGC and CEO of Sundt
Construction in Tempe, Ariz., added, "I think you are seeing
a higher count of people bidding work, but you are also getting
a lot of people
getting into markets in which they have not
historically worked. Even though owners may benefit on bid day from
the lower price, that may be a false sense of security as it could
be problematic for a lot of these projects since you've got people
doing the work who do not have the skill set or experience with
some of the agencies they will be working for. I think we could
see increases in cost or delays on those projects because of that."
According to Simonson, officials have said that the bids they are
awarding are anywhere from 10-40 percent below the estimates that
"Material costs account for part of that
6.8 percent from June 2008 to June 2009," Simonson said. "But
the rest of the difference is the general contractors and the subcontractors
are cutting their margins perhaps to zero. I call this a limited-time
sale because the material prices could shoot up at any time
and because the firms that don't win the contract, if they don't
win something else they will be out of business-even the ones that
win, if they have under-priced their services they may not be around
[for much longer]."
So, is the stimulus indeed working?
"[In the construction industry] the stimulus is working, but
it's not reaching its full potential," said Sandherr. "What
we have found
is [because] there are projects identified
and [because] they [contractors] know there is additional money
that's supposed to come out, they are holding on to their workers
and retaining them because they want to make sure when the projects
do come out they have the ability to do the work with the people
they have relied on in the past."
Sandherr said that while we are only five months into a multi-year
stimulus program, construction unemployment is still at 17.4 percent--almost
double the national rate.
"It is disappointing to see so many of these programs getting
off to such a slow start. Especially when so many construction firms
have been able to turn dirt once contracts have been awarded,"
He added, "We have sent letters to all of the federal agencies
that have gotten construction stimulus money and asked what their
plan is to get their projects out and reminding them that the industry
is ready, willing and able to get the job done."
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