Design firms wait for stimulus

The final verdict is still out, but as of last month, the stimulus package hadn’t been all that stimulating when it comes to infrastructure projects across the country, according to the top CEOs from leading design and construction firms. The leaders responded to a recent "Sentiment Index" question in a survey conducted in April by the Construction Industry Round Table (CIRT) and FMI Research for the Second Quarter of 2009. When these CEOs were asked whether they had begun to see the effects of the American Recovery and Reinvestment Act of 2009 (ARRA), 62 percent of the respondents said no, with only 38 percent answering in the affirmative.

"While still early in the process, the initial reports are mixed at best and belie uneasiness about the timing, focus, and effectiveness of the estimated $100 billion which will go directly to infrastructure design/construction," said Mark A. Casso, CIRT president. "On the positive side, the dollars flowing in from the stimulus package are seen as a short-term lift, helping some states to balance their budgets, thereby maintaining the flow of work into the pipeline, thus stabilizing backlog levels for the companies."

However, overshadowing these positive signs is the general view among the CEOs about the program’s negligible or non-impact, as well as use of the money to address areas outside of infrastructure projects and the emphasis on "shovel ready" projects, which tend to be smaller, less long-term type of work (for example, paving jobs). "It is very apparent that ARRA funds will not and cannot replace the loss of private-sector investments and activities in capital projects for the remainder of year," Casso said.

Furthermore, in many cases the CEOs are seeing stimulus funds barely able to replace the loss of state-funded projects. "Couple this with the growing concern of over-reaching by the federal government with regard to new requirements on such things as financial disclosures, compensation levels, false claims acts, and union ties, it makes for a very serious picture, one in which many firms are reluctant to participate in," noted Casso.

Looking further out, the CEOs have raised concerns that the stimulus funding will actually reduce Congressional "interest" in the urgency of a new and expanded surface transportation bill to supersede SAFETEA-LU. "Even if this authorization is passed in a timely manner, its spending limits may be adversely affected in the out years by the risk of rampant inflation set off by the heavy federal spending and deficits being amassed," commented Casso.

In January 2009, CIRT in cooperation with FMI Research began conducting a Sentiment Index of the top CEOs of the leading design and construction firms that comprise its membership. Included in the quarterly reports are a series of topical questions that address issues affecting the community such as the impact of the federal stimulus package on funding infrastructure projects.

More information on the 2nd Quarter CIRT Sentiment Index is available at www.cirt.org.