Rehab Roars

By Robert Carpenter, Editor | July 2009 Vol. 64 No. 7

As much as the term “shovel ready” generates visions of immediate action, the reality is that the release of funds and subsequent trickle down to the contractor level is a slow process.. Projects have to go through the allocation process at both federal and state levels, then a municipality has to do the final engineering followed by the public bidding process. Due to our struggling economic condition, when projects are sent out RFPs or open for bidding, there are often record numbers of companies submitting proposals or bids. That adds even more time to the process. When contractors actually are awarded the job, that’s when stimulus impacts are truly felt.

A common complaint I’ve been hearing from municipalities is that the stimulus money is being spread so thin that by the time a city finally receives an award, it is frequently not enough to fund any significant work. Cities and agencies are finding themselves forced to become creative in order to fund a project of any size. Some cities are sitting on their stimulus money for 2009 in hopes their 2010 budget can squeeze additional funds to match with a stimulus allotment so they can muster enough funding to tackle a project.

With more than 60 percent of the sewer/water fund still to be awarded after July 1, and with the many hoops owners have to go through before a project can begin in earnest, it is impractical to expect major construction impacts before the late third or fourth quarters of 2009. And as slow as it seems to be for sewer/water funding to be distributed, it is far ahead of stimulus disbursement for other infrastructure markets. As of mid-June, only 7 - 8 percent of stimulus funds had been disbursed overall.

Broadband stimulus funds are experiencing a frustrating, bureaucratic delay. The Obama administration and new Congress are in a dispute with states over just who gets to disburse the several billion dollars in stimulus monies. As of mid-June, virtually no funds had been released. However, it appeared that legislative hurdles would be cleared and distribution of fund could begin distribution by late summer. Again, it will probably be the fourth quarter before any kind of economic impact will be felt.

All in all, not “stimulating” news for the near-term. However, the silver lining is that the U.S. economy has already apparently bottomed out. By the time real impacts from stimulus monies are in effect, the economy will most likely have returned to a slow growth mode. Combine a rebounding economy with stimulus funds and 2010 could see a substantially stronger market for the underground construction and rehabilitation industry.