Shortly after President Obama signed the American Recovery and Reinvestment Act (ARRA) in February 2009 several surveys taken by industry magazines found more than half of the civil engineers taking the survey expressed dissatisfaction with the way things were going at their companies or organizations and the industry in general. Now, one year later — and billions of dollars of recovery spending later — a slightly greater proportion of survey respondents said that they are still very dissatisfied with the status of the engineering, architecture and construction markets. The respondents pointed at the current administration as the primary cause of this lull in the construction sector.
Has the ARRA made any difference for civil engineers? In a recent report, the American Association of State Highway and Transportation Officials (AASHTO) touted a list of projects that were completed during the last year because of ARRA (stimulus) funding. However, since many, if not most, of these projects were “shovel ready” — already designed — civil engineering firms have not likely been impacted as positively as contractors, although some firms received construction management contracts resulting from initial ARRA funding. Nevertheless, funding for public and infrastructure projects and for private projects still remain the two most important issues to the civil engineering industry.
It appears that the impact of the stimulus is clearly being overshadowed by the sweeping downturn in overall construction demand. U.S. Census Bureau figures show that private non-residential spending dropped 18 percent in December 2009 compared with December 2008. Only power construction has increased from year-ago levels, by 14 percent. In contrast, publicly funded construction increased by 1.0 percent between December 2008 and December 2009. Stimulus spending helped boost highway and street construction by 3.7 percent, making it the largest public category. According to IHS Global Insight, an economic and financial information research firm, total construction spending will continue its decline, decreasing 5.6 percent in 2010 before growing 7.6 percent in 2011 and achieving double-digit growth in 2012.
Civil engineers responding to the current surveys also anticipate continued declines the remainder of this year and for early 2011. In 2009, roughly two-thirds of respondents expected the AEC industry to shrink or remain the same during the year. This year more than 80 percent of respondents anticipate that the AEC industry will not grow appreciably during the next year. Nevertheless, slightly more than 20 percent of survey respondents optimistically forecast that their firms’ total revenue for engineering services will increase in the next year compared with last year. A year ago, less than 10 percent of respondents anticipated increased revenue. Significantly fewer respondents expect decreased revenue this year.
If civil engineering firms in particular are able to increase revenue in 2011, it will likely be on the back of traditional infrastructure markets — transportation and water — with help from the quickly emerging alternative energy sector.
According to the American Road and Transportation Builders Association (ARTBA), record federal investment in surface transportation, increased spending through the ARRA, and continued easing in material prices will increase the highway construction market in 2011. However, uncertainty over the reauthorization of a multi-year federal surface transportation bill and future growth of the overall U.S. economy, along with the end of stimulus funds, will determine if there is a “soft landing” in 2011 or a more significant downturn.
Another indicator of work to come is the high level of obligations for ARRA funding — more than 77 percent of stimulus funds have been obligated, but only 16 percent of the total funding available actually has been paid to contractors.
Read the next blog to see how Infrastructure will Fuel the Economic Recovery.
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