Stimulus Complexities

It’s hard to believe in the future when every day you are told that the future is bleak. At least that’s the story we’re being bombarded with by national media. But the recent strength of the annual Underground Construction Technology International Conference & Exhibition was a refreshing breath of optimism and hope in an otherwise environment of despair.

UCT ran counter to trends and even expectations. Attendance actually rose by almost 11 percent. While attendees were understandably very cautious and nervous about the coming year, most were still working – and expected to stay that way through at least the first half of the year.

Not to minimize the world economic crisis; we all know the litany of problems that have to be dealt with – they are many and severe. But in any type of recession or economic downtown, opportunities also arise. Talk of the various federal stimulus proposals led much of the UCT conversation. Underground Construction’s Washington Editor Stephen Barlas is carefully following the stimulus developments and will continue to report breaking developments in detail.

That a stimulus will happen is a given. The House plan has been released for some time, details of the Obama plan have steadily been emerging and, as of this writing, the Senate plan was due to be released soon. The Republican Party, though in the minority in all branches of government, still yields much influence. But they, too, have expressed support for a major stimulus package.

Preliminary details of the stimulus plans indicate a broad impact for underground infrastructure. Figures vary and final negotiations will determine actual dollars, but it looks like sewer and water could receive between $10 and $12 billion.

But the stimulus doesn’t stop there. Water supply may get $2 or $3 billion. This typically means not only securing future sources of water for municipalities, but constructing pipelines to transport water as well.

The Rural Utilities Service may get $2.5 billion to supply broadband for rural areas and $3 billion has been earmarked to provide broadband to under-served suburban areas.

The power grid, still trying to meet Federal mandates after the Midwest/Northeast power blackouts a few years ago, could receive up to $5 billion to jumpstart those efforts. Increasingly, power lines are going underground.

As of late January, nothing was determined for sure. Indeed, this will be the first true test of President Obama’s leadership abilities. His mountainous task will be to not only unify his own party behind a plan that he favors, but bring the minority party into the fold as well. Achieving this in an expeditious manner could be a pre-cursor to the success of his presidency.

Billions in stimulus packages are exciting and needed to correct our economic course. But it doesn’t matter how much money the government wants to spend – it all boils down to distribution of funds. A stimulus means nothing until the money is received by owners and engineers who are prepared to quickly let contracts. When the money is in contractors’ hands is when the true benefits of the stimulus can impact the industry. One government report pessimistically predicted mid-2010 before funds could be distributed. However, many quickly disputed that opinion, me included. Many states are already prioritizing projects, working with their cities to be ready to react immediately once funds are available. Rehabilitation projects will probably see the most emphasis early on as typically those types of needs are already somewhat identified and require less time to develop. There is a distinct possibility that projects will be kicking off in the second half of 2009. The good news is that infrastructure projects in general can react more quickly and should be able to start in 2009. Other, non-infrastructure elements probably won’t see significant spending until 2010.

It is the contractors who will hire the employees and purchase equipment and supplies. It is the contractor’s employees who are pulling in full wages that will spend money at Wal-Mart, the grocery stores, maybe even buy that new car or HD television.

As an industry, we have to be ready to react. The knee-jerk reaction by too many suppliers, owners and contractors is to slash all spending – even business development – and hunker down for a bad year or two. With the stimulus looming, now is not the time to put your head in the sand. Now is the time to be cautious, but ready to react. When that stimulus train comes rolling by, those who are prepared to jump on board may see their best year ever.

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