MONDAY, JULY 27, 2009
by Dennis ThompsonKansas City |
| Dennis Thompson |
In a year when companies have seen deficits and decreases, military construction spending has seen increases, making 2009 the highest budgeted year in history for this type of construction.
This year, the United States military construction budget is $25 billion, with the majority going toward updating and creating new housing and medical facilities for our nation's troops. With the current administration requesting $22.9 billion for construction in 2010, this market shows signs of keeping a steady pace in the near future.
For those in the construction industry, this sector appears to be a bright spot in a weak economy. However, breaking into this industry can be extremely difficult. Experience in military projects is required since these projects often pose numerous challenges unlike those of private construction.
Where it all started Twenty-five billion dollars is no small amount of money. Through the Base Realignment and Closure Act (BRAC) and the American Recovery and Reinvestment Act of 2009 (ARRA) come the funds to update, modernize and construct new facilities for all military branches.
BRAC began shortly after the Cold War when the Department of Defense (DOD) decided to restructure military bases. In 2005, the DOD decided again to realign and close bases - relocating 123,000 people - to strategically position our military for substantial growth. The plan called for all these projects to be finished by Sept. 15, 2011. This is important because the government's goal was to increase the Army's ranks by 65,000, the Marine Corps by 27,000 and the National Guard and Army Reserve by 9,200 each by fiscal year 2012, according to 2009 U.S. Senate documents.
This military restructuring has not only affected bases across the country, but contractor's pockets as well through $23 billion worth of renovation and new construction. Bases such as Ft. Bliss in El Paso, Texas, have been allocated $4 billion through 2012 to help manage the three additional brigades - 47,000 military personnel and their families - that are relocating from a base in Germany. At Ft. Riley, Kan., $334 million has been allocated for a new hospital to support a regiment that is being relocated from Korea.
As more people continue to return from overseas, the military population grows and bases become restructured, there is a greater need for more space and modernization of facilities. The current military housing or barracks and hospitals are unable to handle this additional pressure because many of the existing buildings were built in the 1960s and are out of date.
More money heading this way Recently, the government introduced the ARRA, which is welcome news for the construction industry because it is predicted to create or sustain 85,000 construction jobs in 47 states. This bill includes $7.4 billion for DOD appropriations. Of that, $1.3 billion is set aside for the construction of military hospitals and $600 million for troops and their families' housing. It is estimated that 95 percent of this money will go to companies in the private sector, according to an article in Stars and Stripes.
In total, there are currently more than 3,000 construction projects across the country. The Army has reported 615 projects underway and the Air Force has an additional 1,500 projects, with the majority less than $10 million in contract size. This gives small-to-medium size construction companies a chance to get in on the action. However, since the government wants construction to begin immediately on the 'shovel-ready' projects, more requirements have been added for those interested in military construction.
First, the DOD uses a multiple-award contract process where a group of prequalified contractors can begin working immediately on the first round of projects being awarded, according to an article in ENR. For example, at Parris Island, S.C., Walton Construction was awarded the contract to build three barracks, a headquarters training complex and a central mechanical plant last year. Earlier this year Walton was awarded an additional barrack. The government is hoping this method will get the needed work done more quickly.
Another requirement for contractors bidding on these projects is to show, from the beginning, how they are going to get this done more quickly, while still delivering the highest quality. Contractors will have to be more detailed in their reporting about the financial cost of the project as well as how many jobs were created and sustained.
This is just the tip of the iceberg when it comes to the DOD's requirements.
Not an easy processThere is no doubt that military construction can be profitable, but it offers considerably more challenges than does private construction. The biggest differences involve the source of funding and the additional construction documentation requirements.
Unlike funding for private projects, funding for military projects is designated each year because it is funded by the government. Funds come from various pools of money and organizations. The Corps of Engineers is the entity that pays the construction team and supervises the building of these projects. However, before any project gets to this step, it must be planned out and explained to Congress and the corresponding military branch before the money is allocated.
For example at Ft. Riley, the replacement hospital is being funded by DOD, based in Washington D.C., an agency that contracted the management of the project to the Army Corps of Engineers, Kansas City District, even though the project is in Ft. Riley, Kan.
The government is also looking for contractors that have built barracks and military hospitals before, as well as those with sustainable construction knowledge. All military buildings constructed or renovated in or after fiscal year 2008 must reach a minimum of LEED Silver certification.
Therefore, breaking into the military construction market is difficult. It takes a lot of time, resources and experience. The amount of contractors with all of these necessary qualifications is small, making this a dependable industry for those that are qualified. However, this does not stop the large amounts of contractors from submitting bids, making this industry more competitive.
Dennis Thompson, is the president of the Kansas City Division of Walton Construction Company, LLC. He can be reached at dennisthompson@waltonbuilt.com or 816-221-7500. More Articles
