Engineering News Record recently reported that the recent sequester will remove $4 billion from government construction projects. Mandatory cuts are 7.8 percent in defense spending and 5 percent non-defense expenditures. The impact will occur over the next 10 years.
The total sequester enacted an $85.3 billion reduction in government spending and was signed into law by President Obama on March 1, 2013. This may have a trickle-down effect on many state and municipal governments that rely on federal funding.
According to ENR, although many projects will be deferred or cancelled, many infrastructure projects have received exemptions. These include trust funds and those funds subject to obligation limits. The Corps of Engineers also received a 5 percent reduction but have some flexibility in how they apply the reductions.
Its impact on the design and construction industry will be primarily on those firms and companies that rely heavily on federal contracts. We have already seen certain government-oriented firms began layoffs as a result of the impact. This is not helpful for an industry that has been crippled by the Great Recession, where more than 6,000 design firms have vaporized along with approximately 60,000 architectural jobs.
The firms that serve as vendors for the nation’s design and construction needs will feel the pinch of this reduction. However, the private markets responded favorably to the cuts with three days of record highs for the DOW this month.
It is time for our industry to quickly shift to the private markets, where work is beginning to grow. Commercial and corporate projects are increasing, and HKS has seen a spike in workload in these areas. Healthcare markets are beginning to slow due to the doubt in the industry and funding questions both at the state and federal level.
Our industry is now officially in the sixth year of this record recession. Most of us who still remain viable and successful are resolute and determined to see our way to more stability of our industry. We have done this by leaning our processes as well as offering alternative delivery of our services.
New technology has allowed us to reduce clashes in our documents, reducing errors and omissions. Our documents have taken the form of building information modeling as an accessible database for our consultants and contractors. This shared information has initiated a more solutions-oriented dialogue between designer and builder.
I salute our industry in our response to better serve our clients, communities, and our country. Innovation and responsiveness to this economic crisis has been swift and meaningful. Our industry has changed, our perspective has certainly changed, and we begin to lift our industry to new levels despite the economy. The sequester presents a new challenge but one that will be addressed to successfully improve and adapt our industry.