The U.S. General Services Administration reports less than 5 percent of the $800 billion in federal economic recovery act funding will be spent by the end of 2009. The GSA estimates that it will be 2011 before all of the funds for infrastructure projects will be awarded. NPCA’s technical consultant Sue McCraven asked precast producers Steve Smart of Independent Concrete Pipe Co. and Mark Melvin of McCann Concrete Products how the slow release of stimulus money affects market conditions in their regions. For recently published Perspective articles on the economy and the industry’s response, go to NPCA’s website at www.precast.org.
Q. ARRA (American Recovery & Reinvestment Act) funding has been slow to reach approved transportation projects in some states. What is the situation in your market region?
A. Smart: From our perspective it’s a mixed blessing. In Indiana, which has a fully funded 10-year transportation plan, the ARRA has allowed INDOT (Indiana Department of Transportation) to roll forward projects that were “shovel-ready” but not programmed for another year or two. With residential and commercial construction at a near all-time low, this has brought a depressed pricing structure on the transportation market that could take several years to stabilize. Whereas in Kentucky, which has little funding for roads and bridges and infrastructure improvement, these dollars helped a depressed market.
One other point: With this act was the (intention of) jobs creation it would bring to our industry; as a company with multiple plants strategically placed throughout the Midwest, we have yet to see this (jobs creation) benefit.
A. Melvin: Our market region, primarily Missouri and Illinois, has not seen much of a delay in spending. Both states have been aggressive in spending stimulus money. Missouri was ready to start a project the minute President Obama signed the ARRA. I’m sure it could be challenged, but several news outlets, including the Associated Press, recognized Missouri as the first state to award a stimulus project. In addition, Illinois has been recognized by the Federal Highway Administration as being among the top in the nation for implementation of ARRA money.
Q. Have precast contracts received ARRA federal funding in your state or region?
A. Melvin: To date, Missouri has awarded $297.8 million of its earmarked $525 million of ARRA funds. Illinois has awarded 268 contracts totaling approximately $552 million. Early on, states were letting projects that they could get out to bid quickly, and (that) contractors could start quickly, such as asphalt overlays. In one Missouri highway letting, 40 of 54 projects were asphalt overlays, and in another all 32 projects let were asphalt overlays; not necessarily the project type you hope for as a precaster. We are just now beginning to see larger, more complex projects being bid that offer more opportunities for precasters who might manufacture bridge beams, MSE (mechanicallystabilized earth) retaining walls, sound walls and drainage structures.
A. Smart: The ARRA funding in the region I work in has been handled differently. One of the specifications of the ARRA required that the transportation program and letting schedule would have to be maintained if the dollars had been programmed for 2009. This required INDOT to hold a special stimulus letting each month to appropriate these monies or lose them. As in most states facing this issue of having to spend 50 percent of their dollars by July 1, 2009, this meant that the shovel-ready projects were mostly asphalt overlays and roadway safety improvements that did little to help the precast industry. Kentucky, on the other hand, which had limited road dollars, used its ARRA dollars to construct large-scale projects that were shovel-ready but
Q. Do you anticipate being involved in projects using federal dollars in 2010?
A. Melvin: Well, we certainly hope so. There have been several projects in both Illinois and Missouri that would have taken years to reach the streets had it not been for the stimulus bill. We can attribute recent orders for precast median barriers and MSE retaining walls directly to the ARRA.
With the decline of residential and commercial markets, competition has been fierce in our area. Many precast companies that normally serve those markets have entered the heavy and highway construction markets out of necessity. So we have projects to bid on, but the margins are razor thin. The positive is bid prices are coming in under state estimates. In one Missouri letting, bids were 15 percent under state estimates, which is great news for taxpayers.
A. Smart: In our region, local engineering firms have been under the gun to get the MPOs (Metropolitan Planning Organizations) and local government infrastructure and roadway projects out to bid by the ARRA March 3, 2010, deadline. The DOTs in this region have awarded close to 80 percent of their allocated ARRA monies and are addressing whatever funding shortfalls they have for 2010. These projects, along with sewer and water projects included in this bill, should bring a positive start to 2010.
Mark Melvin is vice president of McCann Concrete Products Inc. located in southern Illinois. He has a bachelor’s degree in business from the University of Missouri and an MBA from St. Louis University. He has been with McCann Concrete Products for 19 years.
Steve Smart is manager of HY-SPAN Bridge Systems for Independent Concrete Pipe. A veteran of more than 35 years in the concrete industry, Smart has been with Independent for 11 years and is based in Indianapolis. Independent Concrete Pipe manufactures reinforced concrete pipe, box culverts and HY-SPAN bridges at nine plants in Indiana, Ohio, Kentucky, Missouri and Illinois.