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FMI Whitepaper Assesses Federal Construction Market

FMI Corp. released its latest whitepaper, “The Federal Construction Sector: Understanding a Transforming Market.” Given the rapid transformations occurring in the federal construction sector, FMI examines the key forces accelerating these changes, as well as their effect on the industry.

Highlighted topics include:

  • The impact of a pronounced decrease in overall infrastructure funding.
  • The continued emphasis upon sustainability and energy efficiency in federal facilities.
  • The push for clean energy innovation.
  • The increase in small business initiatives.

Jackie Robinson-Burnette, associate director of the Office of Small Business, U.S. Army Corps of Engineers, states, “In my 30 years of contract experience with the federal government, I have never witnessed such an emphasis and focus on promoting small business. We are seeing policies, guidance and support at the highest levels of the government, including the Office of Management and Budget, the Office of Federal Procurement Policy, and the Deputy Assistant Secretary of Defense for Acquisitions, Logistics and Technology.”

According to the report, government construction is facing a downturn. When the American Recovery and Reinvestment Act (ARRA) of 2009 passed into law, the landmark bill was intended to lessen the impact of the national economic recession. Work­ers would find jobs, the country’s infrastructure would be stabilized, and there would be a resurgence in both private investment and consumer spending.

Those aspirations fell short. And while ARRA funding did help individual states, and the country as a whole, avert even deeper crises (roads and bridges were repaired, schools continued to be built and staffed, etc.), private sector investment in new capital construction projects didn’t flow back into the market as quickly as hoped. With one crisis averted and the national economy slowly recovering, the U.S. is now facing a mounting national debt and a declining federal discretionary budget.

Concurrently, the U.S. construction market is dealing with weak levels of private investment and proposed federal government cuts. The double whammy is alarming for government-focused contractors, and it is also impacting firms that – in light of the sparse private sector project funding – require federal spending for new project opportunities. Companies that as­sumed increased public spending would tide everyone over until the private market recovered are now wondering where their next project opportunities will come from.

Not surprisingly, numerous contractors, ranging from small to large, have recently attempted to grab a foothold in the fiercely competitive federal market. Consequently, given the complex and bureaucratic nature of the federal construction market, we expect to see less committed and financially unstable firms pull out in the coming years. Growth through federal construc­tion opportunities begins with a well-thought-out plan and a focus on the different govern­ment agencies and departments.

Working for the federal government should not be viewed as a short-term solution to shrinking private sector opportunities, but as a long-term strategy for growth and diversification. Those companies dedicated to a serious, long-term strategy will likely survive and thrive in the new federal business environment.

To download a copy of “The Federal Construction Sector: Understanding a Transforming Market,” click here.