Focus
Recharging the Industry
by John Paul Quinn
Published: April 2009
| |||||||
For electrical contractors, the most interesting aspect of the American Recovery and Reinvestment Act (ARRA) of 2009 (the stimulus bill) is that, out of the $789 billion in available funding allocations, roughly 20 percent—or $150 billion—is earmarked for the kinds of work many contractors have been doing for years.
The bill calls for spending $81 billion on cranking up the infrastructure, which involves power and lighting work on highway, rail and bridge construction and renovation, as well as wireless connections and water treatment; an additional $50 billion for renewable or energy-efficiency projects, including photovoltaic, solar thermal and wind installations; and $13 billion for housing renovation and repair. The main thrusts of the administration’s stimulus program are revitalizing the construction industry, rethinking how to power the national grid, and doing it green wherever possible.
Also, the price tags on individual line items are impressive, even by Beltway appropriations standards.
There are provisions to spend $11 billion to modernize the nation’s power grid, and industry sources estimate electrical contractors stand to earn the lion’s share of this amount—perhaps as much as $7 billion.
Another $7 billion is included for renovation and repairs to federal buildings throughout the country. While this is essentially construction bid money, as much as 20 percent of it would involve electrical work.
Getting part of the pie
For contractors hoping to take advantage of the significant opportunities this legislation offers, understanding the mechanics of the funding and bidding process is the essential first step.
“Nearly 60 percent of the stimulus funds will go to the states, where state agencies will decide how they will be allocated,” said Terry Hatch, director of legislative affairs for the National Electrical Contractors Association. “On the federal level, there are a number of projects already in the pipeline. Most of the funds expended on the federal level during the first nine months of the stimulus are likely to go toward projects already approved by federal agencies, but have yet to be funded. In the coming weeks, various federal agencies, including the Departments of Energy, Education, Transportation, Labor and the Interior, will establish guidelines for the ensuing stream of ARRA funds that will be made available through competitive grants and contract bidding. The projects likely to receive the greatest amount of stimulus dollars include high-speed rail, energy-efficient construction, green building retrofitting and broadband expansion.”
Hatch said many of the projects are intended to pump money into the states and involve the kind of work that electrical contractors are experienced in and qualified to do. Since most infrastructure projects will be handled by state or municipal governments, contractors should make a point of staying current on any proposed local public construction projects.
“Even if an electrical contractor doesn’t directly bid on a given project contract through a federal agency or the relevant state agency that holds the stimulus funds, they will be able to bid for a subcontracting portion of the contract with general contractors,” Hatch said.
Be ready to move fast
One of the key principles driving ARRA is time. By definition, stimulus involves urgency, so contractors interested in participating in any of these projects have to be ready to move fast.
Electrical contractor Cogburn Bros. Electric in Jacksonville, Fla., has focused primarily over the years on water and wastewater treatment plant work, and the firm’s president, Larry Cogburn, has been tracking the stimulus bill, especially the $2.5 billion allocated for water and waste-disposal projects.
“We hope to see more of these projects being funded out of the stimulus money,” Cogburn said. “Normally, the engineering and design on these jobs can take up to a year or more, so if the intent is to get people working as soon as possible, there won’t be the time to go through the usual design/bid process. I would think most cities and states will be looking at the design/build method of construction on any stimulus project in order to get going fast, so workers can be hired.”
Just how fast this process is likely to work is reflected in an experience Cogburn had in early March.
“We were bidding on a project involving a municipal water treatment plant,” Cogburn said. “One of the questions put to the bidders was: ‘If [the city in question] should obtain stimulus money for this project, can you have construction underway within 120 days from notice to proceed? Can you have the project at substantial completion within 24 months from notice to proceed? If the answer to these questions is ‘yes,’ how will you do it?’
“The stimulus issue is on everybody’s mind, and if a city or state gets stimulus money for a project, they are going to make sure that whomever they select is going to get on-site and start working immediately because they won’t offer it to anybody who can’t get moving right away,” Cogburn said.
Follow the spending chain
Electrical contractors would be well-advised to acquaint themselves with exactly what kinds of work ARRA covers, said Mel Buttrum, CEO of Service Electric Co., Snohomish, Wash.
“It would pay for a contractor to get a hold of the summary of the stimulus bill to see what the government is going to spend money on,” he said. “For example, there’s a grant program allocating $7 billion in loan guarantees for renewable-energy projects, including wind, solar and fuel cell technologies, all of which are opportunities for electrical contractors. There are incentives to provide 30 percent credit for the purchase of residential photovoltaic [PV] systems and solar hot water units.
“In addition, there are tax credits for energy-efficient renovation work on existing residential units. This is an obvious chance for a contractor to go in and redo the lighting, provide some load calculations and work on load-shedding. And anybody who’s already into PV and solar hot water can benefit immediately from the stimulus bill,” he said.
Buttrum said virtually all federal work is publicly bid, so contractors should find out what’s available in their state and follow the money down the spending chain to the local level.
“In my case, I have a one-page listing of projects that will be funded in Washington state by the stimulus bill,” he said. “They range from HVAC [heating, ventilating and air conditioning] and electrical upgrades for $17.5 million, central plant electrical upgrades at major institutions for $12 million, lighting retrofits for the Seattle Municipal Tower for $3.5 million, and various energy-efficient projects involving city-owned facilities for $3.4 million. This is federal money that is going to be bid out by the states. And they will be publicly advertised, so contractors should be aware of these projects and then bid them.”
Depending on the nature of the job, the electrical contractor’s role will vary, Buttrum said. On a solar power project, the electrical contractor might be the prime contractor, but in HVAC work or central plant upgrades, the electrical contractor would probably interact with a general contractor. But the key point is to know what kinds of jobs are out there and then to network with trades with which you have been involved before in order to participate in the projects.
Internals and externals
Whether working as prime or sub, the electrical contractor has to have the internal qualifications and the track record on-site as well as the external contacts for the type of job the stimulus bill provisions call for.
“My sense of the stimulus bill is that you have to be prequalified to be involved,” said John Bosma, president of Boz Electrical Contractors Inc., Vernon, N.J. “You would most likely have to be a known quantity in public sector work, which is what our firm has been focusing on primarily for the past three years. We’ve been reaching out to architects and cultivating relationships with general contractors who do public projects, because this is a highly competitive market.”
The firm has done work as both a prime and sub for the School Development Authority of New Jersey, New Jersey Transit, various municipality building maintenance and new construction projects, and domestic water and sewage pumping installations.
“The buzzword in the stimulus bill is anything green,” Bosma said, “and there will definitely be niche opportunities in areas like wind, solar and other energy-efficient systems. Just tread cautiously into any markets that aren’t your normal meat and potatoes. It’s a good idea to align with other companies that do work in these fields and have an established customer base. By speaking with people at a mechanical or a solar farm outfit, you can make connections beforehand and have common ground with them as general contractors and with their end-user customers.”
While this kind of relationship is critical, so is the internal structure of any contractor firm looking for stimulus work, in Bosma’s opinion. The entities with funding to spend are looking not only for quick turnaround on-site, but proven efficiencies within the home-office operations.
“To qualify for the stimulus-related work available, you have to position yourself internally to handle these projects,” he said. “Spend time on your credit situation and have the back-office procedures and controls in order. Be ready to engage in pre-project-planning communications with other players on the project to identify ahead of time any surprises. Be able to prove your abilities in tracking manpower and materials handling skills on a project. Speed and efficiency are crucial in getting this kind of work, so be able to demonstrate accurate estimating, purchasing and project management capabilities.”
QUINN reports on a broad range of business and industry issues for journals in the United States and Europe. He can be reached by phone at 203.323.9850 and by e-mail at mirabel@snet.net.
How would you rate this article (1=Poor, 5=Great)?
