Election Means Changes, Challenges For Construction Industry

Following an election that brought sweeping changes and switched the leadership of the U.S. House of Representatives, construction industry observers foresee changes in policies impacting this sector. Key issues affecting the industry include funding for government related facility construction, sustainability initiatives, and availability of financing for future projects. Gail Warrior, president and chief executive officer, Warrior Group, a provider of construction services for permanent modular construction and conventional site-built construction, is hopeful that the building and construction sector will see growth in the coming year.

“Clearly, there will be a strong focus on government spending by the new legislators, which may lead to increased attention on procurement laws,” said Warrior. Qualifications Based Selection (QBS) laws requiring A/E services be procured based on qualifications and not lowest bid may come under scrutiny, since they appear to cost more money. “QBS backers may have to defend the case that QBS can save money in the long run,” Warrior said. QBS has been tested before and survived challenges from both Republican and Democratic Congresses alike.

While future legislative decisions are difficult to predict, examining where legislators have stood in the past is one way to gauge how they will respond to industry issues in the future. Both chairs of the Congressional High Performance Building Caucus won re-election as did many lawmakers who have supported tax incentives for green buildings or who have supported expanding access to credit for building and construction. The new Chairman of the House Ways and Means Committee appears to support advancing tax incentives for green buildings. Warrior expects lawmakers to work to expand access to financing for design and construction projects and to support sustainability goals.

It is likely that spending by government agencies, such as the General Services Administration (GSA), that procure A/E services, will be cut back as lawmakers push to reduce government expenditures. The President has already proposed holding construction spending close to $112 billion in 2011 followed by a three-year discretionary funding freeze. Meanwhile, the Republicans have pledged to impose budget caps and many want to end earmarks. These factors will likely result in some fierce battles for construction funding. So although the GSA has a backlog in design and construction work, perhaps as much as $10 billion worth, the new Republican majority will likely be reluctant to increase spending on government buildings.

“An easing of credit and available financing for the private sector construction, however, can compensate for any government project losses,” said Warrior. “With commercial construction slowed to record low amounts during the past few years, easing credit and pent up demand should lead to more projects in the future.”