Defense spending may be down somewhat, but there’s still plenty of project dollars out there if you know where to look.
After a few years of explosive growth, the U.S. military building construction budget is getting slashed. The boom that erupted seven years ago was prompted by two immense Defense Department initiatives: the September 2005 report of the Defense Base Realignment and Closure (BRAC) Commission, which determined which military bases would be shut down and which would be beefed up; and the Army’s Grow the Force directive, which was put in place to staff the wars in Iraq and Afghanistan.
BRAC ended last year, and the force development program is expected to be completed in 2013. The troop withdrawal in Iraq and projected drawdowns in Afghanistan mean the Army and Marines will reduce their forces—providing further incentive for DoD to slash construction budgets to pre-2005 levels.
The Obama Administration’s proposed military construction budget for fiscal year 2013 is $11.2 billion, down 24% from FY2012. With less work available, competition for DoD contracts has been as fierce as anyone has witnessed in the last decade.
Recently, for example, Atkins Global North America (formerly PBSJ) won a $12 million contract that had 70 firms vying for the work. “That’s ridiculous,” says Major General L. Dean Fox, USAF (Ret.), the firm’s CEO. Ten years ago, he says, “We would have seen 10 or 12 competitors. It may be that, because of that project’s small size, more firms were willing to compete.” Even so, he says, it is not uncommon for 20 to 30 firms to be competing for Defense construction projects these days.
Those who continue to battle for DoD work over the next few years will have less to chase. “Nothing is going to backfill for BRAC,” says civil engineer Greg Colevas, executive vice president of Clark Construction Group, Bethesda, Md. The purse strings are already tightening. “We’ve seen a number of projects that we were tracking get cancelled,” Colevas says. These include a $500 million biological defense lab at Fort Detrick, Md.
Firms seeking military contracts need to keep abreast of these five trends:
1. Stepped-up demand for alternative procurement and delivery methods
2. Greater emphasis on fast-track scheduling and prefabricated systems
3. Taking BIM to the next level
4. Enhancing sustainability while holding down costs
5. Piloting net-zero in energy, water, and waste
Nonetheless, DoD will continue to be a prime source of contracts for many AEC firms. The $11 billion FY2013 budget is nothing to scoff at. Longer term, there is serious talk of more BRAC rounds in 2015 and 2020, which could spawn additional spending in a few years. Even if additional BRAC rounds don’t materialize, older structures at many bases are badly in need of refurbishment and efficiency upgrades. And with wounded Iraq and Afghanistan veterans needing ongoing medical care, military and VA hospitals will need to keep up with demand for services.