Delicate balance: Needs vs. capital for government agencies

P3s and real estate exchanges help keep some government construction and renovation on track.

October 02, 2017 |
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The city of Chattanooga, Tenn., has been trying to get a new federal courthouse built for two decades. Its 84-year-old courthouse has been on the General Services Administration’s replacement list since 1999. But a new courthouse, which would cost around $157 million, once again fell just short of making the Federal Judiciary Courthouse Project funding priorities list for 2018.

So it goes for construction projects that are at the mercy of the political and budgetary vagaries of local, state, and federal governments.

Even the news that the Trump Administration’s 2018 budget calls for $200 billion in direct federal infrastructure spending over 10 years has AEC sources wondering whether that budget has any chance of passing, and how much of that money would end up financing nonresidential building and renovation.

Some firms are hopeful. “There is a lot of change occurring in all levels of government, which will create project opportunities,” says Karl Stumpf, AIA, LEED AP BD+C, Government Sector Leader with EYP.

Other firms, not so much. “Our federal healthcare clients know they are unlikely to see the level of capital investment to fulfill their current needs,” says Bill Kline, AIA, EDAC, LEED AP, who leads SmithGroupJJR’s Federal Programs–Healthcare group in Washington, D.C.

He notes that the Department of Veterans Affairs has identified 4,200 capital projects totaling more than $41 billion and 89 future projects totaling $10 billion, but is currently short $15 billion for capital improvements.

 

Seeking alternative funding sources

Public nonresidential construction spending was down in Q1/2017, according to Census Bureau estimates. But the value of construction put in place in March was still a seasonally adjusted $278 billion, evidence that governments are more selectively building, replacing, and improving
their inventories.

EYP’s Stumpf says all levels of government are still interested in investing in office projects that result in better space utilization and lower operating costs.

In May, the city of Gainesville, Fla., broke ground on a new 24,000-sf fire station, designed by Bentley Architects + Engineers. Gilbane Building Co. is serving as the CM at risk on this project, which comes on the heels of another fire station, administration, and headquarters facility that Gilbane recently completed for the city of Fort Myers, Fla.

But the inescapable fact is that local, county, and state governments are strapped for cash, or limited by balanced-budget mandates, to where “we’re not seeing public building projects, such as police and fire departments, municipal office buildings, courthouses, libraries, and community centers advancing quickly enough to meet community needs,” says Joseph Ruocco, AIA, Associate Director and Senior Project Manager with Skidmore, Owings & Merrill.

 

The U.S. Consulate in Erbil, in Iraq’s Kurdistan regionThe U.S. Consulate in Erbil, in Iraq’s Kurdistan region, will be the largest such facility in the world. Designer EYP is seeking to create a community whose features are familiar to Americans while also connecting to local culture. Rendering EYP.

 

Agencies at all levels are seeking to uncover new ways to get projects moving. The GSA now selectively employs a “real estate transaction exchange” with potential developers, where the agency offers land and development rights to a developer that provides a building designed to the agency’s specifications on a separate parcel. The developer gets the existing building that is being replaced and the land it’s sitting on, which it can use for future development.

Ruocco also notes that local, county, and state governments are more receptive to the design-build-finance-operate-maintain public-private partnership model, applied over a time frame that can extend 40 years.

At the federal level, SOM is finding that government agencies—such as the State Department’s Overseas Building Operations, the GSA, the Army Corps of Engineers, and the Naval Facilities Engineering Command—have successfully secured project funding over the past few years.

SOM has worked with OBO on new designs for missions in China. Last year, GSA secured congressional approval of nearly $947 million for its Federal Courthouse Program. Funding has been approved for new courthouses in Harrisburg, Pa., Huntsville, Ala., and Fort Lauderdale, Fla., to start building next year.

In St. Louis, the National Geospatial-Intelligence Agency West, a $1.75 billion, 800,000-sf facility, is slated to start construction next year, with completion scheduled for late 2022. Ruocco says this is one of the largest-scale projects to be issued since the Department of Defense’s 2005 Base Realignment and Closure Commission program in 2005.

 

Also See: BD+C Giants 300 government rankings

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SmithGroupJJR has established a relationship with the Department of Defense’s National Intrepid Center of Excellence (NICoE), a research, diagnostic, and treatment center for soldiers with traumatic brain injuries and post-traumatic stress, whose main facility is the Walter Reed National Military Medical Center, Bethesda, Md.

Arnold Fisher, Chairman of the Intrepid Fallen Heroes Fund, which led the initial fundraising drive for NICoE, has commissioned SmithGroupJJR to design template satellite centers for nine military bases, whose construction will be financed by the Intrepid Fallen Heroes Fund and gifted to the government upon completion.

The firm will complete the sixth of nine satellites this fall, at the Joint Base Lewis McCord, Tacoma, Wash., and has the seventh under construction at Camp Pendleton, in San Diego.

 

A fraught supply-chain ruling

Governments’ real estate holdings are vast, and its need to renovate and replenish its building stock will always present opportunities to AEC firms. Ruocco notes that many 1970s-era urban renewal projects are approaching their 50-year shelf life. “It’s time for their modernization or replacement,” he says.

But projects are more complicated today than they were a few generations ago. One potential game changer, says Kline, could be the fallout from a recent Supreme Court decision, Kingdomware Technologies, Inc. v. United States, which regards the implementation of set-aside requirements for veteran-owned small businesses under Federal Supply Schedule contracts.

The Court ruled that if two qualified disabled veteran-owned firms are available, the VA must contract with them over any other firm. That ruling, says Kline, will, at the very least “change the strategy architects and engineers use when competing for VA work.”

 

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