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Contractors from all over the country measure the potential impact of a government stop. On Monday, a meeting between President Donald Trump and Congress leaders did not mean an agreement between the parties.
The Federal Government will close on Wednesday, October 1 if the Congress does not reach a financing agreement. This stop will freeze the construction activity immediately in certain places, both temporarily and in some cases permanently.
The first pain point will be based on projects that are completely based on federal dollars, said Marsa Geldert-Murphey, former President of the American Society of Civil Engineers and current senior associate in GBA, an AEC firm of Lenexa, based in Kansas. Although the money could be in place, a stop could leave the contracting officers and other supervision staff.
This could leave the projects stuck to neutral, said Geldert-Murphey to Construction Dive.
“The real problem will be federal employees,” said Geldert-Murphey. “They will be fascinating? In many cases, we cannot advance the project if the federal supervision is not there.”
Although the ongoing projects are allowed to move forward, any activity that requires the contribution or approval of government employees can simply not proceed, Erik Wright, director of Precision Construction Services, a San Luis Obispo contractor in California, could say. He added that delays are more likely to cancel in these cases.
“When the Government closed at the end of 2018, at the beginning of 2019 for about 20 working days, projects in the final stages of hiring or the early stages of construction were delayed from three to four months,” said Wright to Construction Dive. “We had contracts in the end of 2018 that did not end until April and May 2019, which presented a major cash flow and staff challenges for us.”
Being in the state of limb would have immediate effects on contracts and supply chains. Prices are blocked only for so long and prolonged delays force suppliers to resume offers and contractors to remove crew at an added cost.
Fixed Price Contracts
On the other hand, existing fixed price contracts with appropriate funds should continue, according to the general associated contractors of America. Most federal construction contracts are within this category, as “they were already fixed and appropriated funding at the time of the award”, according to a statement by Email AGC shared with Construction Dive. It includes projects funded by the Investment and Infrastructure Works Law, as well as the road trust fund, according to AGC.
For example, all projects sponsored by the Federal Road Administration and the Federal Traffic Administration should not be impacted, as they are not subject to annual appropriations; According to AGC, they should continue to function normally. In other words, these agencies should continue to make timely payments to contractors on the work done, regardless of the government’s stoppage.
But the cost contracts and prizes still in the pipeline are much more exposed to the fall of a stop, in case it occurs. State and local private construction related to federal projects could also face obstacles, added Geldert-Murphey.
“If the federal project is delayed and suppose you will go to build by connecting with something that has already been built, the cascading effect can be devastating,” Gelder-Murphey told Construction Dive. “If they [contractors] Do not have this communication on the federal side, you are stopped, which is again a domino effect to drive the decisions that are made. “”
Many state, municipal and non -profit projects are based on federal aid, said Wright, which means that a public stop could discourage private clients to move on with capital projects.
“The construction supply chain is closely interconnected, so that if the federal infrastructure or defense work slows down, the volatility of demand for materials and subcontractors will extend beyond federal work,” said Wright to Construction Dive. “Repeated stalls erode confidence in government as a reliable contracting partner, which can influence the way companies take future offers and if they pursue certain opportunities.”
In Messer Construction, a contractor from Cincinnati, Paul Richter echoed these concerns.
“A prolonged halt that lasts several months could have made progress for the planning and development of future projects, causing a disruption of the flow of work on a long -term horizon,” said Richter, vice president of the operations, at Construction Dive.
Signature military projects are largely isolated in the short term, Richter said, because funding through the military construction program or maintenance and maintenance accounts are usually closed in advance. The risk comes from the staff of the installation that can be sent at home, which would prevent renewal projects from moving forward. Richter added that a long closure would hinder the future work.
This uncertainty will ultimately wrap the construction activity again.
“Any government stop creates uncertainty … including possible delays in federal infrastructure projects,” said Kristen Swearingen, Vice President of ABC government affairs, in Construction Dive. “ABC urges Congress and President to find a better way to go.”
