Across-the-board federal spending cuts are forcing already lean state and local governments to work even more creatively to find the funds and manpower necessary to build and maintain infrastructure. Aside from raising local taxes, user fees, and tolls, you’re coming up with some innovative solutions in the form of public-private partnerships, pooling resources through regional partnerships, and infrastructure banks, to name a few.
However, our exclusive reader survey suggests that the $85 billion federal sequester enacted in March — and the months spent anticipating its potential consequences — is already impacting your investments, including the work you outsource.
Slight declines in outsourcing
You would think that public agencies would enlist the services of architecture, engineering, and construction (AEC) firms now more than ever to fill in the gaps left in shrinking departments. Instead, we are seeing declines in your use of AEC firms. Eighty-two percent of those surveyed told us their departments have worked with AEC firms over the past year, which is 4 percentage points down from last year and 5 fewer than what was reported in 2011. Of these respondents, 58% completed up to 10 projects with the help of firms, down from 61% the previous year.
Although slight, the decreases make sense as public construction spending continues to decline. The U.S. Department of Commerce reported government spending on construction fell 1.2% in April to its lowest level since 2006. This drop occurred a month after the sequester began, putting the squeeze on federal aid to states and municipalities. And while home prices are beginning to increase, any relief provided in the form of property tax revenues will take a few years to materialize.
Twenty-one percent of public works departments represented in our survey spent more than $1 million on AEC services during the past year, while almost one-half spent less than $500,000. These numbers are also down from last year’s survey, by 4% and 3%, respectively.
Only 21% of respondents are optimistic about their budgets, expecting to spend more over the coming year; 45% expect their budgets to stay the same. The rest expect to spend less (15%), or aren’t sure what the future holds (20%).