By Shelby O. Mitchell and Victoria K. Sicaras
In the midst of a weak public construction market and uncertainty about federal infrastructure spending, public agencies are still retaining architecture, engineering, and construction (AEC) firms at a steady rate. In 2011, many of these partnerships may have been held together by our readers' sheer determination to get the job done — resorting to more outsourcing and unconventional project delivery methods.
In PUBLIC WORKS' exclusive annual reader survey, 86% of respondents told us their departments worked with AEC firms in 2011 — only one percent less than in 2010. Of these, 61% completed 10 or fewer projects with the help of firms, down from 64% the previous year. These changes make sense, in light of the 2011 public construction spending trend, which was down 2.6% — about $1.3 billion — from 2010, according to the U.S. Department of Commerce.
Nearly 60% of public works departments represented in our survey spent less than $500,000 on AEC services in 2011, while only a quarter spent more than $1 million. A third are optimistic about their budgets and expect to spend more in the coming year; only 20% say they expect to spend less. The rest anticipate their spending will stay the same (35%), or aren't sure what the future holds (19%).Layoffs and outsourcing continue
Readers are retaining firms to cover specific gaps — “[We need help securing] environmental permits for repair of existing systems. Too many permits! Too many agencies!” — as well as broad needs — “We don't have the ability to do any AEC work in-house; it's all done by outside firms.”
The outsourcing trend seems to be growing as public-sector downsizing creates leaner staffs across the country. President Obama made headlines this summer with his remark that “the private sector is doing fine,” in terms of employment. Many news outlets failed to emphasize the rest of his message, which was essentially, “compared to the public sector.” While private employment has begun to pick up — 1.6 million jobs were added in 2011 — public-sector losses continue.
In 2011, around 66,000 state government jobs and 90,000 local government jobs were cut, excluding education (a drop of about 2.4% and 1.2% in employment, respectively). According to one outplacement firm, Challenger, Gray & Christmas , more jobs were lost in the government sector than any other industry in 2011 — accounting for nearly a third of the year's layoffs. And those are just a fraction of the 600,000 jobs the public sector has lost since the beginning of 2009.
This prolonged trend may explain the frustrations some of you feel about having to rely on outside resources. One respondent vents, “[I'm] tired of training idiots who make more than public-sector engineers, have contracts with guaranteed 5% salary increases, get paid higher mileage rates, and sit in offices with phones and computers supplied by the state. As long as consulting firms keep contributing to politicians, they will continue to get more work at a greater and greater cost to taxpayers.”Forming partnerships
In a recent report, Infrastructure 2012: Spotlight on Leadership, the Urban Land Institute and Ernst & Young LLP discuss creative ways in which state, county, and local agencies are planning to repair and expand infrastructure. According to the authors, public-private partnerships have become an important tool that “can help realize development and operating efficiencies, achieve proper risk transfers that protect taxpayers, and enable more cost-effective financing for new projects.”
The report estimates that half of U.S. states have used public-private partnerships over the past decade to complete nearly 100 transportation projects — accounting for about $54 billion in construction spending. However, 65% of these projects took place in only eight states, and 26 states have yet to attempt such partnerships.
In Omaha, Neb., several city departments — including Planning, the Mayor's Office, Parks, Recreation and Public Property — have used public-private partnerships to complete projects. “Our department has done projects with quasi-public entities, such as joint contracting with our Public Utility Board,” says Heather Tippey Pierce, general services manager for the Omaha Public Works Department, “but we have pretty strict rules requiring the design-bid-build model with city funding.”