Sequestration Goes into Effect: What Construction Contractors Should Know
Last week, Congressional leadership and President Obama failed to reach a deal to avert the $85 billion in automatic and indiscriminate budget cuts, called sequestration. The president signed an order directing the start of the spending cuts on March 1. AGC of America has estimated that $4 billion in federal construction funding could be cut during the next seven months of fiscal year 2013 as a result of the sequester. The White House issued a statement saying they hope to continue working to find a replacement for the sequester. However, any potential deal reached will likely be months away.
Contractors who work directly with federal agencies will experience the greatest negative impact of the sequester. With many federal agencies likely to institute civilian employee furloughs at the end of March – which will include acquisition personnel – federal contractors should expect delays receiving permits and answers to procurement/ongoing construction questions and contract award information, among other things. Agencies, like the U.S. Army Corps of Engineers and Naval Facilities Engineering Command, could decide to procure work through more Multiple Award Task Order Contracts and Multiple Award Construction Contracts because of the lack of acquisition personnel to handle smaller construction contracts. Although ongoing construction projects and awards already made may not be affected on a grand scale, some contracts could be terminated for convenience or de-scoped. Similarly, contractors may be asked to hold over their bids for 120 or more days. Ultimately, direct federal contractors should expect fewer new federal construction project solicitations in the coming months.
Contractors who work for state and local governments—which receive some federal funding—could also see negative impacts, albeit not as severe. Again, with federal agency personnel furloughs expected, these contractors could also expect delays in receiving any federal permits and completion of federal environmental studies. Contractors who build transportation infrastructure should not see a dramatic decrease in new project solicitations. The Highway Trust Fund (HTF) and Airport Improvement Program are exempt from the FY 2013 sequestration process, though there would be a slight reduction in last year’s $6.2 billion General Fund transfer to the HTF. Municipal and utility contractors who have a stake in the clean water and drinking water state revolving loan funds (SRF), however, should expect a decrease in new projects. AGC of America estimates about $135 million will be cut from the SRFs under sequestration.
AGC of America has consistently argued for the sequester to be delayed through FY 2013 in order to provide our industry a smaller level of certainty until a grand bargain can be reached – one that truly reforms and prioritizes discretionary spending programs and preserves entitlement programs for multiple generations without unfairly raising taxes. Please TAKE ACTION and inform your members of Congress about sequestration’s impact on your business and the construction industry. Be sure to also take a look at AGC’s recently updated report: “Sequestration and Its Possible Impacts on Construction.”
GOVERNOR SUSANA MARTINEZ ANNOUNCES RETIREMENT OF DEPARTMENT OF TRANSPORTATION SECRETARY
Dominguez retiring after 28 years in transportation-related public service, including 18 years at NMDOT
Click here for full Announcement
Paseo Del Norte/I-25 Interchange Reconstruction Project Issues Final Request for Proposals
for Design-Build Contractor
Contractor Selection Scheduled for Late July
with Construction Scheduled to Begin in Fall
Transportation Funding Reduced in Continuing Resolution
The House is expected to approve a continuing resolution (CR) for FY 2013 today that would fund federal government programs for six months at the same level as FY 2012 with a slight increase of .612 percent. This action is necessary because Congress has failed to pass any of the 12 appropriations bills for FY 2013 whci begins on October 1, 2012. The Senate is expected to take up and pass the CR later this week.
Because the funding is based on FY 2012 levels, highway and transit programs will not receive the funding increase that was included in the MAP-21 authorization legislation passed earlier this summer. A drafting quirk in MAP-21 legislation and the continuing resolution also prevents the federal-aid highway program from receiving the .612 percent increase. While this is viewed as a temporary problem that can be corrected when either Congress returns after the election, or when the new Congress meets and takes action on the remainder of the FY 2013 funding, nevertheless it will impact funding over the next six months.
AGC and the Transportation Construction Coalition sent letters to the House and Senate expressing concern about this limit on transportation funding.