By Lanna Carter Broyles

A cumulative D grade -- that's the score the nation earned in the American Society of Civil Engineers' (ASCE) annual Report Card for the Nation's Infrastructure. With a projected $2.2 trillion worth of work needed over the next five years to bring the nation's structural backbone up to passable levels, it's no surprise that infrastructure was a key topic at McGraw Hill's recent Construction Business Forum in Arlington, Va.

This third annual conference, "Embracing Change: The Impact of the New Administration on Construction," offered a candid venue for project owners, contractors and association leaders to discuss the economic state of the construction industry, as well as the implications the $787 billion American Recovery and Reinvestment Act of 2009, or ARRA, will have on the industry. Since President Obama signed the bill into law on Feb. 17, ARRA has stimulated discussion and debate across all cross-sections of American industry. Prominent among the questions are:

• What is the status of the stimulus funding?
• How will funds be allocated?
• How soon will funds become available?
• And, how can I get in on the action?

The one-day conference provided a glimpse of how the economy and forthcoming stimulus package have affected government insiders and big-name owners. The forum also gave airtime to industry associations and their causes; chief among them - the recession, technology, green building, taxes and proposed regulations. Though the future is never certain, industry heavyweights are confident that with help from stimulus funds, and an injection of proactive industry responsibility, the forecast is bright.

A Crippled Infrastructure
"The nation's infrastructure is really hurting," said Joseph Tyler, director of military programs for the U.S. Army Corps of Engineers (USACE). Years of neglect and temporary patches have created major problems, he said, particularly in the nation's transportation, environmental protection and energy efficiency sectors.

Tyler projects that stimulus funds allotted specifically for Corps projects -- $7.9 billion -- will help correct some of these deficiencies. While the Corps welcomes the funds (and the work it brings with it), it barely scratches the surface of the ASCE's estimated $2.2 trillion needed to bring the nation's basic infrastructure - ground and air transit, waterways, water and waste facilities, schools and parks - up to appropriate levels.

"As infrastructure decays, prices go up," said Pat Natale, executive director of the American Society of Civil Engineers.

And, as prices spiral up, the number of skilled workers spirals down. Katherine Hamilton, president of GridWise Alliance, is concerned about the aging work force. "The infrastructure doesn't meet today's needs," she said. "Members are hiring and they can't find qualified workers."

What's the solution? "Training," said Walker Kimball, president of Bechtel Construction Operations, who promoted the United Association's Veterans in Piping (VIP) training program for ex-service members during his lunchtime keynote address. Kimball also recommends high school training. "We must reach students early and give them encouragement and tools to prepare for the industry."

A 50-year outlook is also vital to improving the infrastructure, he said. "$150 billion doesn't solve infrastructure problems.... We need a long-term, comprehensive energy infrastructure program." Ideally, Kimball wants America to have a world-class infrastructure, "built on safety, quality and accountability.... We can't go with a patch and fix mentality."

"Hold, Not Cancel"
In the private sector, there's no argument that the recession has forced many business owners into construction holding patterns. Owner representatives on a moderated panel discussion each reported 20 to 30 percent lower numbers on capital projects from last year's figures. Bob Wilson, global project services manager for General Electric, said that the depressed economy has "made us go back and look at capacity requirements." As a result, G.E. has put multiple projects on hold. Though the company's official line is "hold, not cancel," Wilson is not optimistic for a quick turnaround, particularly given the company's construction budget cuts of nearly 25 percent.

Peter Buote, vice president of generation services for Constellation Energy Group, said his employer came close to bankruptcy last fall. Even the U.S. General Services Administration has taken a hit. Chuck Hardy, GSA deputy director of the Great Lakes region, said the GSA has "billions of dollars in deferred maintenance."

All is not doom and gloom, though. Joseph Gionfriddo, corporate engineering global construction manager for Proctor & Gamble, reported that P&G is experiencing its heaviest workload in history. "Consumer is king," Gionfriddo said, citing that the company has spent $3.5 billion on capital projects around the globe in its ongoing efforts to cater to what consumers want.

And, Jocelyn Scott, vice president of engineering for DuPont, said DuPont's unofficial motto is "Never waste a good crisis." She admits that the company's auto and residential construction markets have taken hits. But, the positive spin is that the downturn "is a test of our work model," she said. With strategic partnerships in place, Scott predicts that the inventor of nylon can weather the economic storm.

Buote said the secret to staying in business and on budget means "challenging every aspect of a project." That includes looking at costs during every stage of a project: pre-bid, post-bid and during the execution of every contract.

For a global company like P&G, exchange rates must also be considered. Gionfriddo's cost engineers have to keep a close eye on spendables. Engineering services and materials are global expenses. Physical labor is locally sourced. At G.E., construction labor and material purchases are kept at the local level to help reduce costs and stimulate the local economy. "We're working hard to make sure local businesses aren't hurt," Wilson said.

Work in the private sector may be slow, especially with tightened purse strings, so owners are looking for creative ways to manage their work. P&G uses every contracting approach and style available and maintains a very lean engineering staff. DuPont has taken a strong owner role in the front-end loading of projects. G.E. has established two to three-year relationships with select firms. And, it prequalifies all of its suppliers for safety and ability to perform. From the government side, Hardy said that there is more team integration up front with designers and contractors. A national program office in Washington, D.C., helps identify and tap into current resources and will leverage industry partners as it begins to spend its forthcoming $5.5 billion in stimulus money, Hardy said.

Leveraging Technology
Some owners are also embracing new technologies to improve their business models. In a global market, leveraging e-technology can help ease costs, Gionfriddo said. But, with current interoperability problems, it is not a guarantee. "E-technology has such great opportunities, but until the industry gets its act together [on platform compatibility], it is not conducive for the owner to get on board."

Others are taking a more proactive approach to remote project tracking. "We're going to have to learn how to use [Building Information Modeling]," Wilson said. "We're still trying to get our heads around what it is, what lawyers will let us do and what the industry can do." Wilson predicts that the widespread acceptance of technology hinges on how the government approaches it.

Energy's Two Not-So-Divergent Paths
Because sustainability is such a hot topic in almost every industry, it's no surprise that it was a major bullet point at the conference. The GSA eagerly awaits its stimulus payout, said Chuck Hardy. Most of it, $4.5 billion, is already earmarked to retrofit existing buildings into green buildings, he said. "We want to bring that value forward ... with a velocity you haven't seen before in the government," he said.

An entire panel was dedicated to discussing how to rebuild the nation's energy infrastructure. Clean energy and nuclear energy were at the forefront of that discussion.

"We are in a nuclear renaissance," said Doug Walters, senior director for new plant deployment for Nuclear Energy Institute.

Though clean energy is lauded and encouraged, it is not always practical. For example, wind power doesn't work in hurricane regions, said Ashley Baker, vice president of environmental projects and construction for Southern Company. Nor does solar power work in humid and cloudy climates, he said. That's where nuclear energy comes in.

A 20-year lull in nuclear plant construction is about to end. The Nuclear Energy Institute says a typical nuclear plant takes eight to 10 years to build from concept to operation. "We hope to accelerate that schedule," Walters said, by building four to six nuclear facilities by 2016, with 10 more by 2020 and at least 35 by 2030. That will result in 1,400 to 3,000 jobs per site during construction and 700 permanent jobs at each completed facility, he said. And, unlike their predecessors, these new plants will be greener.

Leonard Petrie, labor programs and senior project manager for Exelon Generation, says combining lessons learned with "today's improved computer designs and technology will make [its] next plant much easier to build."

Clean energy is also on the upswing, with an emphasis on solar, wind, geothermal, hydro, marine, tidal and photovoltaic power. In 2008, the United States increased its wind power capacity by 29 percent, to 25 gigawatts, said David Eppinger, vice president of the Fluor Corporation's power business group.

While cleaner air and more sustainable buildings are admirable endeavors, some industry insiders hint that perhaps the industry and government have gone overboard. Steve Sandherr, president of the Associated General Contractors (AGC), worries about "worshipping at the altar of sustainability at the expense of everything else."

Show Me the Money
Just where does the government stand on stimulus-funded expenditures? Money is finally starting to come in, Joseph Tyler said, so only a small portion - $333 million of the Corps' $7.9 billion - has been obligated thus far. "I expect obligations to rise rapidly over the next three months." He noted that funds must be completely allocated by September 2010.

Contractors are also starting to see funds. American Institute of Architects (AIA) executive vice president and CEO Christine McEntee reported that 10 percent of AIA firms have received some stimulus-related work. Citing a 19.4 percent industry unemployment rate, Sandherr said, "We were loud and proud proponents of the stimulus package."

Even with the projected deluge of funds, concern runs high for companies dependent on private developers and their ability (and willingness) to finance projects, said Bob Wilson. Financiers are requiring as much as 50 to 60 percent equity in a project before they will extend a loan.

The Regulatory Landscape
Construction industry associations have been busy as they rally their members to causes important to the industry. Chief among the collective concern are tax increases and incentives, energy initiatives, healthcare reform, OSHA regulations, cap and trade concerns, education and safety.

The AIA is working to increase tax incentives for green buildings and to promote energy efficiency, both of which it says will help the environment and provide jobs for architects. The Associated Builders and Contractors (ABC) is encouraging its members to embrace green building practices. And, the ASCE is looking at partnerships with other countries to advance sustainable practices.

"Why reinvent the wheel?" asked the ASCE's Pat Natale. "We have been behind. We need to get out front." Natale issued a call to all industry associations: "We need to create rules so someone doesn't create them for us." Echoing that sentiment, Kimball of Bechtel said, "We are strong when our groups band together for a common cause."

A noticeable surge in government oversight and regulation is not sitting well with the associations. The ABC has taken a proactive stance against Executive Order 13502, which would require all federally funded projects exceeding $25 million to utilize union-only labor agreements.

The proposed cap and trade legislation has met with mixed reviews by the associations. The ABC argues that the bill will create massive job loss and escalate construction costs. The AGC calls it a "mixed bag." Though it promotes retrofit work, the EPA permits are "not so good," said Steve Sandherr. "It will have a chilling impact on owners to build and expand."

In addition to its fight against the cap and trade bill, the AGC is working to oppose enhanced OSHA enforcements, which, Sandherr said, "is punitive rather than collaborative."

On a Positive Note
The recent economic downturn has a few bright effects, Joseph Tyler said. For starters, the Corps is seeing a lot more competition on bids. Whereas the Corps used to receive two to three bids on a project, it is now seeing as many as 15 bids per RFP. The Corps is also gearing up for the onslaught of projects headed its way. Tyler told conference participants to send its laid-off engineers to the Corps, which is currently hiring 3,000 people above normal staffing levels.

Tyler anticipates the use of fixed-price contracts "to the maximum extent possible," because cost-plus and sole source contracts carry greater risks to scheduling, cost and performance, he said. He also expects to see greater emphasis on the inclusion of small business enterprises (SBEs) and disadvantaged businesses in prime and subcontract work. (Currently, 65 percent of Corps projects go to SBEs.)

A decline in sole-source contracts is good news for ABC president and CEO Kirk Pickerel, who says the ABC will "fight anything that doesn't promote free and open competition."

Hardy said the GSA will "run the full spectrum of contracting capabilities" - shovel ready, pencil ready and BIM ready - as it moves forward on existing contracts and pursues new projects.

Looking Into the Crystal Ball
During the next four (or even eight) years, government projects will have greater transparency and more government involvement, Tyler predicted. "Transparency and media access keep us on our toes." Private projects may also experience greater government oversight, he said, especially if stimulus funds come into play.

AIA's McEntee foresees a push for greater public reporting of building performance. And, she also expects to see the Integrated Project Delivery (IPD) method increase by as much as 60 percent.

The stimulus package "by definition, was a jumpstart. We need to redirect [our attention] to long-term goals," Kimball said. "We're talking about government money today, but it's private money that will take us forward."

Kimball also drove home the point that there is a current shortage of skilled craftspeople. Education is key. "We have to enhance the profile and perception of our great industry," he said. "It's a serious industry with rewarding and good-paying jobs."

Conclusion
So where does that leave the industry? In a pretty good place, actually. After all, as McGraw-Hill's vice president of sales over contractors and services William Paolillo put it, "This is a $3 trillion industry." Not too many industries can claim such staggering numbers. And, said the GSA's Chuck Hardy, with stimulus work out there for contractors, engineers and architects, "I don't think any part of the industry will be left behind."