Opinion—The Economic Perils of Uncertainty

Jul 27, 2016

Continuing uncertainty regarding federal regulations is damaging our industry and the country.

The key to running a successful construction business is planning.

A well-planned project has a far greater chance of being completed on time and on budget than one lacking a detailed preliminary review of the scope of the work involved.

The same is true for the successful, long-term operation of a construction company itself. This is a given.

Planning requires data—information regarding job costs, overhead costs, and the cost of complying with governmental regulations.

Long-term planning requires information about what construction projects are in the pipeline for the next year, or the next five years.

The need for certainty regarding what the government, especially federal agencies, requires is critical for construction companies that do federal contract work.

This certainty is lacking. Our industry is highly regulated (a polite way of saying it is over regulated). This increases exponentially the time and expense of projects. Everything from what constitutes “waterways of the United States” to safety rules for crane operation is subject to federal rules and oversight.

Unfortunately, these regulations are continually being updated or expanded.

Usually the revisions require years of public hearings and reviews of preliminary drafts before they become effective. This makes it difficult, if not impossible, to determine the cost of regulatory compliance.

At this point in time, it is not unreasonable to say that Congress is unlikely to ever pass a budget that allocates long-term funding for highway and related infrastructure repairs and expansion. Appropriations for other federal construction, such as the construction of additional VA facilities, are languishing. Major, long-term funding for alternative energy that would provide construction projects for 15 to 25 years is still being debated.

It is time consuming and expensive for contractors to prepare for large-scale projects. A considerable investment in equipment and personnel is required. Without some assurance that projects will be up for bid in the long term, contractors are reluctant to make these investments.

Construction is a key, perhaps the most important key, to the economic rejuvenation of our country. Our industry has the technical and management expertise to help lead in this endeavor.

What we need is a genuine effort on the part of Congress and federal agencies to provide long term-funding and reasonable regulatory oversight for construction projects.

 

Don Wallis has more than 40 years experience in residential and commercial construction, and land development. He also has a law degree and currently teaches Environmental Law at Santa Fe Community College.