Stimulus Is Helping Contractors, But Buy American Poses Threats

More and more construction firms report winning stimulus contracts that are enabling them to add employees and avoid expected layoffs. But the stimulus money is not enough to overcome the fall in private and state and local-funded projects. Meanwhile, the Buy American provision in the American Recovery and Reinvestment Act (ARRA) threatens to undercut the job gains. The Bureau of Labor Statistics reported on June 5 that construction employment fell by 59,000, seasonally adjusted, in May. Dismal as this number sounds, it was only half as great a job loss as in recent months. Recent job losses in residential construction, while still proportionately worse than in nonresidential construction have been moderating. Within a few months it is likely that homebuilding will stop falling and begin to add workers. Unfortunately, the downturn in nonresidential construction is likely to worsen for the rest of the year. As private projects wrap up-or get scaled back or halted in midstream-contractors have been unable to pick up new customers. And state revenue forecasts keep deteriorating, triggering further slashes to public construction budgets. A steady flow of stimulus money is showing up in highway projects. Water and wastewater construction grants looked promising as well. But some of these projects are being held up by uncertainty over Buy American language. ARRA generally requires contractors to use only U.S.-made iron, steel and materials, and to certify that they have done so. Certain key water and wastewater equipment is available only from foreign suppliers. Other items come from a single U.S. source. In some cases, contractors cannot get a certification as whether all of the components of a piece of installed equipment are U.S.-made. These problems have reportedly held up some project awards and led other water and sewer agencies to forgo stimulus money altogether. In addition, Canadian municipalities have threatened to retaliate against cities that use Buy American to keep out Canadian-made items. This step could escalate to a full-blown trade war that would lose jobs for contractors and many other businesses. AGC is pressing federal agencies to provide clarifications and waivers in order to enable stimulus to achieve its intended goal of putting people to work quickly. Please email simonsonk@agc.org if you have an example of a stimulus project that has been held up or made more expensive by Buy American provisions.