Military projects boost California construction industry

Pass the ammunition: Military contracts worth about $4 billion through 2012 are helping to reinvigorate Southern California's battered construction industry.


Officials say more than $1 billion in projects — including new housing, administrative buildings and infrastructure — are under way and employing about 10,000 people in construction at Camp Pendleton.About $1.4 billion is being spent this year on construction projects at Marine Corps Base Camp Pendleton in San Diego County.

According to a recently released impact study by SDMAC, aka the San Diego Military Advisory Council, fiscal year 2010 will see about $1.4 billion in new construction projects awarded for work at Marine Corps Base Camp Pendleton, in northern San Diego County. That includes construction of a 512,000-square-foot hospital, estimated to cost half a billion dollars.

Already, officials say more than $1 billion in projects — including new housing, administrative buildings and infrastructure — are under way and employing about 10,000 people in construction throughout the 125,000-acre base.

By the end of fiscal 2012, the impact report projects, about $4 billion in construction contracts will have been awarded for work at Camp Pendleton, with more than 35 new or upgraded bachelor enlisted quarters and 1,200 additional family housing units and upgrades planned for the next few years.

In addition, improvements are on tap for the adjacent Marine Corps Air Station Camp Pendleton, including construction of a new hangar, taxiway improvements, and repairs and expansions of hangars and other buildings.

Good Timing

All of this comes as the local construction industry continues to reel from a steep downturn in new residential and commercial building projects. For instance, the Construction Industry Research Board recently reported that no new commercial building permits were requested in San Diego County during the month of March, the first time that’s happened in more than 20 years.

“Especially at a time when private projects have virtually dried up, these government projects have become especially important for us,” said Rick Bach, senior vice president in the San Diego office of Turner Construction Co.

Turner and locally based T.B. Penick & Sons Inc. have partnered to build several Camp Pendleton projects, including modern, energy-efficient residential buildings that are replacing the cramped, no-frills barracks used at military bases for decades.

Both firms have become increasingly involved in military projects during the past 30 years, with their current Camp Pendleton contracts valued at around $200 million and employing between 400 and 500 people. Those figures are likely to rise as the two companies take on more work at the base in the coming year.

Tim Penick, president of T.B. Penick & Sons, says the military work has implications not only for construction companies, but firms in many industries, especially small businesses still suffering from the economic downturn.

Big Plus for Small Firms

Penick says modern-day military contracts, including those for work at Pendleton, call for construction firms to have at least 60 percent of their subcontracting work done by small businesses. That impacts companies in all construction trades that have been scraping for work amid the continued building slowdown.

“That’s a story that isn’t being told,” said Penick. “This is really a big help to those smaller companies.”

Navy Lt. Cmdr. Scott King, who is overseeing work at Pendleton, says the new construction coincides with the military’s “Grow the Force” program, including a gradual increase of 4,500 Marines to be stationed at the base — about a 10 percent rise.

More than $1.5 billion has already been committed to boost the quantity and quality of housing at Pendleton, and the military, in the past two years, has more than tripled on-base staffing related to the planning, engineering and building of new projects.

“It’s unprecedented at Camp Pendleton for sure, and more than I’ve seen anywhere for a long time,” King said of the activity.

The U.S. Department of Commerce reported that nationwide construction spending in March, including public and private projects, was down 12 percent from March 2009. Spending for the first quarter of 2010 dropped 14 percent from the same period a year ago.

Penick says the coming wave of military work is well timed for San Diego County construction firms, since local companies report their overall business is down 30 percent to 40 percent or more since the start of the recession.

He notes, however, that getting such work remains highly competitive, since today’s military contracts require high-tech knowledge in areas such as 3-D modeling, environmental efficiency and safety design.

Local military observers note much of the new building is prompted by pent-up demand, as military bases have dealt with tight budgeting for several years.

Pentagon Spending Increases

Also, according to the San Diego Military Advisory Council report, the U.S. Department of Defense continues to shift from an Atlantic-oriented force to a more Pacific-focused one. San Diego County, which already has among the world’s largest concentrations of military facilities and personnel, figures prominently in the Pentagon’s planning going forward.

The report notes that local construction spending by the Marine Corps and Navy rose from $248.6 million in fiscal year 2007 to $690.9 million in 2008. It was projected to surpass $1.26 billion for the 2009 fiscal year, and remain well above pre-recession levels in 2010 ($843.6 million) and 2011 ($863.1 million).