Sequestration Begins: Construction Prepares for Hits

Up to $4 Billion in federal construction jobs could be cut over next seven months.

On Friday, March 1, 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 late Friday evening. 

AGC 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 on Friday 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.

Click here to learn more from the AGC site.