Better Roads 2010 Forecast Survey
It is also interesting to see almost half the sample (48 percent) calling ARRA “somewhat effective.” With three percent calling the stimulus programs “very effective” there is a surprisingly strong support level; perhaps it might even be called an endorsement.
Agencies basically felt the recession hit them in the fiscal year before their current one and in this current FY have felt its grip tighten. While state DOT budgets are perhaps more predictably tight, this fiscal year has seen city and country trends virtually as negative as the state trends. What is perhaps most shocking is the degree of loss of this FY over the previous one: 40 percent of the agencies report a decrease in their budget for highway and bridge spending and the average drop is a scary 18 percent.
Consider this: half of all of the surveyed agencies are cutting budgets for road rebuilding, and 60 percent of state agencies are doing so. An even more disturbing trend: more agencies at every level are cutting preventive maintenance budgets than are increasing them.
A quarter of all of the reporting agencies and more than one third of the state DOTS are cutting PM budgets. If one accepts the conventional wisdom that in times of thin road budgets PM becomes the work of choice because you can prevent more miles of bad pavement than you can replace with good pavement, the PM cuts mean agencies are resorting to cutting the last line of defense.
These survey results suggest that, ARRA aside, the nation’s inventory of deficit pavements is about to increase, possibly quite dramatically. This is of course another area where reauthorization could be valuable by allowing more agencies to keep up present PM activity levels.
While city and county forecasts for the next year show respondents expecting more of the same, the real concern is perhaps in state agencies reporting where more than half, 52 percent, expect more budget cuts. With Washington dithering on reauthorization the actual amount of money flowing out into active projects may be frighteningly low.
FROM THE CONTRACTORS
A Holding Pattern
While one percent of contractors expect an ‘excellent” upcoming year and eight percent expect a “very good” year (the same percentages rated 2009 this way) 32 percent foresee a “good” year for their companies, as compared to the 26 percent who rated 2009 this way. But 59 percent expect a below average or bad year. Not technically a wash but static enough to indicate contractors see more of the same. And since, unlike the agencies polled, they also work in other heavy construction markets their outlook almost certainly reflects a gloomy forecast of those areas as well.
A combined 59 percent expect a “fair” (46 percent) or a “poor” (13 percent) year. In looking at 2009 the combined “fair” and poor number was 65 percent. (34 percent and 31 percent respectively) So the climb-out begins slowly. Evidence of a recovery, albeit a painfully slow one, is clearer in the forecasts for contract volume More than one-third of the nation’s contractors expect an increase in contract volume this year, while just 24 percent forecast declines. Historically, that’s how recoveries take hold in heavy construction.
Sure, contractors are expecting more contract volume in 2010. But that can be misleading. Traditionally, as contractors begin to dig out of deep recessions contract volume goes up because they are bidding low just to get the work. Getting acceptable an necessary profit margins comes later in the recovery, how much later of course is a key unanswered question.
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