How Will the Sequester Impact Construction Technology?

March 05, 2013

The sequester, which went into effect last Friday, will undoubtedly have an impact on the construction industry. But how it will ultimately affect technology adoption in the construction industry is another question altogether.

Originally set to occur on Jan. 2, 2013, the sequestration process cuts billions of dollars from defense and non-defense programs in fiscal year 2013. Congress decided to delay the process by two months, moving the date from January 2 to March 1. Last Friday, President Obama signed an order directing the start of the spending cuts.

How will it impact construction directly? The AGC (Associated General Contractors of America), www.agc.org, Arlington, Va., issued a report earlier this year that suggests construction will likely feel the cuts, as construction programs make up about 10% of the total federal discretionary budget.

With the sequestration process going into effect last Friday, the AGC has estimated $4 billion in federal construction funding could be cut during the next seven months of fiscal year 2013 as a result of the sequester.

More specifically, contractors working directly with federal agencies will experience the greatest impact. Contractors working for state and local governments could also see an impact, although less severe, says the AGC. In general, contractors working for the government should expect delays in receiving permits.

One area of construction that should not expect much impact is transportation infrastructure, as the Highway Trust Fund and the Airport Improvement Program were exempt. On the other hand, municipal and utility contractors working on clean water and drinking water should expect a decrease in new projects, as the AGC estimates about $135 million will be cut in this area.

While large capital projects won’t necessarily be cut altogether, the amount of people and resources assigned to the projects in some cases will need to be reduced in order to accommodate the federal funding cuts.

How will all of these cuts influence the use of technology on construction projects? Many of the large capital projects that will be experiencing cuts likely already have the use of technology and the processes associated with BIM (building information modeling) in place.

Jarrod Krug, marketing communications manager, Trimble, www.trimble.com, Sunnyvale, Calif., says many contractors recognize the ROI (return on investment) of technology and it has been proven out on previous capital projects.

He believes the common principles and practices of BIM are engrained in many of these projects. “Most of the contracting community doing large capital improvement projects for the government are using this methodology and it would be very hard to displace,” says Krug.

For contractors that have used technology in the past, it will help them remain efficient during this time. Krug explains, “While budgets are being cut and so forth, it allows those who have adopted the technology to stay on track and be able to maintain their lean methodology for projects, reducing labor as need, and being able to use robotic technology on the job, (which) is less dependent on labor because it is more tied to technology.”

Still, the sequester will have an impact on high-tech and innovation in general. The AAAS (American Assn. for the Advancement of Science), www.aaas.org, Washington, D.C., says the sequester will reduce federal R&D spending on science and high-tech by about $54 billion across five years.

In addition, the ITIF (Information Technology and Innovation Foundation), www.itif.org, Washington, D.C., suggests the impact of the cuts on federally supported technology research and development will be huge, and could result in loss of innovation capacity with the possibility of reducing GDP by a minimum of $203 billion per year by 2021.

Time will tell how the sequester will ultimately impact technology in the construction industry. Certainly those projects and companies that already have technology in place will have an opportunity to address budgets cuts by using the technology to heighten efficiencies.