Although the Obama administration is not planning on releasing its fiscal 2013 budget proposal until Feb. 13, some details about the planned cuts to Dept. of Defense spending have been trickling out.
Perhaps of most interest to construction and engineering firms, Defense Secretary Leon Panetta has said that the president will ask Congress to reinstate another round of the Base Realignment and Closure (BRAC) program.
Also, according to the Defense Dept. (DOD), some military construction projects will be deferred “to align our facilities more closely with the size and posture of our future force.” Specific details on what projects, or types of projects, will be put on hold are not yet available, says a DOD spokeswoman.
In a Jan. 26 news conference, Panetta said the DOD would request $525 billion for its base budget in fiscal 2013, compared to $531 billion in fiscal 2012. Additionally, the DOD will request an additional $88.4 billion for overseas contingency operations to maintain support for troops in combat, compared to the $115 billion enacted for contingency operations for fiscal 2012.
The cuts are part of the DOD’s new strategic direction, spurred by the 2011 Budget Control Act’s requirement that the DOD reduce spending by approximately $487 billion over the next decade, or $259 billion over the next five years.
The requirements will impose a new austerity on DOD, and the agency hopes to create a smaller, more agile cadre of armed services, DOD officials say.
With a smaller number of service men and women in the armed forces, infrastructure needs will change, Panetta said. “We’re going to have to be able to reduce that infrastructure, and the best approach to reducing that infrastructure politically on Capitol Hill has been to work it through the BRAC process,” he said.
Industry sources say a new round of base realignments and closures could provide a surge of work for engineering and construction firms, as it has in the past. Mike Pavlides, vice president and director of federal services with the Beltsville, Md., office of Brown and Caldwell, says that base closures typically generate a significant amount of environmental assessments, work related to the shutting down of facilities, and modernization at bases and facilities where forces may be reassigned.
But he notes that if Congress does authorize another round of BRAC, the amount of work for A/E/C firms will be largely dependent on where the bases are. “If they are closing smaller bases or bases overseas,” for example, it will mean less work for firms that work in the sector than previous rounds of BRAC, he says.
Moreover, the question remains: will Congress really support another round of BRAC when closing bases usually has a negative economic impact on cities and towns in their districts where the bases are located?
“It’s difficult for communities…when you close or realign a base,” says Robert Wolff, executive director of the Society of American Military Engineers. “It’s a difficult process, but I think it’s very much needed. Hopefully Congress will support the administration’s request.”
Panetta said that he and other DOD officials had met with congressional leaders in recent weeks, and “I’m confident that these leaders understand the challenges that we face” and will work with the DOD.
While engineering and construction firms may see an uptick in work as a result of a potential new BRAC, military construction firms may take a hit as a result of smaller funding levels for new construction, “particularly if they are asking for BRAC to dictate where they do any construction,” Wolff says.
But some firms are relatively optimistic. Craig Southorn, vice president and general manager of Minneapolis-based Mortenson's Federal Contracting Group, although the surge from the latest BRAC round is winding down, military construction projects are “still at a level that is above historical levels.” He adds, “Certainly if people were expecting the high-volume years to continue, they weren’t looking very far ahead.” He says Mortenson still sees pockets of opportunity, particularly at bases that combine different services, like the Army and Air Force. Some of those bases include Ft Carson in Colorado and Joint Base Lewis-McChord in Washington State.