Business Management

BY BRUCE LYNCH

Turn the American Recovery and
Reinvestment Act Into Your Stimulus Plan

n February 17, 2009 President Barack Obama signed the massive $787 billion American Recovery and Reinvestment Act into law. In terms of money committed, this law is widely regarded as the most sweeping economic recovery package in American history. The collection of tax cuts, cash for states, increased unemployment benefits, and other spending programs promises to put the brakes on a rapidly accelerating unemployment rate, rebuild the nation’s crumbling infrastructure and schools, and inspire confidence in consumers and hope in laid-off workers.

On its face, it would seem that this law is guaranteed to be the elixir for a design industry that has suffered profoundly in every corner of the United States and in nearly all market sectors. That said, certain projects and project types are very likely to be funded while others will remain on the sidelines. In this column, I will explain how you can position yourself to secure stimulus funded projects in 2009. I will also provide some insight as to how small business owners can take advantage of some of the provisions of the law.

Three Things You Need to Know About the Stimulus Package
The infusion of federal stimulus money will allow states to invest in projects and programs that they may have had to otherwise delay or cancel. The first projects that will be funded are the ones characterized as “shovel ready.” In a nutshell, these are projects that will have completed their environmental and right of way (ROW) processes already. There may be fewer of these projects out there than you think. Since many of these “shovel ready” projects have been on the shelf for years, there may be new issues (e.g., environmental) that may take many of these projects off the table in the short term. There isn’t any sort of waiver process in place for these issues in the stimulus plan. In other words, projects that require additional ROW work probably cannot be processed (even without environmental requirements) to meet the timeframes of the stimulus plan funding framework. There is enormous opportunity for design firms that can work with public agencies to pull together projects quickly and leapfrog others in the funding line.

The stimulus package’s focus isn’t entirely short-term, as some percentage of the money allotted for infrastructure projects will not be subject to the short-term deadlines. This suggests that even if you cannot move quickly, you will not be left in the cold by the “shovel-ready” requirements, as some have feared. In December, the AIA launched its Rebuild & Renew plan to ensure that the economic stimulus emphasized sustainable design and safe, healthy, livable communities. In other words not only projects that are “shovel-ready,” but those that have the best chance of succeeding.

The tax incentives in the plan will also benefit many design firms. The legislation extends a provision that allows small companies to write off the costs of equipment and other capital purchases in the year those items are bought, a delay of the 3 percent withholding tax on payments to businesses that sell goods or services to governments, and a capital gains tax cut for investors in small businesses who hold stock for more than five years.

Eight Things You Can You Do Right Now
Capitalize on client optimism. Try to keep your clients’ excitement about the stimulus plan at a high pitch. Use the stimulus plan as a “cue card” to call and reconnect with clients. Even organizations that are not likely to receive stimulus money now believe that their operating budgets are going to be okay, and they feel confident about starting capital projects.

Find anyone who’s likely to get federal funds. Don’t write a lot of proposals, but be ready to write a lot. Have your network help you find out exactly when proposals are going to be needed because this is an extremely fluid situation. Look at ways that you can not only find out what kinds of projects are likely to get funded, but once you find out, figure out what you can do to help agencies that you work with to get their share of those funds. If you can get the agencies lined up to get their share of the funds, then you’re going to be lined up to get your share of those projects. That’s probably one of the best things that you can do, especially right now.

Support your associations. AIA offered critical supporting to framing the stimulus package. As AIA President Marvin J. Malecha, FAIA, recently said, “The plan is far from perfect… but it represents a major effort to help those most in need and provides resources to begin fixing our nation’s crumbling infrastructure.” Clearly, this plan will help a lot of under-funded projects in the overall infrastructure area, and not only be good for our industry, but good for the country in the long run.

Look at operations and maintenance (O&M) opportunities. Projects that look like they’re going to get funded are operations and maintenance opportunities. These are going to be small projects, but they’ll be great projects if you want to break into a new market. For those of you who are in the O&M market, it may not be very glamorous to do a new roof, or to remodel a kitchen, but it does keep staff employed and paychecks flowing until such time as bigger and more glamorous design opportunities come along. A lot of that O&M work is just nuts and bolts--keeping a facility operating. An awful lot of the federal funding, like the weatherization and energy efficiency, is going to be devoted to extremely small projects on a building-by-building basis. If you can get a contract to do several thousand buildings in a state, you can keep quite a few people busy and gainfully employed, and your firm profitable, even if it isn’t work that you’re going to put on the cover of your next brochure.

Be selective. There are going to be a lot of project opportunities out there, a lot of different kinds of government buildings. Don’t try to chase everything. Know what you want to chase, look at your strengths, look at opportunities to take advantage of those strengths, focus on those targets, and really go after those targets. You’re much better off getting two projects out of five, than you are getting one out of ten.

Right size it. If you have a large firm, go after the big municipalities and the big projects. If you’ve got a small firm, focus on the smaller municipalities and the smaller projects. If you’re a big firm looking at small towns and small projects you’re really not going to be very competitive, and the same vice versa. Coordinate your firm size to the size of the clients and the size of the projects.

Go to rehab! If you are in the K-12 or higher education market, in the short term focus more on rehabs than on new schools. We’re going to see a lot more emphasis on rehabs, on energy efficiency, on improving information technology within schools. All those kinds of things are really going to be a lot more in focus than designing new schools.

Track legislation. You really have to track this legislation and the regulations. Generally, environmental regulations and new environmental requirements go through two stages: First, there’s legislation that defines what the goals are of the new environmental requirements, and then it goes to EPA or some other body to promulgate regulations. That cycle tends to be very long--it tends to be years. The good news is, it allows you to track new legislation, and then once the legislation is passed, track new regulations.

Where To Go For Help
PSMJ Resources Inc. offers Webinars, books, and consulting to A/E firms looking to gain a bigger share of the public sector market. For more information, contact Kim Pazera at kpazera@psmj.com or (617) 965-0055, Ext. 138.

Bruce Lynch is vice president of publishing at PSMJ Resources, Inc. and author of PSMJ's Circle of Excellence: How the Best-Run A/E Firms Manage Clients, Staff, and Projects.