Although overall U.S. defense spending has remained elevated in recent years, it’s hardly exceptional relative to other times of war. During the Korean War, for example, roughly 14 percent of the national economy was spent on the military. During the Vietnam conflict, 9 percent of the economy was devoted to the military.
By comparison, recent defense budgets have consumed roughly 4 percent of the nation’s total economic output. The fiscal year 2010 baseline defense budget is projected to reach about $587 billion. The fiscal year 2009 regular defense budget totals $518 billion, but when the costs for the wars in Iraq and Afghanistan are added, total expenditures climb toward $700 billion.
hough much of the increase in defense spending during the current decade is due to ongoing funding for the conflicts in Iraq and Afghanistan, the military is refocusing other resources to prepare for future challenges. The need to support the military of the future—as well as replace inefficient, dilapidated buildings dating back to the 1960s—has created significant demands for military construction and commensurate opportunities for contractors.
Regional Effect
Positively impacted regions abound. For instance, the U.S. Department of Defense (DoD) is spending $3.5 billion on construction at Marine bases in eastern North Carolina during the next few years as part of a broader effort to expand the Marine Corps.
At Camp Pendleton in the San Diego area, five barracks currently are being constructed and $2.7 billion is set aside for 64 additional facilities, including 19 barracks in 2010 alone. Nearly 1,000 new homes also are planned for Marine families. Collectively, these projects could support 10,000 or more construction jobs during the next three years. These contracting opportunities could not come at a more opportune time considering the construction industry has shed nearly 150,000 jobs in California since January 2007.
BRAC Effect
There is little doubt military construction activities will remain elevated for the foreseeable future. The DoD is in the midst of implementing the 2005 Base Realignment and Closure (BRAC) program, which requires the relocation of approximately 123,000 personnel, according to the Government Accountability Office. These relocations are associated with an estimated $23 billion in newly constructed or renovated facilities.
Some of the most expensive and complicated BRAC recommendations the DoD has yet to fully implement have been delayed for a variety of reasons, including environmental impact studies and uncertainty about site locations. In other words, these projects may remain under construction well after the BRAC statutory completion deadline on Sept. 15, 2011.
Some of the most costly recommendations that have experienced or are threatened by delays include the National Geospatial-Intelligence Agency’s new $1.5 billion building at Fort Belvoir in Northern Virginia, the new Walter Reed Army Medical Center in Bethesda, Md. ($1.6 billion in implementation costs), and the establishment of the San Antonio Regional Medical Center and the realignment of medical training at Fort Sam Houston, Texas ($1.7 billion in implementation costs).
Stimulus Effect
The second major impetus behind ongoing military construction is the recently approved American Recovery and Reinvestment Act (H.R. 1). The $787 billion stimulus package includes roughly $2.4 billion for quality-of-life and family-friendly military construction projects, such as family housing and child care centers, according to Stars and Stripes.
Based on U.S. Army Corps of Engineers and Navy Facilities Engineering Command estimates, military construction funding provided in the stimulus bill will create or sustain approximately 85,000 construction and construction-related jobs in 47 states and the District of Columbia. Ninety-five percent of those funds will flow to the private sector, according to Stars and Stripes.
Stimulus-based military construction will include $350 million for child development centers at U.S. military installations, $315 million for military family health care clinics, and $830 million to provide new and replacement housing for troops. Additionally, the stimulus package includes $3.7 billion for U.S. Department of Veterans Affairs hospital and medical facility construction and improvements—$329 million of which will go toward energy-related construction.
Privately financed construction will continue to suffer from the ongoing recession, but publicly financed construction—particularly military construction—is poised to expand briskly in the years ahead due to BRAC and the recently passed stimulus package.
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Friday, September 3, 2010