Monday, January 19, 2009

Stimulating Subsidies for Select Steel Swingers

Much is beginning to be made of the general lack of actual work that would happen under the stiumulus plan. Bookworm gives us a list of goodies passed along from John Boehner, that attempt to put the ridiculous spending into some perspective. No doubt, a decent, though vastly undersized portion of the "stimulus" is intended to go toward construction projects. As Boehner points out, even less will be "stimulating" the economy any time soon:
7. Although the House Democrats’ proposal has been billed as a transportation and infrastructure investment package, in actuality only $30 billion of the bill - or three percent - is for road and highway spending. A recent study from the Congressional Budget Office said that only 25 percent of infrastructure dollars can be spent in the first year, making the one year total less than $7 billion for infrastructure.
In my real life, I work in construction management as an estimator. Part of my past work has included doing federal government construction projects. In that respect I'd like to delve deeper into some of the bill's language in order to highlight some of its contradictory nature.

The bill obviously makes no bones about wanting to expand America's "underserved rural communities" and provides copious billions toward loan programs that would subsidize not only Obama's much ballyhooed broadband line expansions, but also local government buildings, and, one would assume, federally owned government buildings in rural communities.

This brings us to an interesting dilemma in the bill. The bill has language regarding construction projects, that even beyond the normal "Buy American" act that is imposed on all federally funded construction contracts, these funds must be utilized to buy 100% American steel, 5% higher than the typical 95%. This does not appear significant unless you've had experience in dealing with the federal agencies that run construction jobs, particularly the GSA, the DoD (including Army, Navy, etc. subsets) and the Army Corps of Engineers. All of these agencies have a typical clause in common when it comes to steel. They all require not only AISC certified steel fabricators, but AISC certified steel erectors.

In the world of steel, the fabricators and the erectors are commonly completely different companies. AISC certified fabricators are not that difficult to find. Many shops are AISC certified, as many contracts, public or private, require shop fabrication to be based on AISC standards. The major difficulties arise in these agencies' demands that all steel be erected by AISC certified erectors. Checking AISC's website lets us know that there are a grand total of 163 Certified Erectors in the entire country. The simple fact of the matter is that there are thousands of steel erectors that are fantastic at what they do, and that erect their steel to AISC standards anyway, but simply do not want to pay the substantial amount of money required for the certification.

This became a problem for me when I worked on a contract to expand the cemetery at the Rock Island Arsenal in Rock Island, IL (Quad Cities). We had our fabricator lined up without a problem. Despite the fact that the steel to be erected encompassed only a small addition to an existing building, the federal government would not allow the AISC certified erector requirement to be waived. Lo and behold, the closest AISC certified erector we could find that we could talk into doing such a small job had to drive his trucks and cranes 176 miles to Rock Island from Chicago, then back.

If the Democrats and Obama were truly intent on developing rural communities, they would include in the bill that the agencies controlling the oversight of these construction projects should waive such overly stringent requirements. Otherwise we're going to be seeing a very select handful of companies actually raising any steel in this country, and due to their exclusivity, at an elevated price at that. And that's to say nothing of the massive carbon footprint all that extra truck driving will spew forth!

Not that The One really cares.


  1. I don't know if the example you cite is deliberate, or just one of the many thousands of consequence-laden rules imposed without much forethought by civil service bureaucrats, but this sort of thing is a favoite ruse of government types. It is just one of many ways to steer federal money to the right people, taxpayers be dammed. The lucrative feedback loop they are able to construct using the labyrinthine rules written into federal contracts assures it will never change. Except for people like you, familiar at soe level with the ins and outs, all of htsi is invisible. Perfect scam, no?

  2. The example was indeed deliberate. It's a few steps down the road from the money, so it would be very difficult for anyone to catch it. As you say, it is a perfect scam.