Guam – The island could see a significant decrease in military construction within the next year or two. Guam Department of Labor Economist Gary Hiles says that overall construction for Guam has been good but there is a major slowdown in the awarding of contracts for future military construction.
Guam Department of Labor Chief Economist Gary Hiles says that overall construction on Guam is up in 2013. This is based on employment numbers in the construction industry. However, much of this construction is coming from contracts that were awarded back in 2010 2011 and 2012. Also, Hiles says that GovGuam and private construction for the last two years has been at a record levels for the last decade. However, Hiles says that the awarding of contracts this year for new construction projects has also been at it’s lowest levels for the last decade. “It’s almost nothing compared to recent years so when you combine the two for both federal and GovGuam the total contracts issued are down about a quarter from what they were in the last couple of years. So we need to have some more contracts coming on line and if that doesn’t happen fairly soon we would expect total construction activity to decline in the next year or two,” said Hiles.
Hiles explains that there’s a lag between when contracts are signed and when the actual construction begins. Permits must be granted, construction sites need to be prepared with things like clearing and grading before the actual full scale construction begins. “There may be an opportunity in this if private contractors or the Government of Guam see a lull coming that may be a good time to take the opportunity and build a new hotel or other project with the available labor and maybe able to get a good price on the contract,” said Hiles.
DOD contracts in 2010 hit a high of $370.4 million dollars. In 2011 $244.5 million was awarded for MilCon projects, in 2012 $137.9 million and in 2013 year to date only $21.9 million has been awarded.
So why the lull in federal contracts? “There’s two reasons. A lot of the unusually high level of contracts in 2010 were associated with the planning for the marine corps relocation projects and there’s language in the defense appropriations act that restricts those projects until further studies are done. So while there’s an unprecedented high level of dollars that have already been appropriated for construction those contracts are restricted for the marine relocation projects but also in recent months those projects that are not restricted that are not associated with the marine relocation appear to have been…their not coming out and it appears there was some talk that that’s related to sequestration and tightening of federal budgets,” said Hiles.
Meanwhile in Washington the U.S. House passed the 2014 DOD appropriations on Wednesday night by a vote of 315 to 109. The measure contains millions of dollars in military spending for Guam including $119 million for civilian infrastructure improvements, $495 million for MilCon projects, and the lifting of restrictions on the use of government of Japan funds for the realignment of marines from Okinawa to Guam. However the act is now headed to the senate where changes are expected.