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Construction Outlook 2021

TURNING THE CORNER ON THE ELECTION AND THE STRANGE, EXTRAORDINARY YEAR THAT WAS 2020, IT’S TIME TO LOOK AHEAD AND DISCUSS WHAT MEMBERS SHOULD BE WARY OF — AND EXCITED ABOUT — IN 2021

BY A.D. THOMPSON

Pundits, comics and the year’s wittiest t-shirts may have proclaimed 2020 a dumpster fire, but despite its unprecedented challenges, many contractors found favor in this, the Year of Our Pandemic. Some pivoted toward success. Others, in economy segments less COVID-19-tolerant, suffered.

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Regardless, in the wake of an exhausting election cycle, AGC members are looking toward a fresh start.

“We are ready to work with the incoming administration and Congress to help craft an agenda that is focused in rebuilding infrastructure and reviving the national economy,” said AGC CEO Steve Sandherr in a post-election statement, citing highway and transit law, COVID-19-related liability reform and industry-stimulating tax measures among the desired outcomes of these new partnerships.

It’s time again to peek around the corner, to discuss what may be in store and what members can do to prepare.

NATION BUILDING

“Bright spots” were shining amid Murphie Barrett’s prognosticative chat on a recent post-election AGC webinar. Barrett is the association’s vice president of Congressional relations, infrastructure advancement, and her reports included positive takes — one of them a recent one-year exten-sion of the FAST Act (for Fixing America’s Surface Transportation), much of which she credited to AGC’s own grassroots efforts by members.

“[Having this certainty] is pivotal to the construction industry in light of the pandemic which we are all still dealing with,” said Barrett, noting that it’s a departure from the three-to-six-month extensions generally afforded such legislation. “We were able to make a really compelling case for one year.”

The Water Resources Development Act, too, was seeing bipartisan support at the time of this writing.

“Hopefully, we’ll have another bill there in terms of improving the nation’s infrastructure,” says Barrett, noting that the process serves as a reminder to members of both houses “that you can really get things done when you work in a bipartisan, bicameral manner.”

Also encouraging: a $287 billion reauthorization of the Federal Aid Highway Program that would run another five years along with the possi-ble reauthorization of the Invest in America Act.

“This would potentially mean $494 billion over five years not only for what we’ve traditionally seen in surface bills in terms of highways, bridges and public transit systems, but would also provide significant levels of investment for passenger rail systems.”

The ideas have seen similar support among ranking Democrats and Republicans.

“Thematically what we’ve seen from these proposals,” says Barrett, “is emphasis on both addressing the needs for urban and rural areas dealing with climate change, both in terms of improving resiliency and reducing greenhouse gas emissions, expediting the delivery of projects and incorporating innovation and other forms of transportation technologies to really make sure that this infrastructure is operating in a safe and efficient manner.”

CLIMATE CONTROL

It’s something Julian Anderson, president, Rider Levett Bucknall, an Arizona Builders’ Alliance member, says might have some members of the construction industry on alert, but it all depends on your perspective.

“If [the contractor’s] interest is in making a buck today, then I think there will be some regulatory concerns. “If the interest leans more to-ward concern about climate change and other issues, they might see opportunities.”

Many of the climate-related things President-elect Biden said he’d do on Day One could impact the industry, says Anderson.

Among them: limits on methane pollution for oil and gas operations, implementation of the already-existing Clean Air Act and reducing greenhouse gas emissions from transportation by developing new fuel economy standards, but others he says will be seen by savvy contractors as fortuitous.

“Ensuring that U.S. government buildings and facilities are more efficient and climate ready is a cost — but for contractors, architects and engineers, that’s also an opportunity.”

Same goes, he says, for reducing emissions and cutting consumer costs through new standards for appliance and building efficiency.

“And this is all regulatory, none of it requires Congressional action.”

Looking at it seriously, realistically, would be wise.

“[Climate change] is going to have to be addressed,” he says. “The construction industry will be part of that…. I’d rather see it addressed now. It’s an ugly issue already; it will only be worse in the future.”

Opportunities here are many, including the construction required to solve problems related to rising sea levels and fresh-water scarcity.

“In the shorter term, there are coastal flooding situations [architects, engineering and constructors] will be able to help address. In the long term, the issue gets even more complex. By 2050, it’s likely there will be huge parts of the west of the country that won’t be habitable. The opportunities around relocating shifting urban areas will be quite real. And if we can slow things down and extend that horizon, that will be a good thing.”

WILL THE TAXMAN COMETH?

He always does, of course. But will he come for more this year?

“Before the election, my prediction was that taxes would almost certainly go up,” said Matt Turkstra, director, Congressional relations, tax, fiscal affairs and accounting for AGC, in the association’s recent webinar, “but now I think it’s a little more cloudy.”

“We are ready to work with the incoming administration and Congress to help craft an agenda that is focused in rebuilding infrastructure and reviving the national economy.” ~ Steve Sandherr, AGC CEO

It comes down to what Turkstra literally refers to as “a tale of two Senates.”

“There’s such a huge and stark divide between the two parties,” he says, “I think we could make the argument that who is in control will be more important with regard to taxes than any other issue we might discuss.”

Republicans passed sweeping changes in 2017 using a budget reconciliation maneuver “for the Affordable Care Act, the Bush tax cuts in 2001 and again in 2003 … and you only need 51 votes in order to enact tax changes and in some cases some pretty hefty spending changes.”

Many of the changes — the Bush-era tax cuts and a significant portion of those made by President Trump — were enacted on a temporary basis.

“You can’t have a loss of revenue outside of the budget window,” Turkstra explains. “It’s all about the budget window when it comes to rec-onciliation.”

Though Turkstra acknowledges the possibility that some of the Biden campaign’s proposed tax changes may be viable, “it’s tough to see any of those surviving with Mitch McConnell in the majority leader’s chair.”

Smaller firms with concerns over payback of 2020 Paycheck Protection Program (PPP) loans will likely be required to navigate robust applications associated with loan forgiveness, but Turkstra says heightened scrutiny is typically associated with loans above the $2 million threshold.

RELATIONSHIPS ARE FOREVER, REGULATIONS AREN’T

Much in the way the Obama administration saw some of its regulatory changes undone following President Trump’s election, so, too, may the outgoing team see changes as President-elect Biden moves into the Oval Office.

“You can expect a lot more enforcement actions coming from agencies like OSHA, the EPA and others across the spectrum,” says Jimmy Christianson, AGC’s vice president, government relations. This, regardless of who controls the Senate.

That said, he notes, the federal rulemaking process is long, with myriad steps.

“There are many avenues where we as an association and an industry can provide input and assert our legal rights … and much of that litiga-tion and research comes from our construction advocacy funds, which is why that is such an essential tool and will be over the next four years.”

Regardless of how long a given politician is in office — one, two, four, eight years — Christianson is quick to remind members that career ser-vices posts are held by professionals who remain in place for decades.

“We continue to maintain relationships with those folks … and they want to hear from us, because we bring credibility when we make our case.”

Even so, the same Congressional Review Act that permitted President Trump and the Republican-led Congress to repeal 15 of the Obama administration’s late-term regulations could allow the same for the new President-elect.

“The rulemaking process is like whittling wood with a needle,” Christianson explains, citing President Trump’s rollback of the WOTUS (Waters of the United States) rule and its federal protections for rivers and lakes, which took roughly four years to take effect. “The Congressional Review Act is more like dynamite. “Once you repeal a rule through the Congressional Review Act, the agencies can no longer put forth a substantial or similar rule-making … it’s a really blunt tool.”

Sandherr offers context.

“Four years ago, [AGC was] giving members of Congress ideas on what Obama-era rules fit into the time slot, making them eligible for repeal under the Congressional Review Act. Now, we’ll be playing defense on some of these rules.”

LABOR PAINS AND PROMISE

Though the PRO Act, “a unionizing wish list,” — as Jim Young, AGC’s senior director of Congressional relations for labor, HR and safety, calls it — “will not become law on Jan. 5 if the Republicans hold the Senate, which makes the election down in Georgia very important, there are ele-ments of the PRO Act that can certainly be accomplished by executive order and the regular regulatory process.”

But the news isn’t all bad, as is the case with multi-employer pension reform composite plan provisions.

“[AGC has] done a particularly good job in educating the leadership in Congress on this. We’re cautiously optimistic that there could be some breakthrough at year’s end on a funding bill, as this is typically how these things are addressed.”

On the flipside of labor, Anderson holds that the President-elect’s stance on immigration reform could prove beneficial.

“An enormous number of people who work in the construction industry — or did three or four years ago — have had difficulty with their documen-tation,” he notes. “The Biden administration is very committed to fixing immigration and that should help construction on the labor supply side, which has been a real pressure in the last few years.”

A potential focus on education — both higher and K-12 — for families earning less than $125,000 annually, could also be a legislative win, “as it should help people who are looking to hire construction managers, architects and engineers coming from lower income families.”

GOING VIRAL, STILL

Lingering, too, will be the effects of COVID-19, which we’re still in the middle of, Anderson points out. And business-wise, it hasn’t been all bad for the industry.

“If you’ve been involved in data centers, logistics, water treatment plants you’ve been busy as all get-out,” he notes. Other segments, sports, entertainment, hospitality, aviation? Not so much.

Anderson sees two stages for the industry in 2021: a first quarter or half that may be stunted, a second that could come flooding back into the black.

“Initially, I suspect people will have expectations about COVID-19 going away that will not be immediately met,” he theorizes. “As that hap-pens, optimism will sour … especially as we get into the rush to get hold of a vaccine.”

Once over that hump, however, he anticipates industry segments held back since the start of the pandemic could very well take off.

“While the first three or six months, for construction, might be miserable, I expect the last six might be rather good and busy … providing that Congress can come together to actually pass some of this necessary legislation.”