Dealers looking to offset drop-offs in residential production this year and next might want to pay more attention to the Public Notices section of their local newspapers announcing publicly funded projects open for bid.
That's right: government work. Snicker all you want about bureaucracies, but the dollars involved are nothing to laugh at. The value of total public construction jumped nearly 12% over last year to $275 billion in annual spending compared to housing's 10.6% slide, according to the Census Bureau and the NAHB. And government work now includes a wider range of opportunities for dealers–with less red tape than you'd think.
Here's the lowdown on what dealers can expect.
Military housing is a shining example of how far publicly funded projects have come to look and feel like private ventures. Not only have boring barracks and reams of military specs been replaced by architect-inspired single-family homes, but the armed forces are dedicated to accommodating private builders and their subs and suppliers to create the next generation of military housing.
A decade ago, the Department of Defense (DOD) directed its four branches to engage in public-private ventures (PPVs) to build or upgrade 170,000 military housing units by 2008. "Privatization has brought nearly 50,000 Air Force housing units to adequate standards over the last 10 years, compared to only 15,000 units we could have done on our own in the same time frame," says Col. Michael J. Smietana, chief of housing for the Air Force. "Our goal is to have very few differences between our privatization program and the private sector."
Meanwhile, the periodic Base Realignment and Closure (BRAC) process initiated by Congress and executed by the Pentagon since 1988 has made huge tracts of land available for mixed-use redevelopment, typically by private-sector teams following relatively loose guidelines set forth by the departing military leadership. The realignment portion of the BRAC process, in turn, results in the need for more on-base housing for installations receiving troops and families who are reassigned from bases targeted for closure.
That's the case at Fort Bliss in El Paso, Texas. More than 18,000 soldiers (and perhaps triple that when you include spouses and kids) are expected to relocate there within the next five years under BRAC's 2006 base closure plan.
To accommodate the influx, the Army solicited PPV bids to build 1,500 single-family homes in three on-base neighborhoods through 2008. Centex Homes, the fourth-largest builder in the country, won the three-year contract that included purchasing plated roof trusses from BMC West's El Paso location. "The main requirement was whether we could commit to delivering the product," says location manager Roy Gardner. "An average of about 400 [housing] units a year is not out of scale for the larger builders we work with."
Capacity aside, delivering trusses to the base–especially amid heightened security following Sept. 11–might sound like a logistical nightmare. But because the new neighborhoods are carved into an undeveloped parcel on the edge of the base, the builder was allowed to set up and staff its own security gate.
The Army greased other wheels as well to enable Centex and its supporting subs and suppliers to maintain private sector?like production scheduling and profitability. Gardner was able to include annual price increases in his truss bid to accommodate changes in the market rate for materials and labor, and followed the plans and specs of an architect based in Oklahoma instead of from the Corps of Engineers. "There was no more documentation than any other contract," says Gardner. As far as he and BMC West are concerned, "We're working for Centex."
To be sure, military housing privatization and the BRAC process have opened the door much wider for the for-profit construction sector to cash in on various residential construction opportunities. "The PPVs, in particular, have opened the military's eyes to new methods for fulfilling its housing needs," says Robert P. Harris, AIA, who tracks and consults with military and other federally funded housing projects through the NAHB Research Center in Upper Marlboro, Md. "The DOD is looking for long-term relationships," with for-profit builders and their support networks to leverage those methods.
That being said, the DOD is still a bureaucracy, where risk is a relative term. As a result, the military still tends to gravitate toward developers and builders with experience working in its realm as it considers and awards bids and proposals. "The pursuit costs [to develop a proposal or bid, especially for a base redevelopment project] require several thousand dollars," thus excluding the bulk of the builders in an affected market, says Harris. "For smaller builders, contractors, and suppliers, the key is to attach yourself to those teams vying for the contract."