Governments are looking for sustainable products, say modular builders

As part of our Keating Report research on government budgets and spending for the second half of 2011 (view first-half 2011 forecast), govpro.com talked with executives at the DeSoto, Texas-based Warrior Group, a multi-million-dollar provider of construction management services. The company is an innovator in permanent modular construction (PMC) practices.

Phil Slingerland, the company’s chief operating officer, and Wes Carter, director of business development, provided answers to the following questions from Government Product News editors.

Govpro: How do you see the government (federal, state and local) market shaping up in the second half of 2011?

Phil and Wes: The federal fiscal year ends Sept. 30, 2011. Due to the delay in the budget approval process, there is a large backlog of projects for this fiscal year that have been awarded but not yet contracted. There are also a number that have not yet been released but need to be contracted by the end of the fiscal year. So, we expect it to be a busy summer for the federal contracting officers as well as for construction firms that build federal projects.

While we anticipate there to be some new construction projects released in fiscal year 2012, it is likely that there will be an overall reduction in spending for government and Department of Defense (DOD) projects and that the pendulum will swing toward more remodeling projects vs. new construction.

Govpro: Do you expect Warrior Group to sell more to governments?

Phil and Wes: Due to budget constraints and an overall effort to reduce fiscal spending, the government will have to look at how they can reduce project costs in the future. Because of this, the government will more likely consider projects that offer scalable, efficient solutions that result in a more sustainable product.

Companies that have an expertise in helping government and military entities increase the efficiency and cost-effectiveness of their projects will likely have a leg up over traditional suppliers and manufacturers. For instance, the government can be expected to seek out contractors who can offer alternative methods of construction that allow buildings to be built more efficiently, in less time and with sustainable features. This gives innovative construction methods, like permanent modular construction (PMC, which we specialize in), an advantage.

So, yes, as a company that offers PMC solutions, we expect to sell more to governments in the future.

Govpro: Are governments in the market for any specific products, services or technology?

Phil and Wes: With fiscal responsibility being the lead issue in Washington, the U.S. government will be looking for products, services or technologies that can help them reduce their overall costs on new projects in the future.

In addition, the DOD has stated that they intend to focus on increasing sustainability and decreasing our dependence on foreign oil. They are planning to build more and more “net zero” projects in the future, which are self-sustaining facilities/installations that produce as much energy as they use.

So, of course, anything that offers a green, sustainable solution will have a leading edge, as well as other products or technologies that have built-in efficiencies and energy-reduction features.

Also, technologies like building information modeling (BIM) will play a bigger part in government projects down the road. BIM can increase the efficiency of the construction process by detecting any potential issues prior to the start of physical construction, saving time and money for all involved.

Govpro: Do you have any advice for other manufacturers on boosting sales to government?

Phil and Wes: It is important to be in tune with the latest government initiatives and policies, and see how your business can address those needs and issues. Products and services that can meet the government’s requirements for efficiency, cost-effectiveness and sustainability will have the most success in this space in the next few years.

Govpro: Are there any levels of government that are offering more opportunity for projects?

Phil and Wes: There is some activity in the K-12 school market, although this is not universal and not by any means at historical levels, as there have been tremendous reductions in education spending and support. Some municipalities are also building fire and police stations and other essential buildings, but again this is spotty and not at the levels that we saw a few years ago.

On the state and county level, again, most states across the board are cutting back, as consumer spending and job hires continue to be at record lows.

Federally, indications are that the DOD’s level of appropriations for military construction will be about $7 billion in 2012, which is lower than in recent years. This is due to the Base Closure and Realignment (BRAC) initiative wrapping up. BRAC was developed to close excess military installations and realign the total military asset inventory to reduce expenditures on operations and maintenance. With this effort coming to a close, the types of projects we will more likely see are privatized housing (rebuilt and refurbished facilities) for branches like the U.S. Air Force. A bigger initiative for the DOD will be educational facilities on military bases, which need new schools in areas that have grown, or are in overseas communities.

Because money is getting tighter in Congress, the government will be looking to developers and private investors to fund projects that would otherwise be financed through appropriations. We will likely see this same trend start happening with both public and private universities.

Govpro: What are the types of buildings/projects that you see taking off or becoming more popular in the near future?

Phil and Wes: In general terms, there are three areas that represent growth opportunities for building and construction down the road. These include: higher education, healthcare and energy (particularly alternative energy). There will also be some growth in multi-family projects in pockets, especially for HUD properties. So, companies that can easily step into these spaces with economical solutions will likely have the advantage for potential projects that come down the pike.