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Bracing for a Post-BRAC World

As the Pentagon’s massive base realignment winds down, builders seek new contracts

Gazette.Net - Maryland Community News Online - September 30, 2011, by Lindsey Robbins, Staff Writer

While many construction companies around the U.S. were struggling to land contracts in the last few years, Rockville’s Foulger-Pratt was building the $50 million Army Test and Evaluation Command at Aberdeen Proving Ground.

Part of the Pentagon’s Base Realignment and Closure Program — which involved closing 33 bases and realigning 29 across the nation — the 141,452-square-foot project brings 610 civil defense workers from Crystal City, Va., to the Harford County installation.

“In 2006 and 2007, people were saying there wasn’t enough capacity in the region to do federal or private work. Then, in 2007, the private went to sleep, but Maryland had BRAC,” said Brent Pratt, a principal with Foulger-Pratt.

Foulger-Pratt wasn’t alone among Maryland builders to cash in on BRAC. The federal government spent about $1.8 billion on BRAC-related military construction projects in the state, according to a state joint legislative subcommittee report in January. BRAC was officially ordered in 2005, with this month set as the deadline for completion.

And now many of these builders that cushioned themselves with these projects are scrambling to fill the post-BRAC void and must fight for new opportunities, said Daraius Irani, an economist at Towson University. Among those opportunities are spinoff projects, such as housing and retail, as new employees move to the state for BRAC-related jobs, say some construction executives.

“It definitely helped this area, but, unfortunately, all things come to an end,” Irani said. The [Intercounty Connector] won’t be enough to absorb the construction companies looking for work.”

BRAC, he said, “was essentially a stimulus package for construction in Maryland.”

Furthermore, additional federal work might be difficult to procure, as Congress continues to battle over the economy, Irani said.

“The private sector is still sitting in lock, waiting for the economy to return to better times,” said.

“It’s a rough road ahead.”

‘Hugely positive impact’

Foulger-Pratt racked up about $83 million in design-and-build BRAC contracts, including the Aberdeen project and the 99,000-square-foot Missile Defense Agency headquarters at Fort Belvoir in Fairfax, Va.

Both projects were awarded before the Great Recession began in late 2007, and they remained Foulger-Pratt’s major revenue generators throughout the recession, Pratt said.

“They were critical for us during that period of time,” he said. “We’re not that typical a government contractor. ... We’re primarily a private contractor. We’re a developer’s builder.”

“BRAC has certainly had a hugely positive impact on Maryland contractors over the past three or four years and is largely responsible for the fact that the recession in commercial construction the past few years was somewhat blunted in Maryland,” Michael Henderson, president of the Association of Builders and Contractors Baltimore, wrote in an email to The Gazette.

Despite the BRAC boom, employment in Maryland’s construction industry, which also includes mining, still fell to 141,100 in March from 145,300 in March 2010 and 161,100 in March 2009, according to the Association of General Contractors of America.

For St. John Properties, BRAC work came at a time when the economy was “rather blah,” said Al Cunniff, director of marketing for the Baltimore company.

St. John took over work on the $130 million, 416-acre Government and Technology Enterprises from financially troubled Opus East of Rockville in June 2009. Located next to the major homeland security operations at Aberdeen Proving Ground, the project encompasses 2 million to 3 million square feet in office, laboratory and research and development space. One of the project’s tenants is information technology giant CACI of Arlington, Va., which is employing 250 people in a 60,000-square-foot facility for the next seven years.

“It’s certainly been a beneficial project for us. It came along at a great time, and our performance there validated that we were the right business to do this,” said Matt Holbrook, regional partner at St. John. “There was no margin for error there.”

St. John had the project up in two years. To date, the company has delivered 527,000 square feet and nine buildings and leased 392,000 square feet, Holbrook said.

“At [Aberdeen Proving Ground], this kind of market didn’t exist. Not many developers have had the chance to be building these years,” he said. “To have built nine major buildings is amazing.”

Cunniff added that St. John’s diverse portfolio allows it to maintain work even amid economic downturns. The company has $1 billion in property assets and also is working on a 100,000-square-foot business park in Fulton.

“There’s better activity in office than the last two years. It’s not that everything has returned to pre-recession, but all areas are showing tentative improvement,” Cunniff said.

Clark Construction of Bethesda delivered about 10 million square feet of BRAC-related projects worth about $4 billion, including the $850 million consolidation of many of the operations of the Walter Reed Army Medical Center in Washington, D.C., onto the grounds of the National Naval Medical Center in Bethesda, creating the Walter Reed National Military Medical Center. Clark also built the 170,000-square-foot Air National Guard Headquarters and Readiness Center at Joint Base Andrews in Camp Springs.

Out-of-state projects included the 2.2 million-square-foot Fort Belvoir project, a 1.75 million-square-foot administrative office complex in Alexandria, Va., a 765,000-square-foot medical center in Texas and a 99,000-square-foot facility in Miramar, Calif.

“Clark Construction is very proud of its role in bringing BRAC projects across the country to a successful completion. Locally, the Walter Reed National Military Medical Center and the NGA Campus East project [at Fort Belvoir] represent an important component of Clark’s plan to pursue a diversified business strategy that includes significant public and private sector opportunities,” Brian Abt, CEO of Clark’s mid-Atlantic region, said in a statement.

‘It’s a very cool project’

Costello Construction of Columbia also helped with the Walter Reed relocation in its own way, as the closing of the hospital’s former home in Washington, D.C., meant the relocation of its National Museum of Health and Medicine. The museum is best known for having the bullet that killed President Lincoln.

“Nobody ever in their wildest imagination would associate that with BRAC. It shows how it reached and touched everything here,” said David Costello, owner of the company. “It’s a very cool project.”

Costello designed and built the new $10 million museum at the medical center’s Forest Glen Annex in Silver Spring.

“This was a one-of-a-kind space. We had a lot of design challenges and very specific needs,” Costello said. “The biggest challenge was getting everyone on board with a very complicated design.”

Costello, with 38 percent of its work in federal projects, is now working on a regional recreational facility in Allentown and a $20 million building for Longwood University in Farmville, Va.

“This meant a lot for subcontracting, but BRAC contracts tended to be major jobs. The way they were packaged made it difficult for the smaller guys,” he said.

Even construction management companies such as Estime Enterprises in Lanham were able to secure some BRAC work, ranging from $250,000 to $2.5 million.

BRAC provided as much as 40 percent of Estime’s revenue over the past three years, said President Lunique Estime, which gave the company the flexibility to work on the 4.5 million-square-foot Department of Homeland Security consolidation at St. Elizabeths Campus in Washington.

“It gave us a track record. Now that federal work has dried up, we’re looking more at private and public. Private’s really ramping up in D.C.,” Estime said.

Harkins Builders of Marriottsville performed $100 million in work at several of the BRAC-affected bases, and the company also expects an impact from the residential side, as more people move into the area to work in new jobs directly and indirectly related to BRAC, said Larry Kraemer, vice president of preconstruction services. Harkins’ projects included a 50,000-square-foot satellite Earth terminal station at Fort Detrick in Frederick.

The company is building the 400-unit Riverside Apartments in Belcamp, near Aberdeen Proving Ground.

“We still see the best is yet to come as everyone gets here,” Kraemer said.

“While the end of BRAC and the decrease in federal spending in Maryland is a significant concern for the construction community, we think there is still opportunity for those firms who are well-positioned to take advantage of it,” said Henderson of the Associated Builders and Contractors.

He pointed to the strong multi-family housing market in Baltimore that’s also increasing around the state.

“Cash is going to be key. Those firms who have cash on hand, can get bonding and have access to credit are going to be the firms best-positioned to weather this economy,” Henderson said.

BRAC construction spending in Maryland

Total: $1.8 billion.

Walter Reed National Military Medical Center: $641.4 million.

Aberdeen Proving Ground: $579.5 million.

Fort Meade: $529.5 million.

Joint Base Andrews: $52.0 million.

Source: 2011 State of Maryland Base Realignment and Closure Update for the Joint Legislative Subcommittee

Major BRAC projects in Maryland

Walter Reed National Military Medical Center: $850 million, Clark Construction.

Government and Technology Enterprises: $130 million, St. John Properties.

Army Test and Evaluation Command: $50 million, Foulger-Pratt.

Source: Company information

 

To view this article at the source publication, go to www.bethesda.com/news/bracing-for-a-post-brac-world.html.

The information above is for general awareness only and does not necessarily reflect the views of the Office of Economic Adjustment or the Department of Defense as a whole.