Here is something you don't read about too often: federal projects coming in under budget. A lot under.
Of the $5.5 billion worth of Recovery Act projects that the General Services Administration has managed, it estimates it will deliver them at $565 million under their projected costs.
The chief reason is the down economy. As demand for construction plummeted in the last three years, companies are bidding more aggressively and at lower prices to secure work. Both the military's base realignment and closure projects and GSA's federal construction have kept competition among construction companies intense, said Ken Simonson, chief economist for Associated General Contractors of America (AGCA).
The producer price index for new office construction dropped 0.8 percent in 2010, even while raw materials began to cost more, because of a lack of demand in the U.S., according to the trade association.
But as construction on new homes and office buildings slowed, GSA spending for federal buildings picked up. It has obligated $5.2 billion of its stimulus funds and spent $1.2 billion. It is now spending $40 million to $50 million a week on more than 256 construction projects.
And it is getting more projects for a better price, in some cases saving tens of millions of dollars. One example is the $750 million renovation of the Commerce Department's Herbert Hoover Building in Washington.
The second and third phases, projected to cost $225 million, will instead cost $185 million, saving $40 million.
When GSA first began to allocate money to its project list, officials were not sure which way the market would turn, said Bill Guerin, GSA's Public Building Service executive for Recovery Act projects. But as competition for projects drove costs down, GSA began re-evaluating all of the projects, he said.
In some cases, options that had been included but not funded in initial contracts were added to plans. Some of these options included environmental enhancements such as rainwater harvesting systems.
"We managed those projects from the beginning and got options included so that, if we needed to, we could go back and add to them," Guerin said.
Much of the extra money is channeled into projects to make buildings more environmentally sustainable, a continued focus at GSA.
"It really allowed us to push the green envelope," Guerin said.
Beneficiaries of GSA's windfall
The Homeland Security Department's border crossing station at San Ysidro, Calif., has been hungry for expansion. Because of GSA's good fortune in delivering projects well below estimated cost, it appears it will get it. Every day Customs and Border Protection employees who work there process 50,000 cars and 25,000 pedestrians traveling north into San Diego from Mexico. And traffic congestion there is estimated to grow 90 percent by 2030.
The $565 million GSA has saved will be redirected to 17 other projects, including the expansion at San Ysidro, said GSA spokeswoman Emily Barocas. That will bring the total number of GSA's Recovery Act projects to 270.
"That money was then reprogrammed for more job-creating green, high-performance building projects that will save taxpayer dollars over the long-term," Barocas said.
San Ysidro will break ground in February on a 225,000-square-foot facility.
The $577 million project, partially paid for with the extra Recovery Act funds, aims for LEED Platinum certification, the highest rating from the U.S. Green Building Council's Leadership in Energy and Environmental Design program.
The building will have a 700,000-gallon rainwater reclamation system for irrigation and low flow fixtures, as well as solar panels to generate power to be used on site. The project also includes 62 northbound vehicle inspection booths, a renovated historic customs house and a new 600-space parking facility for employees.
GSA is also directing more funding toward a new 56,000-square-foot federal courthouse in Yuma, Ariz., allocating about $27.8 million to cover the entire cost of the project. The new 46,000-square-foot courthouse will replace the use of an existing courthouse.
Other projects include the renovations of the federal center in Atlanta, the Pembina Land Port of Entry in North Dakota and a roof replacement for the the A. Maceo Smith Federal Building in Dallas.