How to Navigate in a Shrinking Infrastructure Market

Within the United States, the shrinking and shifting infrastructure is causing companies to move across state lines in search of work. The same forces are pushing many U.S. companies to consider “going global.”

These trends should not surprise anyone. Large, prominent infrastructure development projects are disappearing in this country. For example, after winning $810 million from an $8 billion pot of federal funds for high-speed railway development, Wisconsin invested $9 million of its own funds for initial project start-up costs. However, Scott Walker, even before taking office as governor, summarily cancelled the project, tacking on an additional $5 million in contract cancellation fees for the state. Walker claimed the debt-ridden state could not afford the minimum $7.5 million annually it would take to keep the railway operating.

Instead of allowing Wisconsin to use the federal funds for other infrastructure projects, the federal government allocated those funds to high-speed rail projects underway in other states, such as California and Florida. Wisconsin businesses were doubly crushed when their work dollars not only disappeared, but moved elsewhere.

Infrastructure development, and public and private funding of that development, drives the creation of opportunities for the construction industry, and shapes how and where it looks for new business. Businesses must go where the work is located and where the money to pay for the work can be found.

It only makes sense then that the move of federal funds will continually force companies to cross state lines to follow the work. Moreover, companies are recognizing that the U.S. domestic market is not the only source of work. Indeed, as this market evolves, more and more U.S. companies are considering projects outside the United States.

They are doing so because there are international projects and money to pay for them. World Bank infrastructure financing alone has increased by more than $10 billion over seven years, to $12.7 billion in fiscal 2009. For fiscal 2009 alone, the World Bank allocated $3.6 billion for Africa, $3.1 billion for East Asia and the Pacific, $5 billion for Eastern Europe and Central Asia, $3.2 billion for Latin American and the Caribbean, $1.4 billion for the Middle East and North Africa, and $2 billion for South Asia.

To survive means to move, and to move means to change. But change brings a host of new challenges: new supply lines, new financing arrangements, new laws, and new compliance requirements. Changed bonding and insurance requirements, and the costs of performance, must be examined.

The second installment in this series will address some of the myths associated with moving into new domestic or international markets. We will talk about how companies can assess risks and how they can decide how best to move ahead.

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