March 1st is the deadline for more than $1.2 trillion in automatic cuts to national defense and other discretionary federal spending, including potentially billions of dollars of federal and federally assisted construction, if Congress and the White House fail to reach a deal regarding the 2011 Budget Control Act, known as the “sequester.” The cuts would be spread over a nearly 10-year period, with approximately $85 billion in cuts projected for 2013.
Although many key construction projects are exempt from immediate cuts, including the Highway Trust Fund, the Airport Improvement Program and General Services Administration accounts, other key federal accounts are not exempt and the construction programs they fund are likely to start feeling the effects of sequestration right away. Army Corps of Engineers, rapid transit, military housing and facilities, water and wastewater infrastructure, school and other federally subsidized local public works, clean energy, and post-disaster reconstruction are some of the project types expected to be hardest-hit by the mandatory cuts.
Sequestration does not affect appropriations for projects that have already been awarded nor the obligation of the U.S. government to pay for contract work that is performed, nor would it impair federal prompt payment requirements. Sequestration is most likely to reduce awards of new contracts, and to increase cancellations and delays in indefinite-delivery contracts. Federal agencies’ use of stop-work orders and terminations for convenience is also likely to increase. California, Texas and Virginia are the states expected to experience the harshest effects of the mandatory cuts. President Obama and a bipartisan group of congressional leaders plan to meet about the sequester on March 1 — the day that cuts start taking effect.
You can read about how the sequester will effect your state here.