Jump-starting Colorado’s sluggish economy through a strong focus on long-overdue public infrastructure projects is a promising priority.
From President Obama, to Governor Ritter to Mayor Hickenlooper, leaders at every level are making public projects and the thousands of jobs they will create a pillar of economic recovery plans. We applaud these efforts.
But there is a warning sign for these leaders, and for taxpayers. Without basic reforms in how government and private-sector developers pay for construction services, the result will be lost jobs and higher project costs due to slow payment to the contractors who perform the work.
It’s a serious and lingering problem. In the late 1990’s and early in this decade, contractors enjoyed getting paid, on average, within 30 to 35 days. Today that number has soared to between 52 and 90 days, depending on the contractor.
Up until now, contractors have compensated for the slow payment by raising their prices, and borrowing from banks so they could pay their employees on time while waiting for the cash to come in. But in the current economic climate, many small businesses can no longer borrow.
The result is that as Colorado gets ready to accelerate building, there will be no money left in the till to pay employees. The much hoped for increase in jobs may not come to pass.
The Associated General Contractors of Colorado (AGC) recently met with state and local leaders to express our enthusiasm for including infrastructure projects in their economic recovery plans.
We also said that it’s vital to maximize the “bang for the buck” coming out of these projects, and, without a solid promise of prompt payment, a lot of the economic potential may never be realized.
The risks of maintaining the status quo are real and substantial – and not limited to higher costs. These projects need the broadest pool of available subcontractors to ensure quality, particularly when we’re talking about transportation and building projects large and small.
Plus, our economy counts on a strong and vibrant construction industry, since we employ about 9 percent of the total private-sector workforce, with over 160,000 jobs.
A recent economic impact study showed that the construction industry generates nearly $2.5 billion for Colorado’s economy, and a $1 billion increase in construction spending in Colorado will bring 24,000 high-paying jobs to the state.
The solution is not difficult. Our industry is seeking passage of a pro-jobs bill in the Legislature that will require prompt payment for construction services performed.
It’s a common-sense measure that demands nothing more from government and our other customers than any vendor requires from average Coloradans.
Follow the terms of the contracts they have signed and pay their bills on time within a basic, established framework.
We would prefer not to have to seek this help from the Legislature, but the lack of regulation we’re suffering from today is hurting our businesses and our workers.
Our political leaders are exactly right to focus on infrastructure projects as a central way to boost Colorado’s economy. Many business leaders recognize that we have built our way out of the last few recessions.
As they begin to move from a good idea to the itty-gritty details of implementation, ensuring prompt payment for the home-grown businesses that are eager to work on these projects must be a central priority.
We know that taxpayers and our economy can benefit from these projects, and to ensure that goal, contractors need a fair shake. Nothing more; nothing less.
Michael Gifford is executive director of AGC of Colorado, a trade association representing more than 300 contractors, subcontractors, suppliers and others that complete 70 percent of commercial building in the state. EDITOR’S NOTE: This is an online-only column and has not been edited.
