Posted on July 10, 2023
By Heiko Osterchrist & Peter Bowe
DredgeWire recently surveyed dredging contractors to try and understand the reason(s) why so many critical Corps (USACE) projects seem to have been delayed in the past year and continue to be so far in 2023.
Between 70-75% of the nation’s imports and exports pass through our ports, harbors, and waterways. Without the proper maintenance of our marine infrastructure the nation would face critical supply issues and lose potential international trade opportunities. A major component of maintenance is dredging. Dredging is what allows our ports to accept the new super Panamax vessels by both deepening and widening the channels. Maintaining our rivers for commerce and flood control and restoring our beaches and marshes to preserve the environment and protect real estate are all essential outcomes from dredging. It’s hard to imagine where the economy would be without dredging.
The USACE and Congress have recognized how critical dredging is to the nation’s economic well-being b
With this amount of record money being allocated dredging contractors should be fully loaded if not overwhelmed with projects, and there should be a long list of dredge bids being issued by USACE. There is a myth that has hung over the industry for the past five plus years that there is not enough capacity available to handle the higher level of bids for the USCAE, plus state and private sector projects. In fact, through massive industry investments over the last few years the industry has increased the Trailing Suction Hopper Dredge (TSHD) cu.yd. capacity by 39%. In addition to increased capacity there also has been fleet renewal program done to bring modern, efficient TSHD dredges into the market. On the big Cutter Suction Dredge (CSD) market (30” + pipe size) there has been additional increase in horse power capacity of approximately 75% in the last six years, which is more than enough additional capacity to handle the promised increase in USACE work.
Yet in the last year there has been a drought of issued bids, especially for much needed beach renourishment projects, which
These developments are alarming.
The Corps risks causing the contractors additional challenges if and when the project log jam opens– trying to fill positions again. The dredge industry has invested in the last five years approx $600-800 million in new capacity premised on the Corps’ promise of future larger amounts of bid work. The fear in the industry is that the release of bids will continue to be slow, and the hoppers and cutter dredges will continue to be tied up in the latter part of the year. This would create further financial duress for the dredge contractors.
It is worth noting that like all government agencies like the Corps have two buckets of funding. The first is new construction budgets, which they are allowed to roll over to the next year because many projects are multi-year. The second is O&M (operating & maintenance) budget which typically are port related and have to be used by end of the fiscal year. Ironically in 2022 the Corps did very little beach renourishment projects, and most of the projects were port related and allocated out of the O&M budget. But even those projects were
So, What’s Going On?
DredgeWire spoke to multiple industry sources to try and determine why the Corps was delaying so many projects. From what we can determine, despite record budgets there are three major possible obstacles accounting for dredge project delays:
- The Corps has a chronic worker shortage of approx. 3,500 people. The Corps has lost people to retirements and departures for other opportunities. This needs to be resolved.
- While the Corps is not working 100% remote, there is yet no mandate to return to the office. This applies to both Headquarters and the Districts. It appears that the majority of the Districts do have a work remote policy. Some are partial, and few may have a full return to the office policy. The challenge here is that it is very difficult in the dredging field, or any type of construction project work for that matter, to plan and manage projects quickly and efficiently with remote staffing. It is especially difficult to advance a project through regulatory requirements when one mustcollect multiple approval signatures from various offices and departments when few if any people are in the office. Projects like these get done best with Teams being together physically.
- Additional regulatory agency requirements that the current administration has attached to the funding create additional delays for project approvals. Plus, many of these various governmental agencies that the Corps interacts with also still have work from home (WFH) policies in place, which delays obtaining necessary approvals timely.
Here Are Some Possible Solutions to Improve Timely Release of Dredge Bids:
- The Corps HQ should mandate that all districts have everyone back in their offices or at least four days per week to improve approval process.
- The Corps could recruit recent retires to come back for a period of time. (The Corps has been rumored to be offering this.)
- The Corps should consider using outside engineering consultants (as many state and local entities are doing) to speed up bid process and regulatory approvals.
We asked the industry if they had an additional wish list for the Corps besides resolving the current project delay issues and here is what we heard:
- Spend all of the Corps’ allocated dredge money. If the Corps were to spend just 2/3’s of their funding, they could resolve this crisis situation they have put dredge contractors in.
- The Corps could be more predictable and transparent. Currently contractors see an advertisement for a project sometime in the coming year and then make their plans accordingly, creating Cap-ex and budget forecasts etc. However, in the past year many of these projects have initially slipped by a few months, then for half a year or longer, in which case the contractor ends up having a substantial portion of its fleet tied up and taking a hit financially. Better transparency and/or predictability of projects would go a long way to relieving the current situation.
- The Corps should stand by using private dredge industry first on projects vs Corps-owned dredges.
The industry is complex, challenging, and capital-intensive. The Corps needs to adapt and evolve to meet current challenges. Fortunately, it has the budget and mission and talent to do so.