Why a Bad Economy Might Be a Good Time to Start a Manufacturing Project

We’ve noticed a slight increase in industrial expansion projects, equipment buying, and companies taking advantage of energy efficiency rebates for buying and installing low-emissions equipment and implementing energy-efficient processes. Although the economic reasons to hold off on these projects are obvious, we came up with a list of reasons why we think more companies are investing in process projects, even though the economy is still far from a full recovery:

  • Many engineering firms were hard hit by the economic downturn and as a result are being much more budget-conscious when budgeting fees for manufacturing clients.
  • The same has occurred with general contractors who have cut their margins on projects and are becoming more creative in budgeting. This same cost-cutting has also filtered down to subcontractors who are willing to accept lower margins as well in exchange for landing jobs
  • Material and equipment costs are down due to sluggish demand
  • Engineering and contracting companies are less busy, so they are paying more attention to the clients they have and encouraging repeat business to keep employees busy and to avoid laying people off
  • Since many engineering firms are less busy, projects can also be completed much faster. A faster project means lower overall cost to the customer.
  • Local municipalities are currently not clogged with as many permit and review requests. This is a good time to undertake projects where a site plan review or other long-term review is required.
  • Many additional tax incentives are available as different states and localities fight for the few projects that will bring jobs to their area. For example, Minnesota-based SAGE Electrochromics is currently building a 300,000 square foot manufacturing plant to produce energy-efficient architectural glass. According to news sources, “The $130 million construction project likely would not have happened – at least not on this scale – without the tens of millions of dollars the company received in government funding and tax breaks” and a large equity investment from St. Gobain (http://finance-commerce.com/2010/11/sage-electrochromics-expands-in-faribault/).